How to Determine The Rent to Income Ratio Required for Tenants

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How to Determine The Rent to Income Ratio Required for Tenants

The rent to income (RTI) ratio is a calculation that compares the tenants’ gross monthly income to the price of the monthly rent and is expressed as a percentage. Gross income represents the combined monthly income, from all sources, from every adult on the lease, before any deductions such as payroll tax withholdings or retirement contributions.

Many landlords use the rent to income ratio to estimate whether the home is affordable for a prospective tenant, and the likelihood of the tenant paying the rent on time.

The premise is that if too large of a percentage of the monthly income is used to pay the rent, the tenant may not have enough money left over each month to pay normal cost of living expenses such as food, utilities, healthcare, and other obligations like credit card payments or student loans. If the tenant’s expenses are “tight” one month, there is a potential risk that the tenant may pay the rent late or not at all.

According to the tenant screening website TurboTenant, many landlords require a minimum rent to income ratio of 30%. However, as we’ll explain later in this article, rent to income ratios vary based on the local rental market.

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