If you’re in the market to move, it’s a time of excitement but also one of uncertainty. You get to look for new and interesting places to live, but the application process can be nerve-wracking. If you’ve moved recently, you may already know about the 3x rent rule and how it can affect your application process. If not, we’ll do a deep dive into the 3x rent rule so that you are fully prepared to meet the requirements of your next potential landlord.
Table of Contents
Do I Really Need to Make 3x the Rent?
Is the 3x Rent Rule Gross or Net?
How to Calculate 3x the Rent
Why Do Landlords Ask for 3x Rent?
What if I Don't Make 3 Times the Rent?
The 3x Rent Rule Bottom Line
Do I Really Need to Make 3x the Rent?
Yes, in most cases, you will need to meet the 3x rent rule or at least be incredibly close to it. However, in situations where you may be receiving rent assistance or putting up additional security deposits, this may not apply. There may also be some “wiggle room” with flexible landlords. They may not require you to meet the rule, but will still expect you to have a steady income that shows your ability to pay the rent.
For example, someone with a Section 8 voucher will not need to make 3 times the rent. This is because the federal government is also subsidizing their rent. A section 8 voucher will generally cover 60%-70% of the rent for a home in the program, lessening the financial requirement of the tenant.
Is the 3x Rent Rule Gross or Net?
The 3x rent rule is based on your gross income, not your net income. That means that your gross monthly income should be 3x the monthly rent. For example, if the rent is $1,400, you'll need to earn a gross monthly income of $4,200 to afford the apartment.
How to Calculate 3x the Rent
To calculate 3x the rent, you just need to multiply the rent amount by three. For example, if you find an apartment with a $1,500 per month rent amount, you will need to make $4,500 in gross monthly income to be able to afford it.
You can also calculate this on a yearly basis instead of a monthly basis. In the above example, you'd start by finding the yearly rent ($18,000). Then, you'd multiply that by 3. So, you would need a yearly income of $54,000 to qualify for the apartment.
Why Do Landlords Ask for 3x Rent?
Landlords want you to make 3x the rent, because they want to know that you can afford the apartment. If you earn 3 times the rent, it is assumed that you will be able to make the monthly rent payments. By following the 3 times rent rule, they give themselves the best chance to find a tenant who can reliably pay the rent. This protects them from having to go through the unpleasant and expensive eviction process.
By requiring renters to meet the 3x rent rule, landlords also protect the tenants from financially overextending themselves. Someone who doesn't meet the 3x rent rule may think they can afford the rent for a particular home. But, it may set them up for failure with other basic living expenses like utilities and food.
If you're a tenant, it can be reckless to rent a place if you don't make 3 times the rent. This is true unless you have big savings or help from parents or loved ones.
What If I Don’t Make 3 Times the Rent?
In some cases, you won't meet the 3x rent rule. This can happen, even when you may be able to afford the rent if you are conservative with your other living expenses. If you don't make 3 times the rent, you still have options. You get the apartment by offering a larger security deposit, finding a guarantor, or showing your fiscal responsibility. You do this by giving bank statements to your potential landlord. These statements show you are responsible with your money and spending.
They may be willing to make an exception. Good money management is never a bad thing. The 3x rent rule is not a law but a guideline most landlords follow. That means you can always find a flexible landlord.
The 3x Rent Rule Bottom Line
The main thing to keep in mind if you’re looking for a new place to live is that you should be ready to prove you can afford it. You must do this by showing you make at least 3 times the rent. Before you start your home search, gather your proof of income documentation. You'll need it to show you can cover rent and living costs. Even if you don’t make exactly 3x the rent amount, have some proof that you can pay the requested rent while still living within your means.