Price To Rent Ratio
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It's the property's purchase price divided by its annual rent (or sometimes 12 times monthly rent), giving a multiple that indicates whether an area favors buying or renting. A lower ratio generally favors buying; a higher ratio generally favors renting.

As a rough guideline, a ratio below about 15 tends to favor buying, 16-20 is a more neutral or mixed zone, and above 20 tends to favor renting, though these thresholds vary by source and local market conditions. Use them as general signals rather than hard cutoffs.

The math is identical — price divided by annual rent — but price-to-rent ratio is typically used at the market or city level to gauge overall buy-versus-rent conditions, while gross rent multiplier is applied to individual investment properties for quick screening.

It reflects the local balance between home prices (driven by supply, demand, and appreciation expectations) and rents (driven by local income and rental demand). Coastal and high-growth metro areas often have high price-to-rent ratios because home prices have appreciated faster than rents.

It's one signal some analysts use to flag potential overvaluation, but a high ratio can also persist for years in supply-constrained, high-demand markets without a correction. It should be read as a valuation indicator alongside other market fundamentals, not a prediction tool on its own.