Many property owners impose rental income requirements for prospective tenants renting their apartments. Property managers and landlords usually state their requirements on marketing material such as brochures or when requesting a rental application.
If you are unlike, others won't say anything and turn down your application or deny you tenancy because of your credit report score. Others will focus on your income to determine if it is adequate to rent an apartment before giving you the lease to sign.
If you’re looking to rent a home of any size, you will have to undergo a tenant screening or application process. During this process, property managers look into various things to ensure that tenants will be responsible with their property.
Tenant screening checks criminal backgrounds along with rental history and the financial situation of the applicant.
Looking into a prospective tenant's financial situation is done to reassure the property owner that the applicant has the means to pay their rent each month and the likelihood that they will pay on time.
When a tenant does not pay their rent on time, the mortgage, utilities, and expenses of the property cannot be paid.
Your monthly rent may also be an important source of income for the owner of your apartment and if you are not able to pay your rent, they could be put in a difficult financial situation as well.
The best way for property managers to ensure that the financial responsibility of the property is taken care of is to carefully screen tenant income and credit history.
In order to determine if you have the financial standing to rent an apartment, property managers start by checking your employment, verifying your income, and running a credit check.
To do this, you may be required to provide proof of your employment or income such as the pay stubs for the last few months or a recent W-2.
They may also contact your employer to verify that your employment is in good standing. The screening process also includes a credit check that provides them with a glimpse into your financial history and financial habits.
Just as important as verifying the source of income is verifying that the tenant has sufficient income to make the monthly rent.
In order to qualify a tenant for their rental, some property owners require that tenants have a certain rent-to-income ratio.
The rent-to-income ratio is a key requirement for new tenants and allows property managers the flexibility to determine actual income requirements based on necessary rent payments.
Under one method, a property manager will prefer, or even require, that applicants have an income that is at least double the amount of the monthly rent.
For example, if rent is set at $1200 a month, the tenant should have a monthly income of at least $2400. Preferably, an applicant will make at least three times more than their monthly rent.
Another method is to ensure that only 30% of an applicant’s annual income goes toward rent payments. For example, if a person makes $50,000 annually, they shouldn’t rent a home with a rent cost of over $1250.
There are many factors that can affect the income requirements of an individual.
For example, if a prospective tenant is still paying off student loans and doesn't have a well-paying job, it is likely to reflect on the credit report, deterring their efforts to rent an apartment.
Since rental income requirements are part of the initial stages of tenant screening, it saves the property managers and landlords a lot of time doing paperwork to process applications.
The rent-to-income ratio method only works if the landlord or property manager knows how much you earn.
This information is acquired from the proof of income every prospective tenant must present before finalizing the lease.
Pay stubs are documents issued to employees after every payment period, showing their earning rate, how often they went to work, and other crucial details.
While pay stubs usually reveal how much money a person makes, they reveal a lot about a prospective tenant. The landlord can use this information to make an informed decision about getting into a lease agreement.
The last thing any rental property owner wants is to get into an agreement with a tenant incapable of paying rent on time.
This is a letter from your employer addressed to your landlord that discloses how much you earn. However, a proof of income letter is different from a pay stub because it reveals less information about your financial situation.
If you are looking to rent an apartment without a pay stub, some landlords and property management companies might accept proof of income letters to accept your application.
This document contains a detailed description of an individual's income in the previous tax year. Although this gives the landlord a look into the financial background of a prospective tenant, it doesn't guarantee a similar financial position today.
Property owners will usually require tenants to present these documents along with others, such as pay stubs, bank statements, and W-2 statements.
It is a document that shows an individual's annual taxes and earnings. If a tenant has not been paying taxes as required in the past year, it will reflect on the W-2 forms, compromising their chances to rent an apartment.
If the tenant holds multiple jobs, they should present W-2 forms from all the employers.
These are your bank balances and transactions which are considered proof of financial capability to make rent payments.
However, one downside to bank statements is that they can't be used to show proof of employment even if the transactions are of substantial amounts.
If your present bank statements as proof of meeting rental income requirements, they can decline your application unless you can show proof of employment.
There are cases when a person's income can prevent them from renting an apartment. To prevent this from becoming a major issue, you can opt for several solutions to ensure you end up with a roof over your head.
The first thing you need to do is get an apartment that's within your price range. This wise option gives you a sense of security, knowing that you meet the rental income requirements.
Another option for tenants who don't meet the set income requirements has good credit. Using the income-to-debt ratio, potential tenants sometimes can use their good credit to appeal to property management companies and landlords.
A tenant with an impressive credit rating and credit score is more likely to rent an apartment since the landlord will be convinced of your financial management skills.
If you don't meet the rental income requirements, landlords will feel comfortable getting into an agreement if you find a guarantor or someone to co-sign the lease.
Even though the co-signer doesn't live in the same apartment, they are responsible for covering the rent in the event you fail to make payments.
It is important to remember that a co-signer undergoes the same level of scrutiny and screening as a tenant, so make sure you choose wisely to increase your chances of acquiring the rental space.
You can also choose to move into an occupied apartment and become someone's roommate.
This means that the current tenant has satisfied all the rental income requirements, allowing you to live there despite your financial situation.
Some landlords require both roommates to meet the requirements, which can be a problem. In this case, possible alternatives could include proving you can pay half of the rent on time.
If an applicant has passed the financial screening process, yet the property manager has concerns about their rent-to-income ratio, they may still accept tenants who are willing to accept further terms.
A few ways that a tenant can attempt to work around a rent-to-income ratio include:
It's important to know that there is no guarantee that offering or agreeing to any of the above will convince a property manager to look past the income requirement. However, it’s worth it to ask if you’re working on finding an apartment.