1.47 Income to rent ratio to low?

Question

I have a potential tenant whose income to rent ratio is 1.47. Their credit score is great (780+) and they have never missed a payment. the only thing is that they also have to pay for all the utilities so realistically their income to rent ratio is going to be higher.

Adam Bartomeo · Answer

2.5 times is on the lower side. To rent to someone with that low of a ratio we would require several months of advance rent. This would protect the owner if the tenant was not able to pay.

Bill B. · Answer

So. They have to live on $800/mo.  Assuming their income is low enough they don’t have to pay any state or federal taxes…

Assuming they don’t have a car as the payment and insurance would pry be $800/mo.

Assuming they don’t have to pay any utilities as that would probably be $300-$400

Assuming all their food is provided by the school or that would be $300-400 minimum

Assuming school is costing them nothing out of pocket. Then probably not. Living on $25/day in California seems tough.

Do they have a parent/parents that makes 3 x the rent AFTER paying their own expenses? Do you have no good applicants? Have you considered a PM? (For better screening, advertising, pricing, etc etc.). Is the property going to be expensive to repair if they skip out on rent and trash the place or is it more of a crash pad?

It’s your property, if you can afford to take the risk or have no other choice you get to make the call. But remember. Don’t go turning down a future applicant that only makes 1.47 times rent or you’ll be guilty of fair housing violations. As I’m sure  your written down qualifications say right in them 1.47x rent in income. Because if they say 3X, or they’re just in your head, that’s not legal to change the rules based on the applicant. Your PM would have told you this for free. :-) Good luck.

Hoi L. · Answer

Since he is a college student, 3x income to rent ratio won't necessary work right?  He would require a co-signer, most likely a parent, who will have to supplement his monthly allowance. etc.  College student hopefully would have school loans and parents' help to rent an apartment since they wouldn't have a job paying $5,100/mo.

Is the $2,500/mo loan/work?  Or just work study/part time employment not counting loans/family?

Arshiya Taami · Answer

1700 rent income before tax 2,500 hes a college student

Ke Nan Wang · Answer

Price point matters. If it's a $500 rental that means their income is $750 a month with only $250 excess after paying rent vs if it's a $10000 rental after paying rent they still have $4700 remained.

In general, 3x rent is a good starting point. In our listing ads, we stated that if the tenant meets all of our qualification criteria, they will be approved instantly. But none of our criteria is a deal breaker on its own and they can always negotiate with putting down more on security deposit.

Part of 3x rent is that we assume people have car payments. So for someone with no car payments, that can be adjusted. I have a $1100 a month luxury one bedroom and I rented to an elderly who has great credit score and no late payments but he's only on a fixed social security income. However, he has absolutely no debt and his lifestyle doesn't spend a lot of money. So even his income to rent ratio is much lower than 3x rent, I was still be able to rent to him and he turned out to be a great tenant who always pay rent on time and take care of things around the property.

So review the application as a whole and try to negotiate more security deposit if you think this person is good and just need a little extra to offset the additional risk.