What is your typical minimum income requirement you pose for your potential tenants? As in the ratio of gross (or net) income vs. monthly rental amount. For example, I am renting a condominium in Texas for $1250/mo and wondering what to set income requirement at.

Enough money to cover their bills, including rent.

Over the years, I have had tenants that make more than enough money but can't get their rent in on time, and I have had tenants who barely make enough, but make it a point to pay rent promptly. Thus, I find these artificial requirements to be not much actual value.

I base my decision on the people standing before me who say that they want the apartment. I prefer university graduates, take only applicants with whom I can reason on a university graduate basis, plus a clean credit record and a collectable source of income. Since adopting this practice, I have not been disappointed.

For me, it varies based on how much the rent is, and how much of a buffer I think people need to have in order to successfully keep me happy and take care of all their other obligations as well-- food, utilities, gas, etc.

So, for example, I have a teeny little place that rents for $360 that's currently open--- but I'm looking for an income of about $1500.

Later on, I'll have a place that rents for about $600. I'll be looking for about an income in between $2000-$2500.

So even though the small 1/1 is about 60% of the cost of my 3/2, in my market, there's no corresponding scale between the rents I ask-- or the incomes I expect. Because when you just look at the numbers, there's really only a $500/month difference between what I'm willing to consider for one versus the other-- but there's a world of difference in that $500. And ultimately, that's that that $500 is--- it's a screening tool.

So, if I was in DFW, or whatever your city is, I'd think about the kind of person you'd want living in your condo. Especially in Texas, when oil & gas is thriving, there's not always a whole lot of connection between income and quality of tenant... but suppose you put it at $4k/month income vs $5k/month income. What sort of options would be available to people of that caliber? What would make them choose to live in your condo? Location? Amenities? etc.

6er,

General rule 33% of GROSS monthly income = rent afford.

But...

Most applicants don’t know what their gross is, just the amount put into their account. And paid by the week, not the month, so we take 4.2 times their weekly = monthly, x .33 = afford.

Leaving 66% for food, utils, auto, clothing, medicine, kids, debt payments, .. life.

But...

We now live in the age of humongous student loans, unbelievable car payments, and wage garnishments.

More accurate: this is where many LLs fail by renting to folks who have income but have too many bills to keep up the rent. We work from the NET (after taxes) and allow 15% for their student loans, and 15% for auto payments. Anything over that we deduct from their monthly NET.

NET x .42 = their true afford over the long term.

We use the data from their pay stubs NOT what they write on the app.

BRAD

Earnest,

Sorry, I used the wrong name.

Thanks for your question!

Rent should be 1/3 of gross, BUT as Brad said watch out for student loans and to a lesser extent massive car payments.

For example I have seen credit reports like this; say my rent is $2000 I figure in $200 for utilities and cable.

$6k a month take home.

$900 for car lease/loan

$200 for cell phone.

$800 for car lease/loan #2

$2000 a month for student loans.

$400 to visa

That's $4300 a month before I get paid my rent, this person cannot afford my rental.

Earnest,

Chris’s reply reminded me - these basic %s have not caught up with lifestyle changes in our society. A few years ago many people did not have $200 cell bills or Netflix, Hulu, Amazon Prime, video games subscriptions, monthly service fees for iCloud, phone insurance and phone payments...and gotta take a few vacations each year...and more.

As a financial counselor for our church folks I see MOUNTAINS of money going to tech that strangles out groceries. Credit cards are used to bridge the overage each month.

Maybe we need to see their credit card statements to see how close tbey are to running out.