Net Vs Gross Income

[Deleted]

Which would you consider as a landlord? As some of you may know already we have been apartment hunting for the past couple of months and we think we have finally find the one.

We gave the deposit monday and we are set to sign our lease next week. The apartment is $1,275/month and it covers gas/heat which was a major drain on our finances the past couple of winter months.

Anyway... We saw about 20 different building complexes and all of them requested credit check, background check, proof of employment, 2 recent pay stubs and where they all differs:
- Gross/net more than two times the monthly rent.

The current apartment we live in and the one we are moving into has it as gross but we saw a few (about 8 or so ) that the requirement was that you had to net more than two times the monthly rent.

So what do you guys think? And which would you pick as a requirement if you were the landlord?

[Tiny]

I'd probably choose net pay - as it better indicates someone's 'disposable' income - it would also take me less math to figure out if I thought they were a good risk or not. It would take me more math and guesstimating to come up with someone's potential 'disposable' income from their gross...

[activeonlooker]

I use gross because net can be manipulated. I also look at net to see the withholdings, retirement contributions, etc. Then I look at the credit reports for required min debt due (as well as payment history) to determine if I think they can afford it.

[Deleted]

May 3, 2011 23:13:57 GMT -5 Tiny said:

I'd probably choose net pay - as it better indicates someone's 'disposable' income - it would also take me less math to figure out if I thought they were a good risk or not. It would take me more math and guesstimating to come up with someone's potential 'disposable' income from their gross...

I agree with that except that in our case and I would guess most YM'ers our net income does not reflect our true disposable income.

We make 90K combined but contribute 25% to our 401K. So right off the bat without considering Health/Dental/Short term & long term disability insurance our taxable income goes to $67,500.

If something where to happen where we would need extra income we could always lower/cut our 401K contributions.

[activeonlooker]

My point exactly. That's why I look at it all - to see what "wiggle room" there is.

[Deleted]

Here's how I screen candidates:

1. What's their story e.g. why are they moving? Many folks don't make it past this point. I will ask them point blank if they know what kind of credit they have.
2. Credit; both credit history as well as score.
3. Income situation. I prefer a W2 wage earner. Gross wages (presumably if they've had 5 years or more of good credit history they know how to budget or are willing to make changes).
4. Last housing payment vs what they will be paying me.
5. If everything checks out I do a gut check. If I'm feeling uneasy about them then I'll find some excuse to turn them down.

[resolution]

I use a property management company I just went with their standard criteria, which is gross income three times rent. However rents are lower in my area so I can see how that might be difficult in higher cost areas.

Income Level
• You should have Gross Income of at least 3 times the monthly rent amount
• Married couples and related residents over 18 may combine income
• All non-related persons should submit separate applications
• If you are self-employed we will need tax returns for the last two years

Credit History
To determine satisfactory credit worthiness we run a report through a credit reporting agency

Rental History
Your previous residencies must be free of evictions, judgments, and unpaid rents

[Deleted]

Gross 3 times? WOW!
That could knock cut the whole single section in my area looking for decent apartments (if we were single, both my wife and I wouldn't qualify )

[Deleted]

I would be concerned taking an apartment that is more than a third my gross income? ...

[Gardening Grandma]

We look at gross. And I'd be uncomfortable renting to anyone who didn't make 3x the rent. We also look at employment history. I like prospective tenants who've been employed two years or longer. If it's less, then I'd want to know why...