Getting StartedQuestion 7
What Is the 1% Rule and Does It Work in Houston?
The 1% rule says monthly rent should be at least 1% of the purchase price. In Houston, many suburban properties fall between 0.7%–0.9%, while value-add deals can hit or exceed 1%.
The 1% rule is a quick screening tool: if a $200,000 property rents for $2,000/month (1%), it's worth further analysis. But it's a starting filter, not a definitive metric.
- Houston reality: Turnkey properties in desirable suburbs (Katy, Sugar Land) often hit 0.6%–0.8%. Properties in emerging or working-class neighborhoods can reach 0.9%–1.1%.
- Value-add plays: Buy a distressed property below market, renovate, and rent at market rate — this is the most common way to hit 1%+ in Houston.
- Why it matters less in Texas: High property taxes (2%+) mean a Houston property at 1% may cash flow differently than a 1% property in a low-tax state. Always run full cash flow analysis.
Bottom Line
The 1% rule is useful as a quick filter but don't dismiss Houston properties that fall at 0.7%–0.8% — strong appreciation, no state income tax, and tenant quality can make them excellent investments. Run the full numbers on every deal.