Price to Rent Ratio Calculator
The price to rent ratio is one of the fastest ways to read a housing market. It compares what a home costs to buy against what the same home costs to rent for a year, and the result tells you, at a glance, whether a neighborhood leans toward buying or renting. The idea is simple: divide the purchase price by the annual rent for a comparable property, and you get a single multiple. A low number means homes are cheap relative to rents, which usually favors owning; a high number means prices are stretched against rents, which often favors renting and waiting. This calculator takes a property price and a monthly rent, converts the rent to an annual figure, and divides one by the other to give you the ratio along with a plain buy versus rent reading. It is a screening tool, not a full decision: it deliberately leaves out mortgage interest, taxes, insurance and maintenance so you can compare markets on a like for like basis. Use it to scan listings or sanity check an asking price before you run the deeper numbers. Every figure here is computed deterministically from the formula shown below, with a worked example that reconciles exactly to the calculator.
The price to rent ratio divides the purchase price by the annual rent: ratio = price / (monthly rent x 12). A home priced at $360,000 that rents for $2,000 a month has a price to rent ratio of 15.00, a level that generally leans toward buying.
Price to rent ratio formula
Price to rent ratio = Price / Annual rent
Annual rent = Monthly rent x 12
Price = purchase price of the home
A lower ratio favors buying; a higher ratio favors renting
The ratio is a pure multiple with no units. It answers a single question: how many years of rent does the purchase price represent? Multiply the monthly rent by twelve to annualize it, then divide the price by that annual rent.
Worked example
A home is on the market for 360,000 dollars. A comparable property nearby rents for 2,000 dollars a month.
- Annual rent = 2,000 x 12 = 24,000
- Price to rent ratio = 360,000 / 24,000 = 15.00
- A ratio of 15.00 sits at the lower end, which generally favors buying
The ratio is 15.00. These are the calculator's default inputs, so the result above matches the widget exactly.
How to read the ratio
| Ratio | Equivalent gross yield | General reading |
|---|---|---|
| Under 15 | Over 6.67% | Tends to favor buying |
| 15 to 20 | 5.00% to 6.67% | Borderline, local factors decide |
| 21 and over | Under 4.76% | Tends to favor renting |
Thresholds are general rules of thumb, not official guidance. Weigh mortgage rates, taxes and how long you plan to stay.
Price to rent ratio calculator: frequently asked questions
What is the price to rent ratio?
The price to rent ratio is the property price divided by the annual rent for a comparable home. It is a quick screen for whether a local market favors buying or renting. A low ratio (roughly under 15) often points to buying being relatively attractive, while a high ratio (over about 21) suggests renting may be the better value at current prices.
How do I calculate annual rent?
Multiply the monthly rent by twelve. If a comparable home rents for 2,000 dollars a month, the annual rent is 24,000 dollars. The calculator does this for you: enter the monthly rent and it converts to an annual figure before dividing the purchase price by it.
What is a good price to rent ratio?
There is no single correct threshold, but a common rule of thumb treats a ratio below 15 as favoring ownership, 16 to 20 as a borderline range where local factors decide, and 21 or higher as favoring renting. Always weigh taxes, maintenance, mortgage rates and how long you plan to stay alongside the ratio.
Does the ratio account for mortgage costs or taxes?
No. The price to rent ratio is a simple, high level screen that uses only price and rent. It deliberately ignores mortgage interest, property taxes, insurance, maintenance and closing costs. Use it as a first filter, then run a full buy versus rent comparison before deciding.
Why use price to rent rather than rental yield?
They are two views of the same relationship. Rental yield expresses annual rent as a percentage of price, while the price to rent ratio expresses price as a multiple of annual rent. A ratio of 20 is the same as a gross yield of 5 percent. Pick whichever framing you find clearer.
Official sources
- Buying a house, renting and mortgage basics: US Consumer Financial Protection Bureau (CFPB). As at 25 June 2026.
Reviewed by the CalculatorHub team, edited by James Graham, 25 June 2026. See our methodology. This is general information, not financial, tax, legal or investment advice.