I was hoping for some feedback and possibly reasoning I should change my mind about the rent affordability test I’ve been using for years now which is that the rent should not exceed 30% of your gross income.
I know have an ‘issue’ where I have a ‘Verified’ tenant from OpenRent where OpenRent shows their affordability to be £813.33 while in my test it would be £610 so OpenRent apparently uses a 40% maximum cap.
So I’m not only confused to why OpenRent is using a different test compared to a generally accepted rule, but also worried that I now have a ‘verified’ tenant (who I just told that he’s income isn’t sufficient and who I believe paid for that verification service from OpenRent) where now both that person and OpenRent can give me a headache saying I should consider this person.
The advertised rent is £850 so you can imagine that my test works out too low, but if the 40% is indeed generally accepted these days, I actually would consider him so I’m eager to hear from others who were put in the same situation or let me know your thoughts if you are a landlord using the 30% or the 40% (or anything else?) affordability test.
OR or the prospective tenant can’t really cause you trouble on this can they?- it’s up to you not them whom you choose to enter a financial contract with and how much financial risk you are willing to take. There is no obligation on you to sign a tenancy agreement just because they have passed a particular test. Some LLs are willing to let to students, UC recipients and HMOs; others not. Nobody can force you to rent to someone if you’re not keen.
The 30% or 40% is a crude measure. Some people have less practical disposable income (eg if they have transport costs to a job further away) some have more dependants than others etc
If someone is close to the limit (whatever you use), you and they need to consider if they will be able to afford and not slip into arrears for their benefit as well as yours- not good for them to end up being evicted and would make hard to find a new place. So consider what might mitigate the risk and if they are still the right tenant for your property
-do they have a history of paying similar amount that can be verified
-how secure is their income/employment (do they have a history of rent payments over several years or ccjs ?)
-can they provide a guarantor
-is it worth considering rent protection insurance
-do you have landlord insurance covering legal advice and costs in the event you did need to evict
I was under the impression that, because this applicant was ‘verified’ he could possibly only apply to advertisements that his affordability fits in, which is why I felt worried since now I had to say he wasn’t (according to my stress test).
I did found that some sites recommend the 40% affordability test so maybe I’ve just been to strict. I’ll have a good think about it if I’ll relax it somewhat.
Also thanks for the additional options such as rent protection (which I have) and I do reference check and go for guarantors if needed. I also offer them options on the deposit (zerodeposit) and here (in Swansea) there’s a council service that helps paying for deposits which I help them with as well.
In all fairness, this is not as much about the money, as it is to find a decent tenant. If I feel I’m already stressing them on rental payments, I would not be comfortable wondering if they would be able to make the rent, and if they do, will they be able to live comfortable as well.
