Price to Rent Ratio Calculator

The formula uses a year of rent, not a month

Price to rent ratio is the price of a home divided by the rent it would collect in twelve months. A $300,000 house that rents for $1,500 a month collects $18,000 a year, so the ratio is 300,000 / 18,000 = 16.7. Dividing by a single month instead would give 200, which is why the monthly figure has to be annualized before it goes into the sum.

Read the result as years. A ratio of 16.7 means the purchase price equals 16.7 years of gross rent. It is the same arithmetic as the gross rent multiplier investors use, which is why the two numbers usually match for the same property: our gross rent multiplier calculator runs the investor side of this exact division.

The ratio is a comparison, not a valuation. It says how the cost of owning one house compares with the cost of renting one house in the same market at the same moment. Two markets with identical ratios can be wildly different places to live, and a single market can carry a ratio of 12 in one neighborhood and 35 three miles away.

Where the US ratio stands on current data

Two official sources give a national reading, and they measure slightly different things. The Census Bureau's American Community Survey reports a median value of $332,700 for owner occupied homes and a median gross rent of $1,413 a month for 2020 to 2024 (Census QuickFacts). Annual rent is $16,956, so the ratio on the housing stock is 19.6.

HUD's quarterly market summary uses current transactions instead: a median existing home price of $397,767 in the first quarter of 2025 against a median asking rent of $1,899 for vacant units (HUD PD&R National Housing Market Summary). That puts the ratio at 397,767 / 22,788 = 17.5.

The two numbers bracket the same story from different angles. The Census ratio describes the whole stock of homes, including people who bought years ago and renters in long held leases. The HUD ratio describes what a buyer and a renter would pay today. Neither is wrong, and quoting one without the other overstates the precision. Somewhere between 17.5 and 19.6 is the honest answer for the country as a whole.

Worked example: a $350,000 house at $2,100 a month

Take a three bedroom house listed at $350,000 that rents for $2,100 a month. Annual rent is $25,200, and 350,000 / 25,200 = 13.9. That sits below the 16 line, in territory where buying tends to beat renting on cost alone. The gross yield is the inverse, 25,200 / 350,000 = 7.2 percent, which is high for a US metro in 2026 and suggests the rent is strong against the price.

Change one number and the reading changes. The same house at $1,800 a month gives 16.2, at the edge of the middle band. At $1,500 it is 19.4, and at $1,200 it is 24.3. Rent moves the ratio more than price does in percentage terms, because rent is the smaller number and a $100 change is a bigger share of it.

Use the rent of a comparable unit, not the rent you hope to charge. A renovated house on the same street renting for $2,400 is the honest comp for a renovated house, and a dated unit at $1,500 is the comp for a dated one.

How to read the 15 and 21 lines

The bands come from a widely used rule of thumb in housing research: a ratio of 15 or less favors buying, 16 to 20 is a toss up, and 21 or more favors renting. A 2025 housing affordability study in the Journal of Housing Research states the same boundaries while using the Census medians to compute the ratio for metro areas (housing affordability study, 2025).

The lines are not laws. A ratio of 22 in a city where you plan to stay twenty years and rents rise 5 percent a year can still favor buying, because the ratio compares today's rent with today's price and ignores everything that happens afterward. It is a screen for the first question, whether the two numbers are in the same neighborhood, not the last word on the decision.

What the ratio leaves out

A mortgage payment is not the purchase price. At a 6.5 percent rate on a $350,000 house with 20 percent down, principal and interest run about $1,770 a month, and adding property tax, insurance and maintenance at about 2 percent of value a year adds roughly another $580. The all in cost of owning is near $2,350 against a $2,100 rent, so the 13.9 ratio describes a cheaper purchase only after the carrying cost gap is closed. Our house payment calculator runs the mortgage side with taxes and insurance included.

Closing costs take another 2 to 5 percent of the price up front, and selling costs take 6 to 8 percent at the other end. On a $350,000 house, that is roughly $7,000 to $17,500 to buy and $21,000 to $28,000 to sell, and both are lost if you move in two years. The break even holding period is where the ratio stops being useful and a full rent versus buy model takes over.

Tax treatment and appreciation cut the other way, and neither appears in the ratio. Mortgage interest and property tax deductions help some buyers, and price growth helps anyone who stays long enough. The ratio tells you what a house costs against its rent today, and nothing about what either will be worth in ten years.

The investor's version: yield and the gross rent multiplier

For a rental purchase, the same division answers a different question. A ratio of 20 is a gross yield of 5 percent, because 1 / 20 = 0.05. A ratio of 12 is an 8.3 percent gross yield, and a ratio of 30 is 3.3 percent. That is why investors in expensive metros accept low yields: they are buying price growth, not cash flow.

Gross yield is before every expense. Property tax, insurance, maintenance, vacancy and management typically take 35 to 50 percent of gross rent, so a 5 percent gross yield can turn into a 2.5 to 3.2 percent net yield before the mortgage. The cap rate calculator handles the net version with operating expenses included, and the gap between the two numbers is the honest measure of what the property earns after expenses.

Net yield in the last column is gross yield times 0.6, the crude version of the 35 to 50 percent expense load above.

One caution for investors: a low price to rent ratio in a market with flat rents and rising vacancies is not a bargain, it is a warning. Check rent growth and vacancy before treating a 12 as a buy signal, and check the rent roll against the market rent rather than the seller's pro forma.

Five mistakes that skew the number

Comparing a month of rent with an annual price. The most common error by far. $2,100 against $350,000 looks like a ratio of 167, which is nonsense; multiply the rent by 12 first and the ratio is 13.9.

Mixing asking rent with gross rent. Asking rent covers units currently listed and runs higher: $1,899 against $1,413 in the sources above. Gross rent includes utilities paid by the renter and covers every occupied unit, including long tenancies. Pick one definition and stay with it, because the gap moves the national ratio by two full points.

Using a house price against apartment rent. A detached three bedroom and a two bedroom apartment are different products, and their ratio is meaningless. Match the property type, bedroom count and neighborhood.

Using stale data. Census five year estimates are a rolling average, so a fast moving market can be two years behind. Check the release date and compare with a current listing site before you rely on the number.

Treating the band as a verdict. Under 15 does not mean buy any house at any rate, and over 21 does not mean renting forever is cheaper. The ratio compares two prices; the decision also involves a down payment, a mortgage rate, a job and a plan for the next decade.