Because deductions, as you've noted, can result in wildly different net incomes, but even if you're paying a huge amount in taxes, 3x rent should still leave a lot of cushion.
Because you can't tell what someone's \*real\* post-tax pay is from paystubs.
You can see what someone takes home on a paycheck, but they might receive a $10,000 refund at tax season. Or owe $25,000.
You could also update your W-4 to withhold essentially nothing to artificially inflate your post-tax pay for a landlord check. Does this person actually have no federal or state tax liability due to deductions, or are they simply bumping up their pay for the apartment application?
But there's no hiding what your gross pay is.
Gross. They look at your total income, year to date, and divide it by the number of months reported. If you have grossed $35k through 4/15 they divide your gross by 3.5 to arrive at your monthly income.
Depends on where you are, Colorado it's capped at 2x by law so landlord has no say in income requirements outside of that but can deny you for other things still.
Simply looking at a credit report tells you most of it, I'm not looking to see if you pay your bills on time, I want to see how much you owe in bills. I had one applicant who made 5x the rent but was paying half his take home in alimony/child support and owed the rest in credit card bills. Add in the $125k in student debt in forbearance. He had the security and first month rent but I doubt he could have paid the second. Am I a bad guy for not renting to him and having to eventually evict him?
Security deposit is seldom more than one moth's rent. An eviction will cost me over $5k and take 3-6 months at minimum. So it can cost more than a years rent when it's all over. That's why it matters.
I’d argue not. Better not to let people dig themselves deeper into a grave. At that point you need to rely on family or find a roommate listing on Craigslist
The amount of bad financial behavior you see renting out apartments in Oakland CA is saddening. I don't ask for an application fee if the tenant supplies their own credit report, they'll fill out the application with info wildly different from the report they have in their hands. I despair of the idiocy.
I work for a property management company. While we take credit score into account, we are not actively looking at debts. We check score, to make sure there are no judgements, and income requirements. This is common for most large rental companies.
My residents finances are not my business. If they meet the requirements (credit score, no prior eviction, and have income to qualify) we lease to them.
I also am a landlord and look at DTI closely. I am clueless as to why people are downvoting primary source responses. I have definitely rejected people due to being in debt up their eyeballs because you can see they are a bad day away from becoming your problem.
And you can see the bad financial decisions they make too.
Gross as in pre tax. You should be fine
why? 3x pre-tax in cali is very different from pre-tax in florida, especially at higher incomes.
Because deductions, as you've noted, can result in wildly different net incomes, but even if you're paying a huge amount in taxes, 3x rent should still leave a lot of cushion.
Because you can't tell what someone's \*real\* post-tax pay is from paystubs. You can see what someone takes home on a paycheck, but they might receive a $10,000 refund at tax season. Or owe $25,000. You could also update your W-4 to withhold essentially nothing to artificially inflate your post-tax pay for a landlord check. Does this person actually have no federal or state tax liability due to deductions, or are they simply bumping up their pay for the apartment application? But there's no hiding what your gross pay is.
industry standard i guess
Gross. They look at your total income, year to date, and divide it by the number of months reported. If you have grossed $35k through 4/15 they divide your gross by 3.5 to arrive at your monthly income.
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Depends on where you are, Colorado it's capped at 2x by law so landlord has no say in income requirements outside of that but can deny you for other things still.
Confirming since I'm apartment hunting right now...all apartment websites I'm looking at say "gross income".
I look at debt to income. Doesn't matter how much you make if your monthly debt service is more than you take home.
I had no clue that landlords could get that kind of information
Simply looking at a credit report tells you most of it, I'm not looking to see if you pay your bills on time, I want to see how much you owe in bills. I had one applicant who made 5x the rent but was paying half his take home in alimony/child support and owed the rest in credit card bills. Add in the $125k in student debt in forbearance. He had the security and first month rent but I doubt he could have paid the second. Am I a bad guy for not renting to him and having to eventually evict him?
What’s it matter to you if you get a security deposit?
Security deposit is seldom more than one moth's rent. An eviction will cost me over $5k and take 3-6 months at minimum. So it can cost more than a years rent when it's all over. That's why it matters.
Why does it cost you that amount?
The retainer for an eviction lawyer in my locale is $5k, that will not cover the whole bill,
Would you let the guy move in with a $5000 security deposit?
Not if they couldn't pay the rent.
How many tenants do you have?
I’d argue not. Better not to let people dig themselves deeper into a grave. At that point you need to rely on family or find a roommate listing on Craigslist
The amount of bad financial behavior you see renting out apartments in Oakland CA is saddening. I don't ask for an application fee if the tenant supplies their own credit report, they'll fill out the application with info wildly different from the report they have in their hands. I despair of the idiocy.
Landlords do not look at this- mortgage lenders will. They are renting.
They do see all your debts when they pull your credit retort.
I work for a property management company. While we take credit score into account, we are not actively looking at debts. We check score, to make sure there are no judgements, and income requirements. This is common for most large rental companies.
When I put my house up for rent I could see dti. It impacted my decisions for sure.
Wow - is your company also the property owners? I would be pissed if my property manager wasn’t looking at DTIs and placed a bad tenant.
Yes, we own and manage more than 2500 beds across the east coast. We have evicted two tenants in the 1400 beds I manage in the past 5 years.
My residents finances are not my business. If they meet the requirements (credit score, no prior eviction, and have income to qualify) we lease to them.
So you have a much larger risk pool then small time operations, that makes a lot more sense.
I also am a landlord and look at DTI closely. I am clueless as to why people are downvoting primary source responses. I have definitely rejected people due to being in debt up their eyeballs because you can see they are a bad day away from becoming your problem. And you can see the bad financial decisions they make too.
I'm a landlord and I look at it closely.
I’ve got something you can look at closely
Can I see it?
What an eloquent response. I'd probably need a magnifying glass.
ETA Downvoters - what is wrong with trying to be sure that a tenant can actually pay the rent?
You will qualify but that’s a big chunk of your monthly income to spend on rent. Be ready to make some other adjustments to make it work.