The 1% guide (if it works for your area) is used by determining the Fair Market Value (FMV) of the property and then using 1% of THAT figure to get your basic rent.
So, if your investment property is worth $120K and you by it for $85K (or about 70% of FMV), then using the 1% guide on both, your monthly payment/expenses should be about $850 and you should be able to rent for $1200, which translate into a $350 positive cashflow per month.
Understand that this is very simplistic, but you get the idea.
Raj