Price-to-Rent Ratio Calculator
Calculate the price-to-rent ratio from a home's price and monthly rent to gauge whether a market favors buying or renting.
How to use this tool
- Enter the home's price or market value.
- Enter the market monthly rent for a comparable property.
- Read the price-to-rent ratio.
- Compare it to the 15 / 20 thresholds.
- Remember the ratio ignores rates, taxes, and appreciation — use it as a screen.
Should you buy or rent in this market? The price-to-rent ratio gives a fast first read. Enter a home price and a comparable monthly rent to see the ratio and which side of the buy/rent line it falls on.
Formula
The price-to-rent ratio compares the cost to own with the cost to rent:
Annual rent = Monthly rent × 12
Price-to-rent ratio = Home price ÷ Annual rent
A common reading: a ratio of 15 or below tends to favor buying, 16–20 is borderline, and above 20 tends to favor renting.
How it works
The price-to-rent ratio is a quick gauge of whether a housing market is expensive relative to what it costs to rent the same kind of home. Divide the purchase price by a full year of market rent and you get the number of years of rent the price represents. Lower ratios mean buying is comparatively cheap; higher ratios mean renting is the better financial deal, all else equal.
The widely cited rule of thumb is that a ratio at or below 15 leans toward buying, 16 to 20 is a toss-up, and above 20 strongly favors renting. Treat these as a starting screen, not a verdict: the ratio ignores mortgage rates, property taxes, maintenance, expected appreciation, your time horizon, and the tax treatment of homeownership, all of which can swing the real answer.
Reviewed by the AbraCalc Real Estate Desk. Compare like with like — the rent should be for a property genuinely comparable to the one being priced. This calculator provides general information, not investment advice; verify figures and assumptions against your own underwriting before acting.
Worked example
$360,000 home, $2,000 monthly rent
- Annual rent = $2,000 × 12 = $24,000.
- Price-to-rent ratio = $360,000 ÷ $24,000 = 15.00.
- A ratio of 15 sits at the buy threshold, so the signal is Favors buying.
Price-to-rent ratio 15.00 | Annual rent $24,000.00 | Favors buying (<=15)
Price-to-rent ratio at $2,000/month rent, by home price
| Home price | Price-to-rent ratio | Signal |
|---|---|---|
| $240,000 | 10.0 | Favors buying |
| $300,000 | 12.5 | Favors buying |
| $360,000 | 15.0 | Favors buying |
| $480,000 | 20.0 | Borderline |
Key terms
- Price-to-rent ratio
- Home price divided by annual rent; the number of years of rent the price equals.
- Annual rent
- Monthly rent multiplied by twelve.
- Buy signal
- Conventionally, a price-to-rent ratio at or below 15.
- Rent signal
- Conventionally, a price-to-rent ratio above 20.
Frequently asked questions
- What is a good price-to-rent ratio?
- Conventionally, a ratio of 15 or below favors buying, 16-20 is borderline, and above 20 favors renting. These are rough guides; local taxes, mortgage rates, and appreciation expectations matter a great deal.
- Does a low ratio guarantee buying is better?
- No. The ratio ignores interest rates, property taxes, insurance, maintenance, transaction costs, and how long you will stay. A low ratio is a green light to investigate further, not a decision.
- How is it different from the gross rent multiplier?
- They are closely related but inverse in spirit. Gross rent multiplier divides price by annual rent for an investor's yield view; price-to-rent uses the same math framed as a buy-versus-rent consumer signal.