The 1% rule is a back of envelope screen, nothing more. It says that if a property costs $150,000, it should rent for at least $1,500 per month. If it does, the deal is worth a closer look. If it does not, the deal probably does not cash flow and you can skip it. The rule became popular because it is fast. You see a listing, you do the math in your head, you decide in 5 seconds whether to investigate. That is the entire value of the rule. It does not account for taxes, insurance, maintenance, vacancy, or debt service. It does not tell you whether the deal is actually good. In high appreciation coastal markets, 1% is almost impossible to hit and investors there are betting on equity growth instead of cash flow. In the Midwest and Southeast landlord friendly markets, 1% is achievable and 1.25% or higher starts to feel strong. For BRRRR deals, the real number to watch is not the 1% rule at purchase but the 1% rule at ARV, because that is the basis you are refinancing into.
Example
A property costs $140,000 and rents for $1,450. Monthly rent / purchase price = 1,450 / 140,000 = 1.04%. Passes the 1% rule.