Rent vs. Buy Calculator Tools

1 to 15: A Price-to-Rent Ratio of 1 to 15 suggests that buying is a favorable choice over renting.

16 to 20: A Price-to-Rent Ratio of 16 to 20 indicates that renting is usually the more sensible option,

21+: A Price-to-Rent Ratio of 21 or higher signifies that renting is significantly more advantageous than buying.

This is a very general rule of thumb and if you are interested in the results, you will want to explore a more thorough understanding of the rent vs. buy option using our Rent vs. Buy calculator.

The 5% rule is an estimate which includes the three typical home expenses: property taxes, maintenance costs, and the cost of capital. Then, you get a breakeven point for what you’d pay each month, helping you decide whether it’s better to buy or rent. If the cost of owning a home is less than renting, you may want to consider purchasing a home.

For instance, if you’re looking at an investment property that costs $155,000, you’ll want to find a loan with a monthly payment of $1,550 or less. Additionally, rental rates should be around the same rate to ensure profitability.

This simple formula helps investors determine how long it will take for an investment to double in value based on the return rate. Simply divide 72 by the annual rate of return, then you’ll be left with an estimate of how many years it’ll take to double in value.

The 50% rule is an effective method for assessing the potential profitability of your investment. In order to generate a profit, it is advisable to allocate 50% of your income towards covering property-related expenses. For instance, if your rental property yields a monthly income of $3,000, it is prudent to set aside $1,500 for these expenses. This cover various costs, such as property marketing, maintenance, inspections, and other necessary expenditures.

1. Avoid Exceeding a 10% Down Payment: While it may not suit every investor, some experienced individuals opt for a down payment equivalent to 10% of the investment’s price.
2. Purchase at a Minimum of 10% Below Market Value: If you’re adhering to the 10% guideline, aim to steer clear of properties priced within 10% below their true market worth.
3. Never Accept Mortgage Interest Rates Above 10%: Ultimately, if your mortgage interest rates surpass 10%, you could potentially be sacrificing potential profits. In the current U.S. market, average mortgage rates typically range between 5% to 7%.