Price to rent ratio:

Take similar homes, one for sale the other for rent (any rental: apt, condo, townhome), and divide the sale price by the annual rent. The result is the rent ratio.

If you're enamored of the age old wisdom that renting a home is akin to throwing your money away think again. A simple calculation called the "price to rent" ratio can give you an indication of whether it's a better move to rent or buy a home.

I've compared the price of a 2 bedroom home, including mortgage fees and maintenance expenses, with the average rental price for 2 bedroom apartments, condos and townhouses. In cities with price to rent ratios between 16 and 20 indicate that is cheaper to rent than purchase a home, but certain financial situations may make ownership a viable option. In cities with price to rent ratios of 21 and above, it is much more expensive to buy than to rent.

Cities where it's cheaper to rent than buy are:

#5 San Diego
#4 New York
#3 San Fransisco
#2 Omaha
#1 Seattle

Be advised, when you're looking to rent be sure to keep this in mind. If the rent exceeds 1/3 of your income, you cannot afford it. Keep looking! ;0)