Rent to Value Calculator

Formula

To calculate the Rent to Value Ratio:

\[ RTV = \frac{MR}{P} \times 100 \]

Where:

$RTV$ is the Rent to Value Ratio (%)
$MR$ is the Expected Monthly Rent ($)
$P$ is the Purchase Price of the Home or Building ($)

Rent to Value Definition

Rent to value is defined as the percentage of the ratio of the monthly rent to the purchase price of a home. This ratio is typically referred to as the opposite of the price to rent ratio.

Understanding the rent to value ratio is crucial for real estate investors as it helps determine the potential return on investment. A higher rent to value ratio indicates a better return on investment, making the property more attractive for rental purposes.

Example Calculation 1

Let's assume the following values:

Expected Monthly Rent ($MR$) = $1500
Purchase Price ($P$) = $200,000

Using the formula:

\[ RTV = \frac{1500}{200000} \times 100 = 0.75\% \]

The Rent to Value Ratio is 0.75%.

Example Calculation 2

Let's assume the following values:

Expected Monthly Rent ($MR$) = $2000
Purchase Price ($P$) = $250,000

Using the formula:

\[ RTV = \frac{2000}{250000} \times 100 = 0.80\% \]

The Rent to Value Ratio is 0.80%.