The 1% rule is a general guideline used by real estate investors to evaluate a rental property's potential profitability quickly. It states that a rental property will likely be a good investment if the monthly rental income is 1% or higher of its total acquisition cost. This rule is a simplified metric to help investors quickly screen properties and assess their potential cash flow. The formula for the 1% rule is as follows: Monthly Rental Income ≥ 0.01 × Total Acquisition CostMonthly Rental Income ≥ 0.01 × Total Acquisition Cost Here, the total acquisition cost includes not only the purchase price of the property but also other acquisition-related expenses, such as closing costs and any initial repairs or renovations. For example, if a real estate investor purchases a property for $200,000, the 1% rule would suggest that the monthly rental income should be at least 0.01 \ imes 200,000 = $2,000 for the property to meet the guideline potentially.