RENT TO INCOME RATIO: Definition and How To Calculate It


The rent-to-income ratio is the portion of income required by a tenant to pay the monthly rent. A healthy RTI is roughly 30% of gross income, and most landlords will want that as a maximum percentage—the higher the percentage, the more likely a tenant will be unable to afford the rent in the long run. This article talks about how to calculate the rent-to-income ratio with a calculator. It also talks about the rent-to-income ratio by city, especially in NYC.


The rent to income (RTI) ratio measures the monthly rent a tenant must pay to the tenant’s entire combined gross monthly income. The entire wages received by each adult renter living in the residence are referred to as the “combined gross income.”

The RTI is a calculation based on monthly gross income. You can use it to see if you can afford the monthly rent on an apartment. Similarly, landlords use it to analyze whether a new renter can afford the lease on a rented property. In layman’s terms, the ratio reveals how much of a person’s household expenditure income is spent on rent.

How to Calculate the Rent-To-Income Ratio

To calculate the rent-to-income ratio using the predetermined 30% amount, take a person’s gross annual income, divide it by 12, and multiply it by.3.

How to Calculate a Goal Rent Income Level Based on the Ratio

You might also set a goal income threshold for your rental. Assume you want to collect $1,800 in rent and your income requirements are for your tenants to earn three times the rent amount. What should the tenant’s income be? You would multiply the rent by three. If the monthly rent is $1,800, multiply it by three to get $5,400. In this situation, you would prefer that your renter make at least $5,400 in gross monthly income.

How to Use the Rent-To-Income Ratio

Investors and landlords can establish the RTI by learning how much an applicant earns. The industry guideline is 30%, which means that no more than 30% of a tenant’s gross income should be on rent.

According to the US Department of Housing and Urban Development, people who spend more than 30% of their gross income on rent are considered to be housing-cost burdened (HUD). If too much money is spent on the rental apartment, tenants may have difficulty paying all of their bills, including necessities such as food, clothing, medical care, and transportation. Although the shelter is also required, low-income tenants may be unable to afford it.

If an applicant does not earn enough money to qualify for your rental, there isn’t much incentive to move forward with them unless they can pay many months in advance, put down a larger security deposit (if permitted by your state), or if you’re ready to take a co-signer.

Why Is the Rent-To-Income Ratio Important?

The rent-to-income ratio is an important measure for screening prospective tenants. It assists landlords in avoiding tenants with insufficient income and directs tenants’ attention to available rental houses that they can afford.

In some ways, the RTI ratio is comparable to the loan-to-value (LTV) ratio that a lender considers when a real estate investor applies for a mortgage.

If the LTV is excessively high, the lender is aware that the chances of an investor having difficulty paying monthly mortgage payments are higher. Similarly, if the rent-to-income ratio is excessively high, a renter may have difficulty paying the rent in whole and on time.

In addition to rent, tenants must pay for utilities, groceries, child care, car payments, student debts, and medical insurance. When rent consumes too much of a tenant’s income, they may be unable to pay for other usual living expenses, such as keeping the home in excellent shape.

Alternatively, they may be forced to pay their rent late. When a tenant fails to pay their rent on time, the property’s cash flow suffers. This could cause a landlord to pay his bills late, lowering the value of the investment due to diminished cash flow.

Rent to Income Ratio Calculator

The rent-to-income ratio calculator assists landlords in determining the maximum amount a tenant can afford to pay in rent. The first calculator will calculate a percentage based on gross monthly income and rent amount. The second calculator allows you to set the ratio and calculate target rent ratio numbers for both gross monthly and gross annual income. The calculator can do the following;

  • The gross monthly income of a tenant
  • Gross Income-to-Rent Ratio
  • Monthly Rent

Why Is Calculating the Rent-To-Income Ratio Important?

The most significant financial concern for landlords is nonpayment of rent, thus ensuring that potential renters can afford the monthly rent is a major responsibility. Determining the rent-to-income ratio should be part of a landlord’s screening process, and setting the ratio, whether it’s 20% or 30%, should be part of every landlord’s screening criteria.

Renting to a tenant with an RTI of 50%, which means that 50% of their monthly income will be on rent, is a higher risk for landlords and their assets. Many unexpected expenses, such as crises or automobile repairs, can significantly lower a tenant’s monthly income and lead to delayed rent payments. Tenants don’t want to live paycheck to paycheck for rent, and landlords want to avoid nonpayment of rent, which can lead to evictions—an expensive procedure for both sides.

How to Calculate the Rent to Income Ratio

To use a calculator to calculate a rent-to-income ratio, you will need the tenant’s monthly gross income, the rent they will be paying, and a percentage threshold. A general guideline is roughly 30% of gross income. To get the percentage, divide the rent by the total income. The rent-to-income formula is (Rent to Income (RTI) Ratio = Monthly Rent Price/Monthly Gross Income).

A landlord can utilize the rent-to-income ratio in two ways to determine if a renter can afford the monthly rent:

#1. Make Use of a Predefined RTI Ratio

Although the normal rent-to-income ratio calculator varies by market, a tenant should spend no more than 30% of his or her gross income on rent.

#2. Make Use of an RTI Ratio Multiplier.

The rent-to-income calculator can also be used to determine how much combined gross income a renter must have in order to pay the asking rent.

