Q: Why do landlords and property managers require applicants make at least 3 times the monthly rent?
A: The 3x the monthly rent requirement you normally see, actually originated in the Housing Act of 1937 (originally proposed in 1934). Then we take into consideration that Section 8 of the Housing Act offers federally-subsidized rent assistance to families. Section 8 requires families to pay 30% of their adjusted income toward rent. The program then covers the gap between 30% of their income and the actual rent cost. This eventually became the standard rent-to-income ratio for the housing market.
And, you are less likely to miss a rent payment or struggle to afford rent.
Q: How do you know if you make 3 times the rent?
A: Let’s do some general math:
If the monthly rent of the property is $2,000, then 3 times the monthly rent is $2000 x 3 = $6000 (monthly income required to keep rental payments less than 1/3 of income)
$6000 x 12 months = $72,000 (annual income required to keep rental payments under 1/3 of income)
Keep in mind, income is just a piece of the application process puzzle because we know rents have increased. Always check and make sure you understand the application qualifications or requirements before you apply.
Also, don't forget to check out our other post How to Calculate your Rent-to-Income Ratio
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