What is a good price-to-rent ratio for buying a home?
A price-to-rent ratio below 15 generally favours buying, 15–20 is a toss-up, and above 20 favours renting. Calculate it as home price ÷ annual rent for a comparable home: $420,000 ÷ ($2,200 × 12) = 15.9.
Price-to-rent bands
| Ratio | Signal | Example |
|---|---|---|
| Under 15 | Lean buy | $240,000 house, $1,650 rent → 12.1 |
| 15–20 | Toss-up | $420,000 house, $2,200 rent → 15.9 |
| Over 20 | Lean rent | $1,100,000 condo, $3,800 rent → 24.1 |
Context
The bands are a screening rule popularised by Trulia's rent-vs-buy index. They ignore mortgage rates: at 6.5%, the effective toss-up zone shifts lower than it was at 3% rates, so treat 15–20 as a prompt to run a full net-worth comparison rather than a verdict.
What moves this number
Financing terms
Rate, down payment and amortisation drive cash-on-cash return more than purchase price does. The same building can cash-flow or bleed depending on the loan.
True operating expense ratio
Management, insurance, tax, maintenance, vacancy and capital reserve typically consume 35–50% of gross rent. Models that skip reserves overstate returns badly.
Vacancy and turnover
One 45-day vacancy plus a turn can erase a year of thin cash flow. Underwrite 5–8% vacancy even in tight markets.
Local regulation
Rent rules, short-term rental caps and licensing requirements change the achievable revenue of an identical property between neighbouring cities.
Methodology
P/R = price ÷ (monthly rent × 12), using rent for the same size and location of home. Example prices are illustrative, not quotes.
Assumptions and caveats
- Returns exclude appreciation and principal paydown unless a row states otherwise.
- Local tax, insurance and regulation can move these figures by several points in either direction.
- This page was last reviewed on 2026-10-01. Ranges are updated as new data lands, so re-check before using them in a contract or a plan.
- Use these numbers as a starting range, not a guarantee — your own historical data always beats a benchmark.
Frequently asked questions
What is a good price-to-rent ratio for buying a home?
A price-to-rent ratio below 15 generally favours buying, 15–20 is a toss-up, and above 20 favours renting. Calculate it as home price ÷ annual rent for a comparable home: $420,000 ÷ ($2,200 × 12) = 15.9.
Where do these numbers come from?
P/R = price ÷ (monthly rent × 12), using rent for the same size and location of home. Example prices are illustrative, not quotes.
How can I estimate my own number instead of using a benchmark?
Use the Price-to-Rent Ratio Calculator on RevenueLab — it takes your own inputs and returns a figure specific to your setup, which is always more accurate than a published range.
Model your own numbers
Related reading
More answers in this category
- What is a good cap rate for rental property?
- How much profit should you make on a rental property?
- How much does an Airbnb make per month?
- How much money do you need to buy a rental property?
Looking for a calculator?
Search every free tool on RevenueLab — or describe your problem and Rex will pick one.
Last updated 2026-10-01.