When screening tenants, I require 2.5x the rental income. Is this before or after tax?
Also, how long should they be at their current job? What’s the minimum?
Hi,
Rent or Mortgage should not exceed 1/3 of gross income!
GR
So 3x the income. Does “gross” mean before taxes?
YES
The answer is enormously dependent on the region. In coastal Southern California, with enormously high rents, you’re accepting 50% Income-to-Rent ratios. Inland, it can be less.
It also depends on the market pressure. If you’re in an economically depressed area with a high vacancy factor, beggars can’t be choosers. You’ll accept worse ratios, and even worse credit, than those in lower-vacancy, higher-demand areas.
You test the market, and accept reality.
1/3 is a good rule of thumb but I often find that less predictive than a proper credit and background check. I recently started screening for eviction reports too. Your original post asked about employment - I always always verify employment myself and I verify previous employment if they haven’t been at their current job more than three months. If there is a big gap between last two employers I decide based on credit report.
Real estate like politics is local. What works in Texas may not work in Southern California. You need to find out how the people in your area are making money and do that. Don’t reinvent the wheel or try to transplant ideas. Do what they do.
3X Gross income.
Often, I see the requirement for tenants to show proof of 3 months of income. You could also use one pay-stub and just compare the year to date to make sure each paycheck averages around the same amount.
Do you screen your tenants?
Jeni
I agree with you. Gather more information about the people making money in your area.
Thanks!!