Helpful for Investors
Price-to-rent Ratio: CALCULATE IT
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.
5% Rule: CALCULATE IT
The 1% Rule - Rental Property: CALCULATE IT
Rule of 72 - Rental Investment: CALCULATE IT
50 % Rule - Rental Investment: CALCULATE IT
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.
The 10% Rule
- 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.
- 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.
- 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%.
In order to receive a helpful estimate, it’s important that you input accurate information. Results in no way indicate approval or financing of a mortgage loan. Contact a mortgage lender to understand your personalized financing options.