Every landlord or property manager has different requirements and expectations for their tenants. Some expect to see steady employment, some look for references that prove a positive rental experience, and some have income requirements. Today, we’re going to discuss why some landlords require 3 times the rent, what it means, and other factors they may consider instead.
Key Takeaways:
- The “3x rent rule” means tenants must earn at least three times the monthly rent in gross income.
- Landlords use this rule to reduce risk, follow industry standards, and ensure tenants can afford housing.
- Tenants who don’t meet the 3x rule may still qualify with a co-signer, savings, or strong rental history.
What Does “3 Times the Rent” Mean?
If you come across a rental ad that says something along the lines of “tenant must make 3x the rent”, it means that the landlord or Austin property management company is looking for someone who can prove their monthly gross income is at least three times the monthly rent. For instance, if the rent is $1,600, the tenant would need to make at least $4,800 per month before taxes.
Why Do Landlords Require This?
So, why do landlords require 3 times the rent? There are a few reasons for this. The most obvious one is that they want to ensure tenants have enough financial cushion to pay rent on time. However, some other reasons for this rule include the following.
Reduce Risk of Missed Payments
Rent is usually a landlord’s biggest source of income, so, of course, they will care if it is paid on time. So, if tenants don’t have the means to cover rent each month, it can make landlords think twice about renting to them.
Following Industry Standards Requiring three times the rent isn’t a legal requirement, but over the years, it has become an industry standard among several property management companies. So, using it can make the tenant screening process quicker and create consistency when reviewing applicants.
Accounting for Other Expenses
Even if you’re able to make the rent payment each month, you still need money for groceries, utilities, and other essential bills. Requiring 3x the rent ensures tenants can live comfortably without rent taking up an unsustainable amount of their income.
Protecting Their Investment
Owning a rental comes with several ongoing costs like maintenance, taxes, and insurance. So, if tenants fall behind on rent, landlords may need to take costly legal measures to evict them and find a new tenant who will pay on time.
Is the 3x Rent Rule Always Required?
No, the 3x rent rule is not always required. It ultimately depends on your landlord or property manager and their rules or expectations for their properties. For instance, some landlords may be more flexible with this rule if:
- The tenant has an excellent credit score or strong rental history
- A co-signer agrees to back the lease
- The tenant can pay several months of rent upfront
- The rental market is competitive, and landlords need to fill vacancies
With that, while some landlords may be more flexible, others may not be. Sometimes, in high-demand markets, landlords stick strictly to the 3x rule since they have more applicants to choose from.
What Can Tenants Do If They Don’t Meet the 3x Requirement?
If you don’t meet the 3x rent requirement, that doesn’t mean you’ll automatically be denied. Some landlords may consider other factors or accept alternative arrangements to work with you on qualifying for the property. Here are some things you may be able to do.
- Find a Roommate - If you split rent with one or more roommates, your combined income may meet or exceed the 3x requirement.
- Use a Co-Signer - You could ask a parent or relative with stronger income and credit to co-sign for you in case you’re ever unable to pay rent.
- Show Proof of Savings - If you have significant savings, provide bank statements as proof that you can afford rent even with a lower income than the landlord is expecting.
- Provide References - You can always ask your employer to put in a good word for you and confirm that you have a steady income and job security, which can strengthen your application.
- Offer a Larger Security Deposit - Some landlords may be a bit more flexible if you can provide a larger security deposit or pay several months upfront.
- Show Rental History - If you’re a great tenant who has always paid rent on time, ask previous landlords to put in a good word for you.
Other Factors Landlords Consider Besides Income
While income is important, it’s not the only factor landlords look at when screening tenants. After all, they want to get a full picture of your financial stability and reliability as a tenant, so a thorough screening process will include looking at the following. ●
- Credit Score - Requirements vary, but most landlords look for a score of 600 or higher. A higher score usually signifies to landlords that you’re financially responsible.
- Debt-to-Income Ratio - They’ll also want to see your debt-to-income ratio, because even if you have a high income, large debts can still set you back.
- Employment Stability - Having a steady job history is reassuring, while frequent job changes may raise some concerns about your income.
- Rental History - Seeing that you have a positive rental history can put you in better standing, even if you don’t meet the income requirements.
- Background Check - Many landlords run criminal or eviction history checks to mitigate any risk that could put their property or other tenants in jeopardy.
Find Your Ideal Rental Property Today
At the end of the day, the “3x rent rule” is one of the many ways landlords can protect their investment and ensure tenants can comfortably afford their homes. While it can feel like a hurdle or maybe even an unrealistic expectation, there are options to explore if you don’t meet that requirement.
At Stone Oak Management, we help make the rental process as easy as possible for both landlords and tenants. For tenants, we can help you find your ideal rental, guide you through the application process, and be there for you throughout your tenancy. For landlords, we provide tenant screening, property maintenance, and reliable rent collection, so you don’t have to worry about it. Contact us today to learn more about how we can help you succeed in Austin’s rental market.
