Tenant's Ratio of Rent to Income?

What should the percentage of the tenant's rent be to their income? Not sure if I even know how to ask the question properly. Sorry. I want to make sure the tenant can afford the rent. Should the tenant's rent be no more than around 35 percent of their income? More than 35 percent? Less than 35 percent?

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Jul 23 '11, 09:12 AM

I require no more than 33%. That said, my daughter and one of her friends have been looking for apartments. They've been trying individually owned small multis and small apartments and most of them seem quite lenient on this ratio.

Jon Holdman, Flying Phoenix LLC

Ryan B.

Real Estate Investor · -, Illinois

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Jul 23 '11, 09:50 AM

I am the same as Jon, tenant must make at least 3x the rent.

Jon K.

Real Estate Investor · Dallas, Texas

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Jul 23 '11, 09:59 AM

I require 3x the rent, too.

On HGTV I saw a couple looking for a rental in Paris, where by law they require net income to be at least 4x rent.

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Jeff Sielicky

Real Estate Investor · Portland, Oregon

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Jul 23 '11, 12:46 PM

If they don't have other debts 36% (which is conforming conventional loan ratio for all debt) should be easily doable. Look at all debts and decide from there. Remember this is on gross income.

Olden days said one weeks pay for rent.

If they have good credit chances are they know what they can afford. If they don't, they don't.

Dorraine Stanley

Property Manager · LaGrange, Georgia

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Jul 23 '11, 03:42 PM

Thank you all for such quick responses! One more question: What if they do in fact have "other debt"? How do I calculate that?

Jeff Sielicky

Real Estate Investor · Portland, Oregon

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Jul 23 '11, 08:39 PM

All debt including rent should be less than 36%. You can go a little higher if the debt is short-term and they have a little savings.

Have heard lenders go as high as 44% of gross but again, conforming loans require no more than 36% total debt and 28% house payment. Using loan requirements not a bad idea with rentals too.

Do a credit check and see if they are doing ok with what they have in debt. If they are then will be fine, assuming your rent isn't a lot higher than what they had.

Allen Bailey

Commercial Real Estate Broker · Memphis, Tennessee

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Jul 23 '11, 08:51 PM

Usually we require three times the rent before taxes. However there are always exceptions. The main exceptions that that we look at are people on fixed incomes from Social Security and or disability. A senior citizen that is retired and gets a Social Security check of 1200 a month and has no other expenses can usually afford a $500 monthly rental as as their other expenses are lower.

However a single parent with a $1200 month income cannot afford $500 month rental. We do accept section 8 vouchers in this also will cause the income ratio amounts to fluctuate as the most important thing is the amount of section 8 voucher.

Dorraine Stanley

Property Manager · LaGrange, Georgia

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Jul 24 '11, 10:46 AM

You folks are great! Thank you so much for answering my questions. You are much appreciated!!!