Sep 2, 2026 · 36 min
Investors replace the 1% rule with payment-based math
The New (Better) 1% Rule for Real Estate
Comparing rent with the full PITI payment offers a more relevant way to assess rental properties in today’s higher-cost market.
- 1The traditional rent-to-price 1% rule becomes less useful when property prices and financing costs rise.
- 2The rent-to-payment ratio compares monthly rent with principal, interest, taxes, and insurance.
- 3A Memphis property shows how investors can apply the metric after comparing markets such as Memphis and Detroit.
Don't miss
Dave Meyer demonstrates the rent-to-payment ratio on a Memphis property after choosing it over Detroit.
The brief
Dave Meyer argues that the traditional 1% rule no longer captures today’s higher-cost rental market, because purchase price alone says little about monthly obligations.
The replacement is a rent-to-payment ratio: compare monthly rent with the full PITI payment, including principal, interest, taxes, and insurance.
The episode frames the metric as both a market-ranking tool and a property-level test, shifting attention from headline prices to financing realities.
Dave applies the approach to a Memphis property selected from his market list, explaining why it earned attention over Detroit.
The broader takeaway is practical: rental investors can judge potential deals against the payment they must cover, not an outdated price shortcut.