I’m a retiree with $360,000 in my IRA. Why won’t rental agents call me back?
- NYC landlords prefer renters who earn an annual salary of 40 times the monthly rent
- Most owners won't qualify you for an apartment based on cash assets like an IRA
- Getting a personal or institutional lease guarantor can help you land a rental
I'm a 70-year-old retiree who needs a new rental apartment, and I am having trouble getting agents to call me back. I’m looking at market-rate listings in the $2,500-$3,000 range. My only income is from Social Security, but I intend to pay my rent by drawing from my IRA, where I have approximately $360,000. How do I calculate how much rent I can afford and how do I get agents to respond to me? It feels like some kind of discrimination—money is money, no?
Unfortunately, not all money is money when it comes to renting an apartment in New York City as a retiree, but there are some workarounds you can take advantage of, according to our experts.
For starters, you’re up against the 40-times rule: NYC landlords prefer renters who earn an annual salary of 40 times the monthly rent, in addition to good credit. So, for that $3,000 a month apartment, you would need an income equal to $120,000.
Of course, as a retiree you’re no longer drawing a salary. Having money in the bank would seem to mitigate that hurdle, but unfortunately, most landlords don’t qualify renters based on cash assets, including IRAs, says Jeffrey L. Geller, vice chairman and chief operating officer at Insurent Agency Corporation (FYI, a Brick Underground sponsor).
Why isn’t money in the bank good enough for landlords? The thinking is it could be wiped out in an emergency or through careless spending. Owners used to take rental payments up front to offset these concerns, but the 2019 rent reforms eliminated the practice of pre-paid rent.
Agents are well aware of what you need to earn in order to satisfy a NYC landlord’s requirements, and that may be why you aren’t getting any calls back.
How a lease guarantor works
One workaround that is available to you is to get a lease guarantor—this could be a parent or other close relative who agrees to pay your rent in case you default. (Be sure to read up on the strict income requirements for using a personal guarantor.) Or you could turn to a company like Insurent, which serves in that capacity for a fee.
“With Insurent, she could easily qualify for the $3,000 monthly rent she is seeking at over 9,000 participating buildings representing over 800,000 rental units,” Geller says.
“With $360,000 in IRAs, we could actually qualify her for a monthly rent of up to $7,000. Insurent would be qualifying her on cash assets, not her Social Security income, and it could be done in 24 hours,” he says. “We would need to show her how to apply online at www.insurent.com, and the guaranty fee for the 12-15 month lease would average 75 percent to 90 percent of one month’s rent, depending on her credit score.”
Tell agents you have a guarantor
Having a guarantor would help you get your foot in the door with agents, says Kevin M. Kurland, president and broker at Home By Choice, a NYC real estate brokerage.
You should definitely mention it upfront when reaching out to agents and brokers, he says.
Take out a lump sum or…
When it comes to estimating how much rent you can pay, Kurland says to take your social security income, IRA balance, lifestyle, and expenses into consideration. You may want to take money out of your IRA to help meet your goals, he says.
“As a general rule, financial advisors often suggest limiting housing expenses to around 25-30 percent of your gross income, but since she’s retired, to calculate a rough estimate, she might consider withdrawing a portion of her IRA as a lump sum to cover annual rent expenses for a certain period for example, a year or two,” he says.
…make regular withdrawals from your IRA
Another approach is to use the 4 percent rule.
“This rule suggests withdrawing 4 percent annually from your retirement savings without significantly depleting it. For instance, if your IRA is $360,000, 4 percent would be $14,400 per year. She can supplement this amount using her social security funds,” Kurland explains. Talking to a financial advisor is a good idea to get a more tailored assessment, he adds.
Go with a mom-and-pop landlord
Another tried-and-true approach is to seek out small, “mom-and-pop” landlords. Private landlords, as opposed to large, corporate owners, are often more willing to look at your entire financial picture and not get as hung up on meeting specific income thresholds.
You’re likely to have more luck finding small landlords in Brooklyn and Queens rather than Manhattan, brokers tell Brick.
Be sure to also look for rentals in co-op and condo buildings as well as townhouses, where owners can be more flexible about choosing their tenants.
Trouble at home? Get your NYC apartment-dweller questions answered by an expert. Send your questions to [email protected].
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