Enter the total home price and the average monthly rent into the calculator to determine the price-to-rent ratio.
The following formula is used to calculate a price-to-rent ratio.
P:R = HP / R*12
- Where HP is the total sale or home price ($)
- R is the monthly average rent ($)
To calculate the price-to-rent ratio, divide the total sale price by 12 times the monthly rent.
A price-to-rent ratio is a proportion of the total home price to the annual rent that could be generated from the home. The lower the ratio the better it is to buy a home. The average P-R Ratio is 16-20.
Price-to-Rent Ratio Example
How to calculate price-to-rent ratio?
- First, determine the median home price.
Calculate the median or mean home price of the area.
- Next, determine the average monthly rent.
Calculate the average monthly rent for the area.
- Finally, calculate the price-to-rent ratio.
Calculate the price-to-rent ratio.
On an average price to rent ratios linger around 16-20. Anything lower suggests that rent is high in the area and anything higher suggests rent is low.