Rent-to-Income Ratio Calculator
Screen rental applicants: rent-to-income ratio, 3x rent income requirement, maximum affordable rent and debt-to-income. Free tool for small landlords.
Not ready? Start with Rental Property Cash Flow Calculator (free). See all templates.
What is the rent-to-income ratio?
The rent-to-income ratio is the share of an applicant's gross (pre-tax) monthly income that would go to rent. Many landlords and property managers use it as a first screening step, often written as an income requirement: "monthly income must be at least 3 times the rent." A 3× requirement equals a rent-to-income ratio of 33.3% or less.
The formulas
- Gross monthly income = annual income of each applicant ÷ 12 + other monthly income
- Rent-to-income ratio = monthly rent ÷ gross monthly income
- Minimum income required = rent × required multiple (shown monthly and × 12 per year)
- Maximum rent at this income = gross monthly income ÷ required multiple
- Debt-to-income with rent = (rent + monthly debt payments) ÷ gross monthly income
Worked example
Your unit rents for $2,000 and you require 3× rent. Two co-applicants earn $60,000 and $18,000 a year, so their combined gross monthly income is $78,000 ÷ 12 = $6,500. The rent is $2,000 ÷ $6,500 = 30.8% of income, a multiple of 3.25×, so they meet the requirement. The minimum income for this unit is $6,000 a month ($72,000 a year), and these applicants would qualify for rent up to $2,166.67. With $400 of monthly car and card payments, their debt-to-income including rent is 36.9%.
Common income rules
- 3× monthly rent: the most common standard. Equal to a 33% rent-to-income cap.
- 2.5× rent: used in some markets to widen the applicant pool, a 40% cap.
- 40× monthly rent per year: common in New York City. Annual income ≥ 40 × rent is about 3.33× monthly.
- 30% rule: the US Department of Housing and Urban Development calls households paying more than 30% of income for housing "cost-burdened". It is a useful affordability benchmark.
Screening fairly and legally
- Write down your criteria and apply them the same way to every applicant. Consistency is your best protection under fair housing law.
- Some states and cities limit income requirements or protect "source of income", such as housing vouchers. Where that applies, you may need to calculate the ratio on the tenant's share of the rent only. Check your state and local rules before you set a policy.
- Verify income with pay stubs, an offer letter, tax returns or bank statements. Use gross income, because that is what the ratio is based on.
- Income is only one factor. Rental history, references and the condition of past rentals matter too.
Before setting rent, check that the property works at that price with the rental property cash flow calculator.
FAQ
Should I use gross or net income?
Gross (pre-tax) income. Income requirements like 3× rent are almost always based on gross pay, and it's what applicants can document most easily with pay stubs and tax returns.
Can I combine roommates' incomes?
Many landlords combine the incomes of everyone who signs the lease, as the calculator does. Others require each roommate to qualify for their share. Whatever you choose, apply it to every applicant.
What about guarantors?
Guarantors are often held to a higher standard because they are also paying their own housing. In some markets it is common to require a guarantor to earn 80× the monthly rent per year. Use the multiple field to test a guarantor's income.
Is a lower ratio always better?
A lower ratio means more room in the tenant's budget, but rejecting a tenant with a great rental history over a few percentage points can cost you more in vacancy than it saves in risk.