Buy To Rent Ratio Calculator
A $300,000 home that rents for $2,000 a month sounds like a deal until you ask the only question that matters at the screening stage: how many years of rent does the price swallow? The buy-to-rent ratio answers that in one division, and it separates cheap markets from stretched ones faster than any spreadsheet.
This calculator takes a purchase price and a rent figure, monthly or annual, and returns the ratio, the gross rental yield, and the 1% rule test, with a plain reading of whether buying or renting usually wins at your numbers.
How it was calculated
Screening metrics only. They ignore financing costs, taxes, insurance, maintenance, vacancies, and appreciation, so use them to shortlist properties, not to make the final call.
Quick Answer
Key takeaways
- The ratio is years of rent in one number: price divided by annual rent. Under 15 usually favors buying, 15 to 20 is the gray zone, over 20 usually favors renting.
- Gross yield is the same information flipped over: yield = 100 divided by the ratio. A 12.50 ratio is an 8.00% gross yield, before any expenses.
- The 1% rule is a landlord screen, not a homebuyer rule. Failing it does not make a home a bad purchase; it makes it a weak cash-flow rental at that price.
- The ratio ignores mortgage rates, taxes, and how long you will stay. Use it to shortlist, then run the full analysis before you commit.
- Quick Answer
- How to use the buy-to-rent ratio calculator
- The formula, and why the bands sit where they do
- Worked example: one house, two different answers
- Reading the ratio for a whole market, not just one house
- What competing calculators miss
- Frequently Asked Questions
- Add This Calculator to Your Website
- References
How to use the buy-to-rent ratio calculator
Enter the purchase price first, then the rent for the same home or a genuinely comparable rental nearby. If your rent figure is monthly, leave the period set to per month; if you pulled an annual figure from a listing or a market report, switch it to per year and the calculator converts it. Press Calculate and read the verdict before the details: it tells you which side of the buy-or-rent line your numbers fall on and whether the 1% rule agrees.
Run it twice if you are house hunting. Once with the asking price and the rent you would pay for an equivalent place, which answers the personal buy-or-rent question. Then again with the rent a tenant would pay you, which answers the investor question. The same house can pass one test and fail the other, and the worked example below is exactly that case. If the deal still looks promising as an investment, the full buying rental property calculator takes the next step with cash flow, cap rate, and a five-year projection.
The formula, and why the bands sit where they do
The formula is one division. Annual rent goes on the bottom, price on top, and the result reads as years.
The 15 and 20 cutoffs are not arbitrary. Owning a home typically costs about 5% of its value a year in taxes, insurance, maintenance, and the cost of tying up your down payment, on top of the mortgage itself. When annual rent is more than a fifteenth of the price (a ratio under 15), rent is expensive relative to ownership, so buying tends to win over a normal holding period. When rent falls below a twentieth of the price (a ratio over 20), renting is cheap relative to prices, and the renter who invests the difference usually stays ahead. Between the two, the answer turns on your mortgage rate and how long you will stay, which is why the verdict in that band tells you to run a full comparison.
Worked example: one house, two different answers
The calculator is pre-filled with this case, and every figure below is what it returns.
| Measure | Result | Reading |
|---|---|---|
| Annual rent ($2,000 x 12) | $24,000 | The denominator for every figure |
| Buy-to-rent ratio ($300,000 / $24,000) | 12.50 | Buying favored |
| Gross rental yield | 8.00% | Before expenses of any kind |
| 1% rule target rent | $3,000/mo | What a landlord screen wants |
| 1% rule test at $2,000/mo | Misses | Weak as a rental |
That split verdict is the most useful thing this page teaches. As a home to live in, a 12.50 ratio says rent in this market is pricey compared with owning, so buying is the stronger default. As a rental investment, $2,000 a month on a $300,000 purchase leaves too little room after taxes, insurance, maintenance, and vacancies, which is what the 1% rule is really testing. Investors who want the expense-adjusted version of yield should look at the cap rate calculator, which divides net operating income, after operating expenses, by price.
