In this video I explain how to use the price to rent ratio to determine whether one should buy a house or rent one. Essentially if you're price to rent ratio is greater than 21 you should rent instead of buying because your capital will be earning a very low return and you could likely put it to work for you in higher yielding investments which would offset your rental expenses. Many other factors go into the rent vs buy decision and this is just one variable to consider when making that decision.
Answer Key: https://docs.google.com/spreadsheet/ccc?key=0AvFYNI9VGM6TdHAyUFNUSUdXdzBwc09HRUlFZE5CX0E#gid=1
Investopedia Definition: http://www.investopedia.com/terms/p/price-to-rent-ratio.asp
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