Price-to-Rent Ratio
How many years of rent does it take to pay off the purchase price?
Formula
P/R = Purchase Price / (Monthly Rent × 12)
Divides the property price by annual gross rent. Lower ratios mean rent is high relative to price — better for investors.
What Is It?
The price-to-rent ratio is a quick screening metric. It tells you how many years of gross rent equal the purchase price. Markets with lower ratios tend to favor investors; higher ratios favor renters (and hurt investor returns).
Worked Example
A $500K property rents for $3,000/mo.
| Purchase Price | $500,000 |
| Annual Rent | $36,000 |
$500,000 / $36,000 = 13.913.9 Price-to-Rent Ratio
Why It Matters
- ✓Instant buy-vs-rent signal for a market or property
- ✓Below 15: generally favorable for investors
- ✓Above 20: renting is cheaper than owning — harder to cashflow
- ✓Compare across zip codes to find relative value
What's Good vs Bad?
Excellent
Below 12 (strong rental yield)
Good
12–18
Poor
Above 20 (appreciation-dependent)
Limitations
- ⚠Gross metric — ignores all expenses, financing, and taxes
- ⚠Doesn't work well for luxury or highly appreciated properties
- ⚠San Diego is structurally high (15-25) due to appreciation premium
- ⚠Should be used for screening, not final decisions
How Prop2Profit Uses This Metric
P/R ratio is shown on the listing detail page and the neighborhoods analytics table. Lower P/R zips are highlighted as better value for investors.