1. What is Rent-to-Value Ratio?

The Rent-to-Value Ratio is a real estate metric that compares the annual rental income of a property to its current market value. It helps investors assess the income-generating potential of rental properties.

2. How Does the Calculator Work?

The calculator uses the Rent-to-Value Ratio formula:

Where:

• Annual Rent — Total yearly rental income from the property
• Property Value — Current market value or purchase price of the property

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 investors compare properties, assess cash flow potential, and make informed buying decisions. Higher ratios generally indicate better income potential.

4. Using the Calculator

Tips: Enter the annual rental income and property value in dollars. Both values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Rent-to-Value Ratio?
A: Generally, 6-10% is considered good, but this varies by market. Higher ratios are typically found in lower-priced areas.

Q2: How does this differ from capitalization rate?
A: Cap rate uses net operating income (after expenses), while Rent-to-Value uses gross rental income.

Q3: Should I include all rental income?
A: Yes, include the total annual rent from all units in the property.

Q4: What property value should I use?
A: Use either the purchase price or current market value, whichever is more relevant to your analysis.

Q5: How does this help in property comparison?
A: It allows quick comparison of income potential across different properties regardless of their size or price.