Price-to-Rent Ratio

When I’m coaching investors, one of the first habits I try to build is putting cash flow first… And an indicator of this is priced to rent ratios. This simple metric tells you in seconds whether a market or a specific property is likely to support the kind of cash flow that builds forever money. Economists like Ken Johnson at Florida Atlantic University have long highlighted the power of rent-to-price comparisons to identify undervalued markets, and John Schaub has preached for decades that wealth comes from buying based on income, not emotion.

Here’s the truth: if the ratio doesn’t make sense at the market level, it probably won’t magically make sense at the property level. And if the ratio works at the market level, your job becomes finding the individual assets where rents are mismatched with value. That’s where the opportunity is.

Run the ratio. Trust the math. Cash flow isn’t complicated, but it does require discipline, clarity, and a willingness to walk away when the numbers don’t perform.