A question about rent (low income, real estate, rentals)

[ChezAloha]

I have read a couple of times here on the forums that net income must be 3x the rent asked in order to qualify for a property on Kaua'i (or anywhere in Hawai'i). Is that something that is set in stone, or are other factors considered, such as an excellent credit rating, stability of income or references (or other connections), which might allow someone to pay a bit more than 33% of net for a rental?

[OpenD]

Originally Posted by ChezAloha

I have read a couple of times here on the forums that net income must be 3x the rent asked in order to qualify for a property on Kaua'i (or anywhere in Hawai'i).

Setting an income threshold is pretty much standard practice all over the country, and income requirement of 3X rent is also common.

Is that something that is set in stone

Depends on the situation. A property manager for a large rental complex typically has less leeway than an individual property owner. And a property manager for any property with lots of vacancies will typically bend more than one with few vacancies.

or are other factors considered, such as an excellent credit rating, stability of income or references (or other connections), which might allow someone to pay a bit more than 33% of net for a rental?

Again, depends on circumstances, but typically the income threshold and credit rating are considered somewhat separately. For example, if you meet the income threshold but have a poor credit record, you might be turned down as a bad risk, because you have inadequate resources if you lose your job, or maybe you just don't pay your bills, for whatever reason? On the other hand you could be turned down if you have excellent credit but low income because they'd be afraid you couldn't pay the rent consistently over time. In other states they might ask for additional security deposit, or prepayment of several moth's rent, but that is not allowed in Hawai'i.

Having a co-signer is one way around a problem in this area. Another is to find a less expensive place to rent.

BTW, the 3X factor is common, but not absolute. Some use slightly different numbers. You can always ask.

[oregonwoodsmoke]

Each landlord sets his own criteria. 3 times the rent in take home is pretty commonly used.

I'm a landlord and I figure I am not doing anyone any favors to allow them to rent from me when their income is so low that they won't have enough to live on after they pay the rent.

Federal guidelines dictate that all applicants must be treated the same. If I set my criteria at 3 times the rent and reject the applicant who has $800 a month and wants to rent a $700 a month house, and I use the 3 times the rent criteria as an easy way to reject her, I must then apply the 3 times the rent criteria to every applicant. No exceptions. It's the law and there are heavy fines for breaking Fair Housing laws.

And incidentally, I also expect good credit, good references, and steady verifiable reliable income. Having those does not make up for lack of income. Not having any one of those will get you rejected.

[ChezAloha]

Thanks much for the advice - we haven't rented for nearly 20 years, and so have absolutely no idea of current laws, criteria, etc. but it all makes sense. The last time we rented it was from family, so there were no credit or income checks, references needed, etc., and before that we were in military housing, so we are woefully naive about this.

I was thinking more about what if the rent were say 35% - 37% of net income; would we still most likely be rejected if everything else was in order? I cannot imagine paying a higher percentage than that on rent, but just wondered if we would still be considered or outright rejected if we were within a couple of percentage points of the 1/3 amount. I guess if each landlord sets their own criteria, who knows except to ask.

We're not moving until next June, but just want to have all this figured out before we go.

[OpenD]

Originally Posted by ChezAloha

I guess if each landlord sets their own criteria, who knows except to ask.

Exactly. Sometimes you can be surprised. I was helping somebody else try to find a place and found one property where the formula was unexpectedly a little lower. But with the cost of living generally higher in Hawai'i than wherever people are coming from, I don't think it's a good standard to push. IOW, paying the rent is more stressful in general, for a lot of people, so playing it safe on rent is a pretty good strategy.

[ChezAloha]

One more piece of advice needed: Coming from the mainland, who should we use for references for a potential landlord? We have owned our home here in Portland for the last 18+ years, but will be renting a few months here before we head for Kaua'i - our house will be listed next month.

[whtviper1]

Originally Posted by ChezAloha

Coming from the mainland, who should we use for references for a potential landlord? We have owned our home here in Portland for the last 18+ years, but will be renting a few months here before we head for Kaua'i - our house will be listed next month.

If you can show you owned your home - have a good credit score - have sufficient income to rent - then you won't need to worry about that.

[mdand3boys]

Originally Posted by ChezAloha

One more piece of advice needed: Coming from the mainland, who should we use for references for a potential landlord? We have owned our home here in Portland for the last 18+ years, but will be renting a few months here before we head for Kaua'i - our house will be listed next month.

Rent a vacation rental for the first month or two that you are in Hawaii. Rent prices are negotiable, deposits are little to nothing, there are no credit checks, income checks, etc. Then, having a local reference as to your rental history will help you out later. Only go through a legit site like vrbo.com or similar to avoid the scams, of which are many, on free sites like craigslist.

[ChezAloha]

We already have a vacation rental (VRBO) set up for when we arrive, but just until the first of July. Our plan right now is for my husband and I to visit Kaua'i for a week at the end of April or in early May next year and see if we can find something then to be available June 1. Even though we won't "officially" arrive until mid-June, and will be in the vacation rental, we hope that by finding something earlier will keep us from scrambling to find something in June, and allow us time to get our stuff over and moved in without too much stress.

A former high school classmate has lived on Kaua'i for more than 20 years, ran a successful business there and is now a real estate agent. He doesn't handle rentals, but said he would connect us with some property management agents when we come. We're hoping that will work in our favor as well - he said the rental market on Kaua'i is very tight. But we want to be prepared as much as possible so we're ready to go when we get there, and know it still might be difficult to find something.

LOTS of good advice - mahalo!

[oregonwoodsmoke]

Originally Posted by ChezAloha

............ Coming from the mainland, who should we use for references for a potential landlord? We have owned our home here in Portland for the last 18+ years, but will be renting a few months here before we head for Kaua'i - our house will be listed next month.

Phone calls can be made from Hawaii to the mainland, so references from the mainland will work.

If you own your own home, the mortgage will show up on your credit report. However, take a copy of your closing papers on the sale, for instant proof that you owned your own house. Also, a copy of the agent's flier that has pictures of your house and shows the condition you kept it in.

Then you give your landlord of a few months as another reference.

It doesn't sound to me like you will have a problem with landlord references. Landlords like homeowners as tenants.

% of income for rent, some landlords are going to be flexible if you are close. You won't know until you ask each individual landlord.