Rentals: Financial Guide

Renting in New York City is very different process than renting anywhere else in the world including the US. Clients who have never rented in NYC tend to be surprised by the strict rules and requirements for renting in the city. Other than requiring US credit and a social security number, another big factor that  affects whether you can rent or not is annual income. Below is a guide to what sort of income is required by landlords and options available to the renter if they do not meet income requirements.

Financial Requirements

Landlords of rental buildings will require that a tenant's annual income meet certain minimums. The minimum requirement is 40 - 50 times the monthly rent and it depends on the building and what number they use. For example if an apartment costs $2,000 and the landlord requires a minimum of 40 times, the prospective tenant has to make a minimum of 40 X 2000 = $80,000 a year. The annual income depending on the landlord may include guaranteed annual bonuses and exclude bonuses that are not guaranteed. In additions, landlords require a credit history showing no delinquencies, defaults, judgements, evictions or bankruptcies. Also, please keep in mind that condos and co-ops may have stricter requirements for prospective tenants.

Security and Initial Rent Payment

Assuming the tenant meets the landlord's minimum financial requirement and credit check, the landlord will require the first month's rent check and a security deposit equalling a month. Some landlord's require the last month's rent as well. The landlord may require these payments in the form of certified checks, cashiers checks or money orders, and that they need to be delivered at the execution of the lease. The process from applying to approval and lease signing is usually done within 48 - 72 hours.

Guarantor or Co-Signer
If an applicant does not meet the financial requirements or credit test, a landlord may require a guarantor or co-signer on the lease. A guarantor or co-signer will be required by the landlord to submit documentation such as 2-3 years tax returns, net worth statements from their accounts, bank and brokerage statements. A landlord will also require the guarantor/co-signer have a credit report showing no delinquencies, defaults, judgements or bankruptcies and have an annual income of 80 - 100 times the monthly rent. For example, if an applicant is seeking an apartment that is $2,000 a month, the guarantor/co-signer is required to make $160,000 - $200,000.

Additional Security and/or Prepaid Rent Requested by the Landlord
In the event that the renter does not have a guarantor or co-signer who satisfies the landlord's financial requirements for a guarantor, the landlord may require additional security beyond the typical security deposit of one month's rent and/or prepaid rent. The amount of prepaid rent or extra security deposit will vary depending on the landlord. Please not some buildings will not take prepaid rent or more security.

Non-U.S. Residents
Landlords have stricter requirements for Non-U.S. residents, who may have no credit history and no rental history in the United States. Landlords may require additional security and/or prepayment of rent that may range from 6 -12 months. A landlord may require the renter's annual income be a minimum of 40 - 50 times the monthly rent.

Self-Employed Renter
Landlords may have strict requirements for self-employed persons because of the variable nature of the self-employed person's annual income. A landlord may require the renter's annual income be a minimum of 40 - 50 times the monthly rent and for the renter's credit report to be free of delinquencies, defaults, judgements or bankruptcies. A self-employed renter will need to prove income by getting a letter from an accountant certifying how much income the renter earned.

Persons No Longer in the Workforce
Landlord may have strict requirements for retired or other non-salaried persons. Landlords may require evidence of significan liquid assets to offset the lack of an annual salary. In addition, landlords may require additional security and/or prepayment if rent.


A last resort would be to use Insurent

Attention Recent or Soon-to-be Graduates: Why your parents should use Insurent!

As you know, Landlords’ requirements in the New York City are very difficult for many renters to meet, particularly college and professional school graduates entering the workforce. Landlords typically require that an applicant's annual income be 40 to 50 times the monthly rent, and that the applicant has good credit. For applicants whose income does not meet the test or who has no credit score, a landlord will require a guarantor on the lease. Typically in this situation you would ask your mother/father to act as your guarantor or co-signer.  If you have ever been through this process before in NYC then you know it is very difficult for most people’s parents to be approved as a guarantor.

A landlord may require the guarantor or co-signer to reside in the local metropolitan area, and have an annual income of 75-90x  times the monthly rent. For example, a landlord may require the annual income of the guarantor/co-signer to approximate $225,000- $270,000, if the renter  is seeking to rent an apartment with a monthly rent of $3,000.

In addition, the landlord will require the guarantor or co-signer to submit extensive due-diligence documentation to the landlord, such as 2 to 3 years of tax returns, net worth statements from their accountants, bank and brokerage statements. In addition, the landlord will require the guarantor or co-signer to have a very good credit report, showing no delinquencies, defaults, judgments or bankruptcies.

All of this takes considerable time and effort for the parent to compile for the landlord. In many cases, the time taken causes you to lose your chosen apartment. The Insurent® Lease Guaranty offers a fast and simple solution.

Rather than acting as a co-signer or guarantor, the parent now has the option to utilize the Insurent® Program, with Insurent being the guarantor, and pay the small Insurent® fee for their son or daughter rather than subjecting themselves to the burdensome, time-consuming, expensive and invasive process required of guarantors/co-signers by landlords.

Full article on Insurent Lease Guaranty's Official Blog