An Agent has a Duty of Care to both tenants and their Owner clients, to ensure that a Tenant moving into a property is on sufficient income to afford the rent.
But what is deemed to be ‘sufficient’? There are many variables associated with this, because everyone’s situation is different.Many agents use a simple calculation that is often used by the banks to determine if an applicant can make repayments on a house loan. They take the total income for all the tenants applying for the property and divide it by three. If this works out to be more than the weekly rent, they consider the affordability to be good.
While this can be a good rule of thumb, it can exclude a proportion of the tenant population who have a relatively low income but a good rental payment history. These tenants have shown that they are able to budget effectively and prioritise their rental payments. They may have fewer expenses – for example, no car payments or school fees. Therefore, a tenant’s rental history in these cases becomes very important when an Agent is trying to work out rent affordability.
Likewise, a tenant may have a relatively high income – but if their rental history shows a habit of late payments, the agent will most likely not approve this application.
If a tenant is applying for their first rental property, and they are on a low income, they may need to start with a low-priced property, or move in with friends who can help them pay their rent. Once they start to build up a good rental history, they will have more flexibility in future leases.