The New (Better) 1% Rule for Real Estate

The rules of real estate investing have changed.

For years, investors were using the one-percent rule to quickly determine if a real estate deal would cash flow. But the one-percent rule, rent-to-price ratio, and other common rules of thumb have a glaring blind spot. They account for purchase price, but they don’t account for expenses.

Meanwhile, mortgage rates, taxes, and insurance have all risen across the board—expenses that can easily kill your cash flow.

So, Dave’s come up with a new rule of thumb you can use to quickly analyze rental properties and markets. He’s calling it the rent-to-payment ratio. By comparing estimated rents to the estimated PITI payment itself, you’ll have a much better idea of whether a rental property will actually cash flow month to month.

And today, we’re not just breaking down how the formula works. Dave also built an entire spreadsheet that ranks U.S. real estate markets by their rent-to-payment ratios. Whether you’re looking for the best cash flow markets to invest in or a quick way to weed out unprofitable properties, this is the kind of math you need to make sharper investing decisions in 2026.

In This Episode We Cover

The “new” rule of thumb for finding great real estate deals and rental markets

Why rent-to-price ratio is a flawed metric (and which ratio to use instead)

Why the popular one-percent rule no longer works in 2026

The top 10 real estate markets with the highest rent-to-payment ratios

How to bake today’s mortgage rates, taxes, and insurance into your initial analysis