1. What is Rent-to-Value Ratio?

The Rent-to-Value Ratio is a key metric used by property investors to evaluate rental property performance. It compares the annual rental income to the property's market value, expressed as a percentage. In Australia, this ratio helps investors assess yield potential and compare properties.

2. How Does the Calculator Work?

The calculator uses the Rent-to-Value formula:

Where:

• \( \text{Annual Rent} \) — Total yearly rental income in AUD
• \( \text{Property Value} \) — Current market value of the property in AUD

Explanation: The ratio shows what percentage of the property's value you earn back each year in rent.

3. Importance of Rent-to-Value Ratio

Details: This ratio helps Australian investors compare properties across different markets, identify high-yield investments, and assess whether a property is priced appropriately relative to its rental income potential.

4. Using the Calculator

Tips: Enter the property's annual rent in AUD and its current market value in AUD. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's a good Rent-to-Value Ratio in Australia?
A: Generally, 4-6% is considered decent, but this varies by location. Capital cities often have lower ratios (3-5%) while regional areas may offer higher ratios (5-8%).

Q2: How does this differ from gross yield?
A: They're essentially the same calculation - both show annual rent as a percentage of property value.

Q3: Should I use purchase price or current value?
A: For ongoing analysis, current market value gives the most accurate picture. For purchase decisions, use the purchase price.

Q4: Does this include expenses?
A: No, this is a gross ratio. For net yield, you'd need to subtract expenses from the annual rent.

Q5: How often should I recalculate this?
A: Recalculate whenever rents change or property values shift significantly - at least annually for portfolio reviews.