Rent-to-Value Ratio

The Rent-to-Value Ratio is a financial metric used to assess the profitability of a rental property. It compares the annual rental income to the property's market value. To calculate it, divide the yearly rent by the property’s current value and multiply by 100 to get a percentage. A higher ratio indicates better cash flow potential, while a lower ratio may suggest less profitability. Investors often use this ratio to help determine whether a property is a worthwhile investment. Generally, a Rent-to-Value Ratio of 10% or more is considered favorable for potential returns.