Income 3x before taxes - one piece of the puzzle

Income 3x before taxes - one piece of the puzzle by Anna Mouse on February 4, 2012 @18:09

I have learned much from this forum.

One of the things that has been discusse is requiring that the tenants income be 3x more than the monthly rent.

This criteria is a key to having a good tenant which will not turn into a bad situation.

What has not been answered on this board is if the income should be before or after taxes.

I have come to the conclusion that the income needs to be at a minimume 3X the rent after taxes. I also believe that combining income is a path to having problems.

If you require that at least one person makes 3X the rent in monthly wages after taxes you are going to be secure and not end up with feeling your tenant is a bum or squatter.

Your response may be what if that one person loses there job. That is no different than if you have two people meeting half the expenses each. I have 2 people meeting the required rent then one loses their job your in the same boat.

If you have one person capable of meeting the rent and have more than one person renting the second and or third persons income is in addition and above and beyond. That second or third income will be of use when the first perhaps runs into trouble.

This is a winning forumla for I would say 90% of the rentals. There are some situations that cater to different markets whose formula is different.

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I mean AFTER taxes. Not before but after. by Anna Mouse on February 4, 2012 @18:11	[ Reply ]

Re: Income 3x before taxes - one piece of the puzzle by Anonymous on February 4, 2012 @23:37	[ Reply ]

The only problem with your theory Anna is that in some states (CA for example) it is illegal. CA requires by law that you include ALL household income in your calculations. Also in many areas it is becoming increasingly difficult to find any qualified tenants. We have to include income from food stamps, community assistance, etc. or remain vacant. The problem is with insufficient income, two months after they move in the car needs new tires, or worse, the tenant discovers that running the AC 24/7 results in an unexpected $375 bill and guess who's last in line to get paid?

Re: Income 3x before taxes - one piece of the puzzle

Re: Income 3x before taxes - one piece of the puzzle by Anonymous on February 4, 2012 @23:46	[ Reply ]

While your scenario is ideal it is not practical for alot of rentals. My rental is in a so-so neighborhood and rents for $1000. To find someone who makes $3000 after taxes to live there is never going to happen.

Re: Income 3x before taxes - one piece of the puzzle

Re: Income 3x before taxes - one piece of the puzzle by Eric (MN) on February 5, 2012 @09:48	[ Reply ]

I use gross income, combined with credit score. Most Landlords do not have a clue how to attract good renters, so they think they cannot find a good renter. The landlords who say things like "it is becoming increasingly difficult to find any qualified tenants" and "who makes $3000 after taxes to live there is never going to happen" are naive and do not know how to price or market their property. If someone does not make 3x the rent, they cannot afford it, period.

Re: Income 3x before taxes - one piece of the puzzle by MrDan (Georgia) on February 5, 2012 @15:22	[ Reply ]

If you receive applications from unmarried couples and married couples, you must treat them the same during the screening process. Therefore, you cannot have different standards to combine income for unmarried couples than for married couples.

Re: Mr. Dan.....

Re: Income 3x before taxes - one piece of the puzzle by Fred (MN) on February 5, 2012 @16:03	[ Reply ]

Credit score, 3X gross income. I've rented to a billion tenants, and this formula works. Bad credit score - don't rent to them. Less then 3X gross - don't rent to them. Combined vs. uncombined incomes? I don't agree with your approach of using just one income. Overall your formula is pretty stiff, but as a landlord, I understand where you are coming from. You just want the rent paid each and every month on time. We all do. But you also have to keep it realistic.

Re: Income 3x before taxes - one piece of the puzzle