Price-to-Rent Ratio Calculator
Compare the cost of buying versus renting in a market with the price-to-rent ratio. Enter the price of a home to buy and the rent for an equivalent home to see the ratio and a quick read on which option tends to make more sense.
How to use the price-to-rent ratio
- Enter the purchase price of a comparable home.
- Enter the rent for an equivalent home, monthly or annual.
- Read the ratio and the buy-or-rent interpretation.
Examples
300,000 home, 1,500 monthly rent
Home price 300,000, monthly rent 1,500 (annual 18,000)
Price-to-rent ratio 16.67, interpretation Mixed
Frequently asked questions
What is the price-to-rent ratio?
It is the price of a home divided by the annual rent for an equivalent home. A 300,000 home with 18,000 of annual rent has a ratio of about 16.67.
How do I read the ratio?
A common rule of thumb says a ratio of 15 or below favors buying, 16 to 20 is mixed, and above 20 favors renting. It is a quick screen, not a full buy-versus-rent analysis.
Why use annual rent?
The ratio compares a one-time price to a yearly cost, so rent must be annual. If you enter monthly rent, the calculator multiplies it by 12 for you.
What does the ratio leave out?
It ignores mortgage interest, property taxes, insurance, maintenance, closing costs and how long you stay. Use it alongside a full rent-versus-buy calculation before deciding.
Should I compare similar homes?
Yes. Use the price and rent for comparable homes in the same area. Comparing a small rental to a large purchase will skew the ratio and the conclusion.
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