Tenants Income

Hello everyone,

I have a question for the more established landlords on the forum. I'd like to know how you determine if a prospective tenant's income is sufficient for them to afford your rent payments. I imagine you would require that the rent payments be under a certain percentage of monthly net income. If so, what percentage has everyone generally found to be a good indicator of the tenant being able to afford the rent?

Tim

Comments(5)

  • Apprentice2Him12th October, 2004

    As a general rule, I require monthly income to be 3x rent if two wage earners, and 4x rent if one wage earner.

    Exceptions, of course are Section 8, where your concern is with their voucher and whether you think they can take care of your property.

    Good luck.

  • roboxking12th October, 2004

    You have to measure alot of things.

    Like Debt-to-income, credit experience.....ect
    to play it safe the rent should be no more than 35% of income.

  • alexlev13th October, 2004

    Various books list different percentages that are "acceptable." Most of them lean toward 25%. But I don't think that's very realistic. Most people today carry quite a bit of debt on their credit cards, and school and car loans. I generally tend to go with 30-40%. I've gone as high as 50%, but I was really nervous signing the lease, and thankfully, the tenant got a raise a couple of months later.

  • davmille13th October, 2004

    I would agree with the above comments, but I would also add that it depends on the tenants. Older tenants can often spend up to 50% with no problem. Younger tenants, especially if they have kids and only one income should not spend over 25% for obvious reasons.

  • murph051113th October, 2004

    Thank you to everyone for the responses...

    I assume these percentages are based off of net pay, not gross pay, correct?

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