Underwrite
Rent to price ratio calculator
Rent-to-price ratio is annual rent divided by purchase price - a clean screen before you drown in expense lines. It's the annual cousin of the monthly 1% rule (1% monthly ≈ 12% annual rent-to-price). Enter rent and price; get the ratio and a pass/fail against a hurdle you set.
Assumptions
Returns stack
- Annual rent-to-price
- —
- Monthly rent / price
- —
- Hurdle (annual)
- 12.0%
When to use
Triaging a spreadsheet of listings; translating "1% rule" into annual language; comparing two prices with the same rent.
When not to
A high ratio ignores taxes, insurance, and repairs - pass the screen, then run cash flow. And use the same rent definition across every comp.
Assumptions: Annual ratio = (monthly rent × 12) ÷ purchase price. Optional denominator: all-in cost (price + rehab). Monthly form available for 1% rule style checks.
Worked examples
Input
Rent $2,000/mo Price $240,000
Output
Annual ratio 10.0% Monthly 0.83%
Fails a strict 1% monthly screen - still might work with low OpEx.
Input
Rent $2,400 Price $240,000
Output
Annual 12.0% / monthly 1.00%
1% rule pass - next step is real expenses and debt.
Common traps
- Ratio ignores taxes, insurance, and repairs.
- High ratio with rotten expenses still loses.
- Use the same rent definition across comps.