Definition
Rent-to-price ratio is monthly rent divided by purchase price (as percentage). Ratios above 0.8% indicate good value; below 0.5% suggests overpriced.
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Rent-to-price ratios of 0.8-1.0% indicate good value; ratios below 0.5% suggest overpriced properties relative to rents. This metric quickly identifies markets or properties with strong rental income relative to price. For example, a 0.8% ratio means you recover your purchase price through rent in about 125 months (10+ years).
Pro Tip
Look for markets with rent-to-price ratios above 0.8%.
Example
A property purchased for $200,000 renting at $1,600/month has a rent-to-price ratio of 0.8%