Nearly every New York-area property owner and managing agent qualifies their tenants using the same benchmark financial criteria.
Landlords should seek renters who earn wage or salary income of 40 to 50 times the monthly rent due for their property. For a home asking $5,000/month in rent, a tenant should need to show proof of $200,000 per year at a minimum.
In our area, where bonus income is common and may make up a significant percentage of annual compensation, landlords often accept bonus compensation as income, with, importantly, evidence of similar historical bonuses being paid.
For combined incomes for shares or couples, we typically use a slightly higher benchmark: 60 times rent. In our case above, if two spouses each make $300,000/year, or three roommates each make $100,000/year, approval could likely be rendered, assuming other qualifications check out.
If the combined incomes aren’t sufficient, then a guarantor or co-signer should be required to accept financial liability in event of non-payment.
A guarantor faces stricter income requirements, generally of 80 to 100 times the monthly rent due. In our example above, if one or more tenants do not make $200,000/year total, then a guarantor will be required, and will face an income minimum of at least $400,000/year.
We advise some landlords to only permit guarantors from New York and surrounding states, and to have them submit a full set of paperwork.
Keep in mind that no set of requirements is set in stone. It is not unheard of for a tenant who just misses the cutoff to be approved, if they pay additional rent up front or have spectacular credit. Conversely, a tenant with weak credit or no assets in the bank may be asked to get a guarantor or declined.
Your property manager should be committing time and effort up front to ensure a tenant is going to be good for a landlord/owner’s investment. At Ian K. Katz Group, we find it important to be upfront and transparent with tenants so the application process is legal, thorough and full proof.