Reading the ratio for a whole market, not just one house
The same formula works on medians. Divide a city median home price by its median annual rent and you get the market ratio that housing researchers publish: the Federal Housing Finance Agency and the Census Bureau both release the price and rent series behind those figures, and the FHFA House Price Index is the standard source for the price side. Coastal metros with ratios in the high 20s and 30s are telling you that buyers there are paying for appreciation hopes, not rent value. Midwest and Southern markets in the 12 to 16 range are telling you the opposite.
Market ratios also discipline a negotiation. If the market sits at 18 and the house you want prices out at 23 against realistic rent, the seller is asking you to pay a premium the local rental market does not support. If it prices at 14 in that same market, either the rent estimate is too optimistic or the house is genuinely cheap, and checking which one is true is worth an afternoon. Before either conclusion, pressure-test the purchase itself with the buy a home calculator, and check the payment against your income with the affordability ratio calculator.
What competing calculators miss
Most price-to-rent tools reviewed for this page return the ratio and stop, leaving the two questions people actually ask unanswered.
Miss 1: no yield, no 1% rule. A bare ratio forces you to do the investor math in your head. This calculator shows the gross yield and the 1% rule target side by side, because homebuyers and landlords read the same two numbers in opposite ways.
Miss 2: annual rent only. Several tools accept only an annual rent figure, so a monthly rent from a listing has to be multiplied by hand first. Here the period selector does the conversion, and $2,000 a month and $24,000 a year return the identical 12.50.
Miss 3: a verdict with no reasoning. Tools that label a market good or bad rarely show their working. The step-by-step breakdown under the result lists all four calculations in order, so you can audit the answer or reuse the numbers in your own notes.
One honest limit: this is a price comparison, not a cost comparison. It knows nothing about your mortgage rate, tax bracket, or moving plans, and a ratio in the gray zone cannot settle the question on its own.
Frequently Asked Questions
Under 15 generally favors buying, over 20 generally favors renting, and 15 to 20 depends on taxes, maintenance, your mortgage rate, and how long you plan to stay. There is no magic number that works in every market, so treat the bands as a first screen, not a decision.
The 1% rule says a rental property monthly rent should be at least 1% of its purchase price: a $300,000 property should rent for $3,000 a month. It is a quick landlord screening tool, not a profitability guarantee, and it is hard to meet in expensive coastal markets.
Gross rental yield is annual rent divided by purchase price, as a percentage. It is the inverse of the buy-to-rent ratio: yield = 100 / ratio, so a ratio of 12.50 is an 8.00% gross yield. It ignores all expenses, so it only ranks properties against each other.
Either; the calculator converts. The ratio always uses annual rent on the bottom, so $2,000 a month and $24,000 a year give the same answer. Use whichever figure you trust more from your listing or market data.
No. It is a price comparison, not a cost comparison. A full rent-vs-buy analysis adds mortgage payments, property tax, insurance, maintenance, and expected appreciation on the buy side, and it weighs how long you will stay.
Yes, with median figures: divide the median home price by the median annual rent in each city. A city at 14 and a city at 28 are pricing ownership very differently relative to rent, which matters if you are choosing where to buy or where to invest.
Because they answer different questions. The ratio compares price with rent for a homebuyer deciding whether owning beats renting. The 1% rule is a landlord cash-flow screen that needs rent high enough to survive expenses. A home can be a sensible purchase and a weak rental at the same price.
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References
- Trulia research on price-to-rent ratios and the 15 and 20 thresholds for buy-versus-rent markets, the widely cited origin of the bands used here. Trulia: Rent vs Buy research. Accessed October 2026.
- Federal Housing Finance Agency, "House Price Index" - the standard US house price series used for market-level price-to-rent comparisons. FHFA: House Price Index. Accessed October 2026.
- US Census Bureau, "American Community Survey" - median gross rent and median home value data for computing market ratios. US Census Bureau: American Community Survey. Accessed October 2026.
- Consumer Financial Protection Bureau, "Owning a Home" toolkit - guidance on comparing the full costs of buying with renting before committing. CFPB: Owning a Home. Accessed October 2026.