Enter the purchase price of a property and the expected monthly rent into the calculator to determine the rent to value ratio.
Rent To Value Formula
The following formula is used to calculate a rent to value ratio.
RTV = MR / P *100
- Where RTV is the rent to value ratio (%)
- MR is the expected monthly rent
- P is the purchase price of the home or building
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. This ratio is typically referred to as the opposite of the price to rent ratio.
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.
Typically anything above 2% is a good ratio. This means the rental earnings will pay for the purchase price after just 50 months or roughly 4 years.