Affordability less than £100pm

Hi all
Newbie landlord here. Have completed referencing for a property, rent is 1250pm. Tenants monthly income is c2100 and they have failed referencing on this basis. Report actually saya they can only afford monthly rent of less than £100!!

Can anybody help as to why and what sort of monthly/annual income i should be looking for? This doesnt make any sense to me but i am beginning to think I need to reject the application.

Thanks in advance
Newbiez

Aim for salary being around 30 times the monthly rent

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They will need to earn £37’500 p.a. or
£3’125 pcm

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Thank you both. I didnt realise there was a rule of thumb for this. Is there anywhere that has a comprehensive guide for landloeds and how to vet tenants? Ive done all the stuff required as far as certification but clearly need to do a bit more homework on this side of things!!

Thanks again for your guidance! @Mark10 and @Christopher32

you need to join a landlords association

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Plus thet only have £850 per month left after rent so by the time you allow for Council Tax, Utilities and any other costs like travel to and from work or fuel shopping that kind of stuff are they really giing to be able to afford to live? And theres a chance that the rent payments may suffer
Would’ve thought it a no brainer from the start (am NOT a landlord though so I may be missing something or simply wrong)

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because rent is always pcm and people typically get paid monthly, not annually, i have no idea why people complicate things and look for annual salary comparisons.

Simply do monthly rent x 2.5 for affordability. So, with a 1250pcm, you need tenants bringing in £3125

In Bristol a lot of agents are 35 times monthly income and I know two which are 37 times
For a guarantor it the same plus 6k
Ie 1000pcm is 35k and 41k

I think you mean 35 times monthly rent Jason, not “monthly income”

For further context on why I prefer working with a monthly income figure, most of the people I let to aren’t in jobs with an annual salary. They are paid hourly. Referring anything to an annual salary figure is meaningless to them.

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Exactly. Depends on the nature of tenant’s employment and location of property. In certain London boroughs, its not unheard of to pay 50% of gross income in rent. I target a maximum of 40% in the last couple of years and previously 30-35% prior to COVID.

I can only say WoW ! to that

50% of income is not sustainable and will lead to a higher turnover of tenants.

No doubt, but that is where affordability is and strong evidence of how messed up housing is in England. I would never accept a tenant offering 50% of gross income. It’s not good for either party. You want your tenant to be able to have a life!

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