The 1% rule calculator for Canada
The 1% rule says rent should be at least 1% of price. It is a US shortcut that most Canadian deals miss. Check your ratio here, then read why it is a screen, not a verdict.
The rule ranks. BrickROI runs the real deal.
The 1% rule is a US screen. BrickROI runs the Canadian numbers on your real listing: cap rate, cash flow, DSCR, the CMHC and MLI Select paths, and a lender-ready PDF. A sub-1% deal can still work. Paste a Canadian listing and see for yourself in two minutes.
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The 1% rule and Canada
The 1% rule is a US rule of thumb. It says the monthly rent should be at least 1% of the purchase price. A $400,000 property would need $4,000 a month to pass. The idea is that a property which clears 1% has a decent chance of cash flowing once you add the costs and the mortgage.
In today's Canadian market, almost nothing passes. Prices have run well ahead of rents in most cities, so the typical deal sits well below 1%. One Sarnia investor put a deal at 0.67% on a forum, and that is not unusual. If you treat 1% as a pass or fail line in Canada, you will reject nearly every property, including ones that cash flow fine.
So what is it good for?
Ranking. The ratio is a quick way to sort listings within a market. A property at 0.8% is closer to working than one at 0.5%, all else equal. Use it to decide which deals get your time, then run the real analysis. The rule cannot see the city mill rate, the CMHC and MLI Select paths, or rent growth, and those are what actually decide a Canadian deal.
What to do instead of trusting 1%
- Use the ratio to rank a list, never to approve or kill a single deal.
- Run cap rate and cash flow on the deals that rank near the top.
- Check the CMHC and MLI Select paths. A 40-year amortisation can lift a sub-1% deal into positive cash flow.
1% rule questions
What is the 1% rule?
The 1% rule is a quick screen that says monthly rent should be at least 1% of the purchase price. A $400,000 property would need to rent for $4,000 a month to pass. It is a rough US rule of thumb, not a Canadian standard.
Does the 1% rule work in Canada?
Rarely in the current market. Most Canadian properties miss it by a wide margin because prices are high relative to rent. A Sarnia investor noted a deal at 0.67% on a forum. Use it as a sorting tool, not a pass or fail line.
What ratio should I expect in Canada?
It varies a lot by city. Cheaper markets get closer to 1%, while Toronto and Vancouver sit far below it. The honest move is to treat the percentage as a ranking number and let cap rate and cash flow make the call.
Is a deal under 1% always bad?
No. Plenty of Canadian deals below 1% still cash flow once you account for the real costs, financing, and rent growth. The 1% rule is a fast filter from a different market. It cannot see the CMHC paths or the local mill rate.