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
They will need to earn £37’500 p.a. or
£3’125 pcm
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
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)
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.
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!
If they have provided excellent verifiable references, have evidenced reasonable timescales of living at previous addresses (multiple past addresses over short periods of time are, for me a red flag unless there’s a very good reason for it), can evidence a stable job/work history and a stable banking history (which I can only imagine must be a struggle given their monthly income), and importantly, having met them in person, your instincts absolutely must be followed, no matter how tempting it is to just get tenants past the line, if you have any niggling doubts at all those doubts could well come back to haunt you.
Only then, if you’re happy with all of the above two options remain for these potential tenants - either they must provide evidence of sufficient savings to cover their monthly financial shortfalls for both the medium and long term (short term won’t cut it, because that’s just kicking the can down the road towards a future headache), OR they must provide a guarantor, who will also be reference/credit checked. It is a big responsibility for whoever it is, and based on your numbers, they will need to financially support your new tenants quite significantly so that they can cover all their additional household bills on top of the rent, travel costs, and they must eat too! And don’t be influenced by the ‘but I’m going to get a pay rise next year…’ line, or ‘I’ll get another job…’, do this at your peril. Trust your instincts. In your case, I would probably reject the application - unless their guarantor is rock solid. Good luck!
Do they not qualify for universal credit or housing benefit that could be taken into consideration ?
I work on the basis monthly rent should be around 33% of net monthly income. You say the tenant’s net monthly income is £2,100. Monthly rent is therefore 59.5% of net monthly income. After paying monthly rent of £1,250 the tenant would only have £850 left for council tax, utility bills, wifi, food, and day- to-day living expenses for the month. I would therefore not proceed with the tenant.
I have a £ 3,000pm household income…Excellent credit score and past rental references. There has only been a few in the last 20 yrs from landlords selling the properties. I am now retired, an OAP and physically disabled, and my income is made up of my pension, pension credits, secure PIP payments, savings, and housing benefit and council tax payments… Would this be held against me , or would landlords be happy to rent their property to me for a longterm secure rental? I also could pay for a few months rental upfront if wanted…
I would hope that References take into account current debts, loans, etc, so if income £3000 a month but with current debt repayments of £2000 a month, they can not afford much in rent.
Maybe that is what your reference is telling you?
I agree 50% of income spent on tent is too much.
Look for another tenant.
Maybe use an agent for first rental as they know about the rental multiplier and other rules. Don’t think
Open rent really for complete newbies !
We have the scars from renting so know the rules
I’d look at the credit report. Maybe its got a bunch of outgoings/debts on it which will bring affordability down. At approx 2.5 income you’d expect it to show a higher affordability. Or might be for example that a contract or job is ending and they can’t take into account a new position.
But whatever it is, it should be in there.