Income of 3X monthly rent requirement?

9 Replies

How was that "income of 3X rental" figure arrived at and do most of you hold to that figure for your rentals?

Also, for renting out a room in a home do you follow that same concept of 3X?

Assuming 1/3 of your income is spent on rent or a mortgage, we'd want someone to still have 2/3 of their income for the rest of their bills/debts. I would follow the 3x concept at all times. If you find that is unreasonable for your area, you could go down to 2.5x. I'd never go lower than that though personally.

That's actually standard advice you'll see on the other side of the coin also.  Financial advice given to people is to not spend more than 30% of their income on housing, sometimes with a caveat that up to 40% is okay for a HCOL (high cost of living) area.  It's just a good rule of thumb all around.

Good for tenants because they (hopefully) won't feel stretched too thin.  And if tenants aren't stretched too thin, they are more likely to pay their rent and pay it on time.

@Digger Odell

3x income is good.  I put more weight on character and rental history....


Frank

I follow the 3X income rule also. Those who meet that rule in whatever area you are in tend to be more financially stable than those who dont.

Great replies, thanks. 

... and would you also follow that same 3X rule for a room renter (roomer) in your home?

I've had some who were 4 times the rent and one who was 7 times the rent. they were still late and paid the late fee. go figure!

I've had one was 3x the rent and they were always on time. ha!

Originally posted by @Digger Odell :

Great replies, thanks. 

... and would you also follow that same 3X rule for a room renter (roomer) in your home?

I absolutely would.  If anything, I might make it 4X, lol.  Just because it can become a much stickier situation if someone living in your own home with you is too low on cash.  They might start eating your food, using your toiletries, etc.  To me, it is even more important that a roomer can comfortably pay the rent.

If the ratio is less, they will move in an unauthorized person to help pay the rent. Watch out!

I always use the 3X rule on income for renting.  There are a few exceptions for retired people.  They seem to manage their money much better than most.  They are usually better tenants too.  You also need to verify this information.  I call the employer to verify income as well as calling their last landlord.

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