Income/Rent Ratio

[NorthernAlex]

Hello world.

I just received a Rental Application for an August vacancy and was thinking that she is earning not enough to pay rent AND to live.

She says that she makes 22.000/annually and the rent would be 750$. So, even if this the annual income AFTER tax (which I doubt), the monthly payment for rent would be roughly 41%.

Rule of thumb I would say 1/3 of the salary.

What is your point of view?

 

[invst4profit]

1/3 is the maximum I accept. Anyone over that I reject as being too risky.

Yes some tenants may be able to afford more but I do not take that chance.
Many LLs may say they had a 40% tenant that was the best they ever had but for me I do not see any reason to take chances on a stranger that may place my business at risk.
When I do my screening I eliminate any applicant that has an above average risk factor in any category.

There are more than enough tenants out there to not have to accept a sub standard applicant but that is simply how I operate.

 

[HeatherBrandt]

QUOTE (invst4profit @ Jul 14 2009, 09:47 AM) 1/3 is the maximum I accept. Anyone over that I reject as being too risky.

Yes some tenants may be able to afford more but I do not take that chance.
Many LLs may say they had a 40% tenant that was the best they ever had but for me I do not see any reason to take chances on a stranger that may place my business at risk.
When I do my screening I eliminate any applicant that has an above average risk factor in any category.

There are more than enough tenants out there to not have to accept a sub standard applicant but that is simply how I operate.


I agree. 41 % is too high. If she ever got behind on the rent (even a week), she couldn`t catch up without a big cash infusion. 22,000/yr=$10-10.50/hr fulltime work. Not much over minimum wage.

If you wanted to investigate further, I guess you would find out about where the (small) disposable income goes. Any savings? Dependants? Smoker? pet? Extremely fashionable clothes/accessories? Job that might lead somewhere? Career plans? Significant other that may suddenly moving in to share expenses?

 

[invst4profit]

No scientific evidence, but when income is that low, it seems to me the first solution is a boyfriend and roommate appears.


That is one of the worst things that could happen to a LL in Ontario.

 

[NorthernAlex]

Thank you all. I will let her know that I picked someone else (and I did).

BTW: Greg, what happened you your scary clown avatar?

 

[invst4profit]

I had one of those days that I was in a serious mood and decided to change to a different picture. Took it down and never got around to replacing it.
Probably won`t now. This site has a different style than most of the sites I frequent.
Besides I think I am off center enough on this site without adding to that image.

 

[Nir]

Hi,

Good points. however, what about all those great tenants on disability? so I think it also depends on how stable the income is based on the source of the income.
otherwise how can you explain why people on disability are in many cases good long term tenants? yes, low income but... stable!

Regards.

 

[NorthernAlex]

100% ACK, Neil, if you can get rent directly from Service Canda.

I am referring to a 21 year old, who will move to my town to start a new job. I am just thinking that she is getting desperate (very hard to find an apartment at all right now, students are invading the city...) and willing except even a too high rent without thinking about the consequences/potential risks.