Real Estate
Price to rent ratio
The yield inverted. Reads as the number of years of rent needed to equal the purchase price.
The Formula
price to rent = property value / annual rent
The yield inverted. Reads as the number of years of rent needed to equal the purchase price.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| ratio | Price to rent ratio | years | Years of rent equal to the property value. |
| V | Property value | currency | Purchase price or market value. |
| R | Annual rent | currency | Total rent received in a year. |
What Each Symbol Means
ratioyears
Price to rent ratio
Years of rent equal to the property value.
Vcurrency
Property value
Purchase price or market value.
Rcurrency
Annual rent
Total rent received in a year.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate rental yield page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Rental Yield, filed under Finance. Every number the guide produces comes from substituting into this one line.