Price-to-rent ratio
Median home price divided by annual rent. A quick screen for whether a market is cash-flow or appreciation.
Price-to-rent compares the cost of buying vs. renting in a market. It's a coarse but useful early filter.
Formula: Median home price ÷ Median annual rent.
Reading the ratio
- Under 15: cash-flow market. Cleveland, Memphis, Indianapolis.
- 15–20: balanced.
- Over 20: appreciation market. Most coastal metros.
- Over 30: rent essentially cannot cover ownership at standard leverage; appreciation-only.
A low ratio doesn't guarantee a good deal — operational reality, tax burden, and tenant quality all still matter — but a high ratio almost guarantees rentals won't cash-flow without subsidies.
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