Before Atif Afzal buys an investment property, he runs a simple calculation: divide the projected monthly rent by the purchase price.
“If it’s 1%, then it really makes sense for me to buy that property,” he told Business Insider. “If it’s 0.6% or 0.7%, it doesn’t make sense.”
In real estate, that rule of thumb is known as the 1% rule. It suggests a property’s monthly rent should equal at least 1% of its purchase price to have a good shot at generating positive cash flow. If it falls short, Afzal keeps looking.
He began investing in real estate in 2019 to create an additional revenue stream. As a freelance film composer and singer-songwriter, his monthly income fluctuates.
Over the past seven years, he’s built a portfolio of four investment properties in Monroe, a town in New York about 50 miles north of the city. Business Insider verified his property ownership by reviewing copies of his mortgage interest statements.
The 1% rule in practice
The first property Afzal bought cost about $200,000 and rented for $1,975 a month, giving it a rent-to-price ratio of 0.98%. His second cost $211,000 and rented for $2,100, or 0.99%. His third beat the benchmark by a more comfortable margin, at 1.125%.
So far, the rule has worked for Afzal. Each property he has purchased has cash-flowed immediately.
As of April 2026, Afzal said his properties generate roughly $5,300 a month in cash flow. His most profitable rental, which he bought outright and therefore has no mortgage, brings in nearly $1,800 a month.
The rule isn’t perfect. Interest rates, HOA fees, insurance, maintenance, and other expenses all shape whether a property will actually be profitable. Still, Afzal said it remains one of his main filters.
“As long as I’m able to be close to the 1%, I’m willing to buy that property,” he said.
The 1% rule is meant to evaluate a property at the time of purchase, but Afzal still checks the ratio against current values on properties he already owns. By that measure, some have slipped below 1% over the last few years because home values rose faster than rents. Two years ago, for example, he said his first property was worth about $350,000 and rented for $2,650 a month, putting the ratio at 0.76%.
He said he largely stopped buying over the last few years because high home prices made it harder to find deals that met the rule. He spent that time saving, tracking prices, and waiting for the market to improve. Now, he said, the numbers are starting to look better and getting closer to the 1% sweet spot.
Cash flow is one of his top priorities, not only because it creates additional monthly income, but because it can help him qualify for future loans. Showing positive cash flow on his tax returns gives underwriters confidence that his rentals aren’t losing money, he said, “so it helps me buy more properties.”
