Help with the 1% Rule

[Summer Noyes]

I'm a newbie to rental real estate investing and I'm doing my research and education. I've read and listened to some books and podcasts, but I'm sorry I'm a little confused about the 1% rule. As I understand it, if the rent comes out to 1% or more of the purchase price, that is a short cut to assume it will be a profitable rental. I realize it's only a short cut and that all expenses should be calculated. I just want to be sure its the purchase price and not the loan amount that I'm to use in the equation. Meaning if the property is $100k and I put down $20k, the 1% is based off the $100k and not the $80k. When does this rule not apply? I am considering property in CA where if I bought a $500k, 3bd/2ba home, there is no way I'm getting $5,000/month. I might make a slight + cash flow, but I'm looking down the line to 5-10 years from now when this property appreciates, because of community improvements, and I sell it. Any input is greatly appreciated. Thank you.