1% Rule - 1% of what

[Francisco Escobar]

Hey everyone, I'm starting to analyze houses on the market and I'm curious if the 1% rule applies to the purchase price or if we should throw add the estimated cost of repairs?  I'm seeing some homes where rents, say 2000/month (after repair) would be about 1% of the purchase price 200k.  But they seem to require tens of thousands in repairs, say 25k.  So when I add the two, 2k monthly isn't enough to meet the 1% rule on 225k spent to acquire the home.  

Am I looking at this the right way?