Similarly, savings or substantial liquid assets might allow renters to bypass the 3X rule if they can show they have enough resources to cover rent, even if their monthly income doesn't meet the threshold. For renters who fall short of the 3X rule, another option is to secure a guarantor or co-signer.
The ``income equivalent to 3x rent'' standard protects landlords because it says to them that you'll earn enough money to pay your rent and still be able to afford the other necessities of living (food, transportation, utilities etc).
However, it is essential to remember that this guideline does not consider the cost of living in your area or how much money you need each month for living expenses such as utilities and cable bills. You can determine 3x the rent by simply multiplying the rent amount by 3.
One rule of thumb involves dividing your pretax earnings by 40. This means that if you make $100,000 a year, you should be able to afford $2,500 per month in rent. Another rule of thumb is the 30% rule. If you take 30% of $100,000, you will get $30,000.
The 3x rent rule applies to your gross income – that's your income before taxes, deductions, and expenses.
The 3 times the rent of $1400 is $4200.
It means that the total gross income of the household should be at least three times the monthly rent. For example, if the monthly rent for an apartment is $1,000, then the potential renter or renters should be earning at least $3,000 per month.
If you make $17 an hour, then you make around $35,360 a year assuming you work 52 weeks a year, at 40 hours a week. This means you can spend around $884 a month on Rent. Using the 30% Rule. Using the 3X rule (33% of your monthly income), you could afford around $982 a month.
If the monthly rent of an apartment is $2,000, then 3 times the monthly rent is $2000 x 3 = $6000 (monthly income required to keep housing payments less than 1/3 of income) $6000 x 12 months = $72,000 (annual income required to keep housing payments under 1/3 of income)
The 3x rent rule is almost always based on gross income—that's the amount of money you earn before taxes and other deductions. Most landlords want to see the big number on your paycheck, not what you actually take home.
Get someone to co-sign the lease.
Many apartments will allow you to rent without proof of income as long as someone else also signs the lease.
The rule generally applies to household income, so a couple's combined annual gross income must be 3x the monthly rent amount. But in many roommate situations, the landlord will require each roommate to meet the 3x rule separately to ensure that they still have a viable tenant if someone decides to move out.
Larger Security Deposit: If you can put down a bigger security deposit, some landlords may feel more comfortable renting to you even if your income isn't exactly three times the rent. Guarantor or Co-signer: A co-signer (like a parent or friend) who has the income to meet the 3x rule can also be a great option.
Spending around 30% of your income on rent is the golden rule when you're trying to figure out how much you can afford to pay. Spending 30% of your income on rent can help you reach a healthy balance between comfort and affordability.
According to this rule, multiply gross monthly income by 0.30 to find the maximum affordable rent. For example, if gross monthly income is $5,000, maximum rent would be $1,500 (5,000 x 0.30 = 1,500).
3 Times Rent (Required Tenant Gross income) Formula
To calculate the required income per tenant, multiply the monthly rent by 3, then divide by the number of tenants.
Often, the income requirement is simply proof that a renter's gross income is high enough that 30 percent of it would cover the monthly lease price. This is called the Three Times Monthly Rent rule. Total gross income should be about three times the rent.
Apartment communities often use equations to determine what's affordable for prospective renters. Some communities use a 3 times rent calculator formula, meaning a renter's monthly income should be at least 3 times what goes to paying rent.
For example, if you're making $20 an hour, assuming you work a standard 40-hour workweek, your monthly income is $3,200. Based on the 50% needs category, you should aim to spend no more than 30% of yours income on rent, which comes out to $960 per month.
Calculate Net Income: While gross income is important, tenants' ability to pay rent depends on their net income after deductions. Deductions may include taxes, Social Security, health insurance, retirement contributions, and other applicable items. Make sure to calculate the net income accurately.