There are several ways to design a rental contract to determine the amount of payments a tenant must make. These range from paying a monthly or yearly fee to paying based on a percentage of income. The U.S. Department of Housing and Urban Development (HUD) offers the HOME program which determines rent based on the ability to pay. The HOME program allows recipients to pay 30 per cent of their adjusted income as rent.
- Skill level:
- Moderately Easy
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Determine the renter's adjusted income. Different programs have different definitions of income; and when negotiating and writing a rental agreement, the contract should define the term "adjusted income." As an example, a renter has adjusted income for the year of £15,600.
Determine the percentage of income on which to base the rental payments. This percentage should be explicit in the rental income agreement. In the example, the HOME program is based on 30 per cent of adjusted income.
Multiply the adjusted income by the percentage of income to determine rental payments. In our example, £15,600 times 30 per cent equals a yearly rental payment of £4,680 or £390 a month.
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