Price-to-Rent Ratio Calculator

Price-to-rent ratio is the classic signal: price ÷ annual rent. Below 15 = cheaper to own. 15-20 = toss-up. Above 21 = cheaper to rent. This calculator runs the ratio and contextualizes against typical market tiers.

Home price

Comparable monthly rent

Price-to-rent ratio

15.07

Signal

Coin flip — run full rent vs buy

Gross rental yield

6.64%

Annual rent

$28,200

How the math works

$425K ÷ $28.2K annual rent = 15.1 price-to-rent ratio. On the edge of 'buy signal' — worth running full rent vs buy. Gross yield 6.6% — decent rental investment territory.

Watch for this ratio creeping above 20 in a market; it signals overheated prices relative to rental value. Drop below 12 = distressed market or strongly undervalued rental income.

How to Use

Enter home purchase price and monthly rent for a comparable unit.
See the ratio and what it signals about buy vs rent in that market.

Frequently Asked Questions

What's the history of this metric?

Popularized by Trulia 2010 and earlier research. Based on long-run analysis that 15x annual rent was the historical break-even for owning vs renting. Not a complete analysis — ignores appreciation, tax benefits, maintenance — but a quick signal.

What markets are typically low vs high?

Low (< 15): Cleveland, Detroit, Memphis, rustbelt — owning clearly cheaper. Mid (15-20): most US metros. High (> 20): San Francisco, NYC, Boston, LA, Honolulu. Above 25: renting almost always wins.

Does this replace rent-vs-buy analysis?

No — just a first-pass filter. A full rent-vs-buy needs mortgage rate, hold period, appreciation forecast, maintenance, opportunity cost of down payment. Use price-to-rent to decide whether to run the full analysis.

How does this tie to cap rates?

Roughly inverse. Price-to-rent ratio of 16 = 6.25% gross rental yield. Ratio of 25 = 4% gross yield. Convert between them easily: ratio = 1 ÷ gross yield.