Price-to-rent ratio compares a home's purchase price to the yearly rent it commands. Divide the price by twelve months of rent: a $360,000 house renting for $2,000 a month ($24,000 a year) has a price-to-rent ratio of 15. Lower ratios point to markets where prices are cheap relative to rents, which tends to favor buying and to make the numbers work for a landlord.
The ratio is a fast way to compare cities or neighborhoods on a single scale, and it is the rough inverse of gross rental yield. Like any one-number screen it says nothing about operating costs, financing, taxes, or growth prospects, so treat a promising ratio as a reason to underwrite the deal properly with NOI and cash flow, not as a conclusion.
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Written and maintained by the Aptoria editorial team
Editorial method reviewed July 28, 2026. Aptoria reviews scope, source fit, examples, limitations, links, and publication gates. This record does not claim attorney, CPA, lender, appraiser, or other independent professional sign-off.
Related terms
Investing metrics
Gross rent multiplier (GRM)
A sale-price-to-gross-rent screening multiple whose monthly or annual rent convention must be stated.
Investing metrics
Rental yield
A property's annual rent as a percentage of its price or value — gross yield uses rent alone, net yield subtracts operating costs.
Investing metrics
Capitalization rate (cap rate)
Capitalization rate is annual net operating income divided by a stated property price or value, expressed as a percentage.
Investing metrics
The 1% rule
A rough rule of thumb that a rental's monthly rent should be at least 1% of its total purchase price.
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