Rent to Income Ratio by City

The amount or proportion of your earnings that goes to rent is referred to as the RTI. This ratio varies around the world because it is affected by the average wage and, of course, the real estate market. Even though a country has a high average pay, it may simultaneously have a high RTI. The lower the number, the greater the purchasing power of individuals. This means that real estate in their city is affordable in comparison to the typical household income. The following are the rent-to-income ratios for major cities around the world.

#1. United States of America, New York

Monthly rent in New York City runs between $2,000 and $3,000. With an average salary of $4,400, a person will typically be required to pay 48.9% of their entire wage on rent.

#2. Tokyo, Japan

Japan is a mysterious country that never ceases to amaze us. A one-bedroom apartment can be rented for as cheap as $700 to $1,150 per month. Rent accounts for only 29.4% of monthly expenses when average salaries exceed $2,700.

#3. France, Paris

Living in Paris means you may earn roughly $2,600 per month and pay rent ranging from $870 to $1,200. As a result, around 32.6% of the payment would be set aside for monthly rent.

#4. Italy, Rome

Renting a one-bedroom apartment in Rome ranges from $700 to $1,100. Despite the fact that the average after-tax earnings are $1,600, rent typically accounts for only 33% of monthly expenses. Thereby, making Rome more affordable for the majority of people.

#5. München, Germany

A one-bedroom apartment in Munich costs between $800 and $1,100 per month. If you earn an average wage of $2,900 after taxes, you will spend only 34.2% of your income on rent each month.

Rent to Income Ratio NYC

Most landlords in New York City (NYC) require that the tenant’s yearly wage be greater than 40 times the monthly rent income ratio. This means that a tenant interested in a $1,500-per-month apartment would need to earn $60,000 per year to qualify, resulting in a maximum rent-to-income ratio of 30%.

Most New York City (NYC) landlords apply a 40x rent income ratio rule, which means your annual wage must be 40 times the monthly rent to qualify for most units. If you wanted to rent a $1,500-a-month apartment, you would need to earn $60,000 per year. The 40x rent rule makes it more difficult to rent income ratio in New York City than in other parts of the country, where the threshold is normally 3x the monthly rent (which would mean 36x by NYC standards).

Some New York City (NYC) landlords, particularly those who own more cheap, low-income units, may have even stricter requirements for the rent-to-income ratio. It’s not uncommon to see sub-$2,000 per month rentals with credit requirements of 50X the monthly rent and 700+.

NYC Rent Calculator

Here is what the rent calculator in NYC is all about below;

  Gross Yearly Income     Max Monthly Rent
$60,000 $1,500
$70,000 $1,750
$80,000 $2,000
$90,000  $2,250
$175,000 $4,375
NYC Rent Calculator

What Is a Good Rent to Income Ratio?

Typically, a good rent-to-income ratio recommendation is 30%. That is, around 30% of a tenant’s gross wage should be spent on rent. The usual RTI is widely accepted to be 30%. If you spend 30% or less of your monthly salary on rent, you’re probably in good financial shape.

What Is the Best Rent-To-Income Ratio?

The industry guideline is 30%, which means that rent should not exceed 30% of a tenant’s gross income. According to the US Department of Housing and Urban Development, people who spend more than 30% of their gross income on rent are deemed housing-cost burdened (HUD).

How Much Income Do Most Landlords Require?

Landlords typically demand tenants to have a combined monthly income of at least three times the monthly rent. This means that if the rent is $2,000 per month, the tenant must bring in at least $6,000 per month.

How Much of the Paycheck Should Be for Rent?

The 30% rule is a typical benchmark for budgeting rent, which states that you should spend no more than 30% of your monthly income before taxes (your gross income) on rent.

Do Apartments Look at the Debt-To-Income Ratio?

Landlords should demand at least one financially responsible adult to have a credit score of 600 or higher. The next piece of information to consider is the renter’s DTI (Debt-to-Income Ratio). This is the portion of a renter’s monthly gross income that goes toward debt repayment.

Do I Make 2.5 Times the Rent?

Some towns employ a “3 times rent” calculator method, which means that a renter’s monthly income should be at least three times the amount spent on rent. REE recommends that your salary be at least 2.5 times your monthly rent.

What Does “3X the Rent” Mean?

The 3x rent rule is a basic guideline that many landlords follow, which states that a potential tenant’s optimum income level is three times the amount of rent. So, if the rent is $2,000 per month, you must earn at least $6,000 per month to qualify.


When finding an apartment, a good landlord or house owner will always ask for your rent-to-income ratio to check if you are capable of paying the rent. Also, individuals that want to rent apartments should have a debt-to-income ratio. This article teaches about the “rent to income ratio.”


How much income do most landlords require?

In summary, landlords prefer that your monthly income (or the merged monthly income of all renters) be at least three times the rent. So, to afford the same $2,500 apartment, you’d need to make $7,500 per month or $90,000 per year.

What credit score do landlords use?

FICO credit scores are commonly used by landlords to determine whether an applicant is qualified for an apartment. The following are typical criteria for those scores: 800 to 850 is exceptional.

How do you avoid paying three times the rent?

Increase the security deposit: If you can’t pay three times the rent, give the landlord a larger security deposit. Obtain a co-signer: When speaking with the landlord, find someone to vouch for you. Seek out a roommate: Look for an empty room for rent in an apartment building.

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