Rent-to-Value (RV) Ratio

[John Thi]

Does anybody know the correct way to calculate this ratio? I have seen two ways on the internet.

House Value $200K and monthly Rent is $900 - This is an example

1. Monthly rent 900/ 200,000 = 0.005

Ideal valuation measure for investment property is 0.7% or more while 0.5% is acceptable and below 0.5% is unacceptable (monthly gross rental income divided by the current fair market value of the property should ideally be 0.7% or higher)

2. Annual gross rent 10,800 / 200,000 = .054 What is the Ideal valuation measure for this calculation?