Purchase Price to Rent Ratio

I earlier wrote a post about Renting vs. Buying with a link to a calculator. There is also a simple way to see weather you should buy a place or rent using the Purchase Price to Rent Ratio. What you do is figure out the cost of the house/apartment you are renting and divide that by the total yearly rent. If you get a number above 15, it is better to rent and if you get a number below 15, it is better to buy. For example: your rented dwelling is worth $250K, but you are paying only $12K per year in rent. Your number is 20.83, which is higher than 15, so, according to this formula, you should keep renting.


I could buy my apartment for 150K (at the low end) while my current yearly rent is $12,600. The Purchase Price to Rent Ratio is low, 11.91. It seems that I should buy the apartment, however, you must consider other factors. The association fees for my building are $500 per month and regularly increase. Therefore, buying would be more expensive.

The NY times calculator in the previous post accounts for the association fees, however, the Purchase Price to Rent Ratio is easy to use on the go.