Show Notes
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
And So Much More!
Links from the Show
Join the Future of Real Estate Investing with Fundrise
Join BiggerPockets for FREE
Join us at the BiggerPockets Conference October 2-4 in Orlando. Buy tickets
Let Us Know What You Thought of the Show!
Sign Up for the Investor Brief Newsletter
Find Investor-Friendly Lenders
Dave's BiggerPockets Profile
BiggerPockets Calculators
The Summer 2026 Rent-to-Payment Report: Where You Can Still Cash Flow with Real Estate
Grab Dave’s book, Real Estate by the Numbers
Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/on-the-market-460.
Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected]. Learn more about your ad choices. Visit megaphone.fm/adchoices
More from On The Market
The affordability crisis isn’t improving. Gas is above $4 per gallon, inflation just hit 3.7%, and paychecks aren’t keeping pace. This is a tough spot for the American economy, but why does it feel like we’re getting hit on all sides of the affordability spectrum? Today, I’m breaking down the American household’s affordability crisis, and whether it’s a modern spending problem or something much, much deeper.
Commercial real estate prices have fallen 20%-50% from their peaks just a few years ago—but the slide may not be over yet. A “second wave” of the commercial real estate crash is on the horizon now that interest rates are back around 7.5%, and struggling multifamily, office, and commercial investors who thought a long-term refinance would save them are now in a stickier spot.
The housing market isn’t going back to “normal” anytime soon. In fact, it could take significantly longer than many of us thought. Rates are around 7.5%, median home prices hover near $400,000, but your salary is not keeping pace. Something needs to change: is it rates, prices, incomes, or a combination of all three?
A Fed official says what we’re all thinking: home prices must drop—and sellers seem to have gotten the message. Per a recent Redfin report, 44.7% of home sales included seller concessions such as price cuts, rate buydowns, covering closing costs, or even renovations, repairs, and expensive layout changes. So, if you’re a buyer, how do you get the most from your seller on the next deal?
America could enter what nobody wants—a “lost decade.”