What is the price-to-rent ratio?
The price-to-rent ratio compares the cost of buying a property to the cost of renting a comparable one. It is a fast way to gauge whether a market leans toward buying or renting.
The formula
Price-to-rent ratio = Property price / Annual rent
The result is a multiple, not a percentage. A lower ratio generally favors buying; a higher ratio generally favors renting.
How to use it
- Enter the property price.
- Enter the annual rent for a comparable property.
For example, a $400,000 property against $24,000 of annual rent gives a ratio of 16.7.
Rules of thumb
A common (rough) guide: a ratio under 15 tends to favor buying, 15–20 is a gray zone, and above 21 tends to favor renting. These are heuristics — local taxes, appreciation, and how long you plan to stay matter just as much.