Select monthly rent to value percentage, monthly rent, or purchase price, then enter the two requested values. The ratio uses monthly gross rent, not net income.
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Rent To Value Formula
The following formula is used to calculate a rent to value ratio.
- Where RTV is the rent to value ratio (%)
- MR is the expected monthly rent
- P is the purchase price of the home or building
To calculate a rent to value ratio, divide the monthly rent by the purchase price of the home, then multiply by 100.
| Monthly Rent ($) | Purchase Price ($) | Rent to Value (%) |
|---|---|---|
| 800 | 100,000 | 0.80 |
| 900 | 120,000 | 0.75 |
| 1,000 | 150,000 | 0.67 |
| 1,200 | 150,000 | 0.80 |
| 1,200 | 180,000 | 0.67 |
| 1,300 | 160,000 | 0.81 |
| 1,400 | 175,000 | 0.80 |
| 1,500 | 200,000 | 0.75 |
| 1,600 | 200,000 | 0.80 |
| 1,800 | 220,000 | 0.82 |
| 1,800 | 250,000 | 0.72 |
| 2,000 | 250,000 | 0.80 |
| 2,200 | 275,000 | 0.80 |
| 2,400 | 300,000 | 0.80 |
| 2,500 | 350,000 | 0.71 |
| 2,800 | 350,000 | 0.80 |
| 3,000 | 375,000 | 0.80 |
| 3,200 | 400,000 | 0.80 |
| 3,500 | 450,000 | 0.78 |
| 4,000 | 500,000 | 0.80 |
| Formula: Rent to Value (%) = (Monthly Rent / Purchase Price) × 100. Example: $1,500 on $200,000 = 0.75%. | ||
Rent to Value Definition
Rent to value is defined as the percentage of the ratio of the monthly rent to the purchase price of a home. It is reciprocal to price divided by monthly rent before percentage scaling. A price-to-annual-rent ratio uses a different period.
Rent To Value Example
How to calculate a rent to value?
- First, determine the monthly rent.
Estimate the expected monthly rent you will charge for the property.
- Next, determine the purchase price.
Determine the final purchase price, including fees, of the home.
- Finally, calculate the RTV.
Calculate the rent to value using the equation above.
FAQ
There is no universally good ratio. At exactly 2% per month, 50 months of unchanged gross rent equals the purchase price before expenses, vacancy, financing and taxes; this is not a net payback period or a recommendation.
