The biggest financial concern landlords face is the nonpayment of rent, so it’s important to make sure that prospective tenants can afford your monthly rent.
Determining the rent-to-income ratio should be a part of a landlord’s screening process, and setting the ratio – whether it’s 20% or 30% – should be included in every landlord’s screening criteria. With our intuitive calculators, it’s easy.
The number one benefit of checking a tenant’s income is to ensure you select a tenant who can appropriately afford your rental.
For example, renting to a tenant whose rent-to-income ratio is 50%, meaning that 50% of their monthly income will go to rent, is a larger risk for landlords and their investments.
There are many unexpected things tenants might need to pay for, such as emergencies or vehicle repairs, that can greatly reduce monthly income and lead to a missed rent payment.
Tenants don’t want to be living paycheck to paycheck for rent, and landlords want to avoid nonpayment of rent, which can lead to evictions – an expensive process for both parties.
The rent-to-income ratio calculator is simple, and you’ll only need a few things to determine the correct ratio or gross income depending on which calculator you choose to use above.
This is the total gross income a renter makes a month before any deductions or taxes are taken out. Typically, on a rental application, landlords will ask the total gross monthly income of a tenant.
This is the amount of rent that will be due monthly for the rental property.
The gross income-to-rent ratio is the multiplier you are looking for compared to the rent – it is on a scale of five so you can determine the type of ratio you are looking for.
For example, if you want a tenant’s income to be three times the monthly rent, you would select three on the slider to get the correct output.
This is the percentage representing how much of a tenant’s monthly income will be needed to pay the rent.
This is the monthly income you’d expect with the ratio you determined on the slider.
Similar to the target gross monthly income, this is the amount of annual income you’d expect with the ratio you determined on the slider.
Using the first calculator, say a tenant’s monthly gross income is $5,000 and the monthly rent is $2,000. The rent-to-income ratio would be 40% which is higher than the recommended 30% threshold.
Applying the same numbers to the second calculator, with the monthly rent being $2,000, say a landlord wants the tenant’s income to be three times the monthly rent amount (close to 30%).
When you set the gross income-to-rent ratio to three, the outputs show that you’d want a renter’s target gross monthly income to be around $6,000 with a target gross annual income of $72,000.