high end rental investors: does the 3x income/rent apply?

[Bao Nguyen]

It's part of my rental policy: household income must be at least 3 times the rental rate.  But most of my homes are renting around $1k/month or less.

Should this rule apply to high end homes that rent for $3k/month or more?   For example:

Scenario A: $900/mo rental, prospect's household income is $2700.  This prospect would qualify based on income alone.  $1800 gap between rent and income.

Scenario B: $2500 higher-end rental, prospect's household income is $6k.  Doesn't meet the 3x income/rental multiplier.  $3500 gap between rent and income.  I would imagine despite not meeting the 3x multiplier, renter B is still better off than renter A because end of the day, he/she still has more income after rent.

Let's make the example really extreme: $10k/month rental, prospect makes $20k/month.  I can't imagine turning down such a prospect - but based on the 3x rule, $20k/month is not enough.

High end rental investors - please let me know what your thoughts and experiences are with this.

[Luka Milicevic]

This is a really interesting question.

Here is something I read on yahoo finance the other day....

1/3 of someones income going to rent is considered a financial strain and a large amount of Americans are in this "financially strained" position

1/2 of income going to rent is considered very financially strained and that there are also a large number of people in this situation.

I would say 2x income is too low. 2.5 is the lowest I think I would consider on a high end rental. Then again, 10К a month rental is of course extreme and I have no experience in such rentals so I'm not sure what the norm would be.