Protecting your property investments includes making good decisions about the people you rent them to. Tenant screening is a layered process with lots to consider- not least of all verifying their stated income and ensuring it is enough to cover rent each month.

With real estate calculators, you can work out this vital piece of the tenant screening puzzle- and much more.

Understanding rent-to-income ratio and how to verify prospective tenants' earnings compared to the required rent payments can help you avoid difficult situations further down the line.

This guide to using a tenant screening income verification calculator covers when, how, and why to use it, as well as the details you need to make the calculation. We have included example situations and a few other helpful facts about applying rent-to-income ratio for your investment properties.

What Is Tenant Income Verification?

The purpose of tenant income verification is to double-check that when your tenant says they have enough income to afford rent, it is true.

It is exactly what it sounds like- a way to verify if a tenant's monthly income is sufficient for the monthly rent you charge.

Once you verify how much a tenant's income is, you can use a rent calculator and work out the rent-to-income ratio.

What Is Rent to Income Ratio?

Rent-to-income ratio means the percentage of income that a tenant would be spending on rent each month. It is normal practice for landlords to set a required rent-to-income ratio for prospective tenants, but it is up to you at what point you wish to put it.

This is an integral part of the tenant screening process, and it prevents you from ending up with renters who are continuously making late payments or are short on rent.

You want to make sure the potential tenants you place in your rental properties have enough income to comfortably pay rent, even if unexpected expenses arise.

How Does an Income Verification Calculator Work?

A standard income verification calculator works by quickly working out how much your tenant earns per month or per year to establish whether or not they meet the criteria for your maximum rent-to-income ratio.

Depending on how your potential tenant is paid, you can calculate their gross monthly income or gross annual income. It is more common for landlords to look at annual income for long-term tenants, and it gives them a better picture of the financial stability in the long run.

There are options to verify income for hourly wages (including tips and commission) and monthly pay stubs.

What Affects Income Verification and the Rent to Income Ratio?

Before we explain how the calculations work, let's look at the variables that affect them.

Gross Income

The most important part of the equation is the gross income earned in a year by those applying to rent your property. Depending on a person's pay schedule, salary, or provided documents, there are a few different ways to input the information.

In most cases, you look at the hourly or gross monthly income earned- which is automatically converted to an annual income rate by the calculator.

Rental Amount

Although this doesn't come into play when verifying income, it is important for working out the rent-to-income ratio. The whole point of verifying income is to establish if a person can afford the rent you are asking for.

More expensive rentals demand a higher income to maintain the correct ratio. An annual salary of $70,000 might sound fine at first, but it doesn't work for a rental property that costs $5,000 per month! That would make their rent-to-income ratio 85%- unmanageable by any standard.

The same salary would be more than sufficient for a property costing $1,200 per month or $14,000 per year. This ratio is just over 20%- which is typically well within the approval range.

What Does the Calculation Look Like?

First, let's look at how an income verification calculation works.

It is fairly straightforward. You start by choosing the timeframe of the tenant's income, a.k.a hourly, monthly, bi-weekly, quarterly, etc. Then, you input how much they earn over that period- including the number of hours or weeks worked in a year.

Once you do this, the calculator converts it into an annual amount.

Here is an example of someone earning $30 per hour on a 40-hour work week with four weeks of holiday per year.

  • Hourly Wage x Weekly Hours x Weeks Worked = Gross Annual Income
  • $30 x 40 x 48 = $57,600

Another way the calculation can work is by finding an average earning over several pay stubs and converting it to an estimated annual income rate.

If an applicant provides four months of wage stubs- two at $4000, one at $3950, and one at $4100, the calculator would work as follows.

  • (Combined Total from All Pay Stubs ÷ Number of Pays) x 12 = Estimated Annual Earnings
  • ($16,050 ÷ 4) x 12 = $48,150

You can then compare these figures to the rent amount to work out if the ratio works for you.

Rent to income ratio is calculated by dividing the rent by the income.

