What Income Does a Tenant Need, to be Approved for a Rental Property?

By September 24, 2018 No Comments

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.