Rent to Price Ratio
Rent to price ratio refers to a percentage calculation comparing the rent that is available to be earned from a rental home, to the price of the home. For example, if a rental home can be rented for $3,000 per month or $36,000 per year, and the price, of the property is $750,000, the rent to price ratio would be 4.8% ($36,000/$750,000 = 4.8%). Investors in rental homes compare rent to price ratios for various rental properties for sale and· utilize this ratio as part of their analysis. Other factors include the condition of the properties and the probability that each property will appreciate in value over time.