If rent is $1,000 or $12,000 per year and the tenant earns $50,000, the ratio would be worked out like this.

  • $12,000 annual rent ÷ $50,000 annual income = 0.24 (24%)

What Is a Good Rent-to-Income Ratio?

Ideal rent-to-income ratios look different for different properties and landlords. As a general rule of thumb, most people look for an applicant's income to be more than three times the rent amount. Expressed as a percentage, this would be around a 30% rent-to-income ratio.

This varies throughout the rental industry, with some following the 2.5 rule (meaning a tenant's gross income could pay the rent two and a half times annually. Others look for the rent amount to be a maximum of 20% of the gross monthly income.

It depends on the local market, property value, rental cost, and several other factors. It is also largely up to you, as the landlord or property owner, to decide what you feel comfortable with.

You also need to think about other living costs when you calculate how much income you need your tenants to have. Many landlords forget to allow for additional expenses and unexpected costs- which can cost them later.

That said, you need to stay competitive. Setting the rent-to-income ratio requirement too high can alienate the vast majority of potential renters and seriously limit your options. You may be okay with this prospect with the goal of finding a high-quality tenant you don't need to worry about, but it can cause problems if your rental property stays vacant for too long.

Limitations to Consider when Verifying Tenant Income

Verifying income is only one part of it. Screening tenants for financial reliability takes more than just looking at income.

Some higher earners may look great on the rent-to-income ratio calculator, but look into their rental history, and they have a habit of paying late and causing other problems.

At the same time, someone who may not score as highly (but is still within a reasonable range) may have a long and stable employment history and be the perfect tenant in many other ways.

It is important to look at more than whether or not a person can afford rent for your property. You also need to consider their history and reputation as a tenant.

Don't let a high monthly gross income that could pay rent ten times over blind you to other red flags. Using this valuable tool can rule out some applicants based on financial data, but it shouldn't be the only reason you accept a new tenant.

How Can DoorLoop Calculators Help Rental Property Owners and Managers?

DoorLoop calculators make it easy to verify income to work out whether or not someone is a good fit financially. You can choose two ways to work out tenant income using the standard income verification tool or the advanced verification calculator.

Both options a fast, simple, and free- all you need are the earning details provided to you by your possible future tenant.

The first calculator calculates income based on the hourly wage, hourly tips or commission, the number of hours worked in a week, and the number of weeks worked in a year. You should ask for an employment letter confirming the wage before you move ahead.

Alternatively, change the time frame to weekly, monthly, quarterly, or various options in between. Whatever you pick, the calculator automatically works out the gross annual income for you to compare with the annual rent obligation for the property in question.

DoorLoop's advanced income verification calculator lets you input individual pay stubs ranging from weekly to quarterly. Add up to six pay stubs with gross earnings and dates, and let the calculator work out the average.

The calculator automatically works out the expected annual income total based on the averages on the payslips.

This saves you time, effort, and hassle- making it easier to dismiss a rental application or move it on to the next stage.

Other Ways DoorLoop Makes Life as a Landlord Easier

As well as providing a range of useful real estate calculators, DoorLoop also offers a comprehensive property management solution for rental managers and landlords. It tackles the screening process in detail, managing everything from background checks to finalizing lease agreements.

You can also find an excellent selection of everyday tools to manage rental payments, maintenance requests, marketing for vacancies, and customizing the application process.

Put simply, DoorLoop helps you maximize your productivity and profitability with streamlined, intelligent solutions.

Learn more today by scheduling a free demo to explore the many excellent features DoorLoop has to offer!


Verifying a tenant's income is an important step in protecting your investments and ensuring your rental business runs smoothly. Using a calculator simplifies and speeds up the process, leaving you free to determine the rent-to-income ratio in no time.

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David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!

Legal Disclaimer

The information on this website is from public sources, for informational purposes only and not intended for legal or accounting advice. DoorLoop does not guarantee its accuracy and is not liable for any damages or inaccuracies.