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The numbers don’t lie! Before you decide to accept your next tenant application take a closer look at their income. Many landlord find themselves in trouble shortly after accepting a tenant into their rental units…mainly because the tenants are financially overextended.

A good rule of thumb is to require that your tenants annual income is at least 40 times the monthly rent. For example, if two roommates are looking at a $3,000 per month apartment, you would require a combined income of $3,000 × 40, which equals $120,000. To determine how much rent you they can afford, simply divide their combined annual incomes by 40.

You might have also heard that you should spend no more than 30% of your annual income on rent.  Spending 30% of your yearly income on rent is believed to be an affordable amount, leaving enough money for all your other expenses. What’s the difference between 30% and 40 times the monthly rent? Absolutely nothing, they’re just two different ways of deriving the same number.  The 40x trick is just easier to calculate.

For example, let’s take $120,000 of income.

  1. 30% of $120,000 = $36,000.
  2. $36,000 ÷ 12 months = $3,000 per month.

But to make the calculation easier, just divide $120,000 by 40.

  1. $120,000 ÷ 40 = $3,000 per month

Again, to determine how much rent your tenants can afford, simply divide your combined annual incomes by 40. Don’t have a calculator handy?  Use the following table to look up your maximum rent.

Gross Annual Income

Max Monthly Rent

$40,000

$1,000

$44,000

$1,100

$48,000

$1,200

$52,000

$1,300

$56,000

$1,400

$60,000

$1,500

$64,000

$1,600

$68,000

$1,700

$72,000

$1,800

$76,000

$1,900

$80,000

$2,000

$84,000

$2,100

$88,000

$2,200

$92,000

$2,300

$96,000

$2,400

$100,000

$2,500

Need help renting one of your units? Contact us! We can help you find qualified tenants….often at no cost to you!

Contact@MandrellCo.com or 617-297-8641