How to calculate if tenants can afford rent

[Cumulonimbus]

Hi Guys,

I have searched but cant seem to find any info on this.

I would like to know how Real estate agencies/landlords decide on whether an applicant for a lease will be able to sufficiently afford rental payments

Thanks

 

[Hope74]

Rent should be a maximum of 30% of the tenant's net income.

 

[nhg]

Rent should be a maximum of 30% of the tenant's net income.

ive seen 30-40%.
be reasonable 30% is a good indicator to work out if rent prices can go up as well.

 

[Cumulonimbus]

Thanks!

 

[Xenia IM]

30% of combined income of all tenants on the lease.
check rental history to determine if they have been able to handle those payments in the past.
ensure you ask how many other people were living in rental property that were NOT on the lease as that gives you some insight into affordability.

 

[Jamie M]

Agree with the others - 30% seems to be general rule.

Are you looking to self manage?

Cheers

Jamie

 

[Lil Skater]

General rule is 30%

BUT, it's not a hard and fast rule.

If you have a tenant earning $3000pw and rent is $1500pw they still have quite a lot of disposable income, would you knock them back because the rent is 50%? Unlikely.

Particularly if they have solid rental history, or even mortgage at a similar level.

 

[rosehill]

Should also consider high net worth applicants with unearned income like interest income. Many migrants fall into this category and proved to be good tenants paying rent on time.

 

[Jamie_]

It's 30% FYI

 

[Salvatore1]

In 11 years I have only had 1 tenant that has applied for a property that they could not afford. That doesn't mean that some don't go bad later. Normally the applicant knows what they can afford and only apply for what they can. Applicant normally the best judge.

 

[Adelaide]

TICA site has a calculator for affordability.

http://members1.tica.com.au/rentafford_tenants.php

 

[InvestorCharlie]

Usually agents will request the prospective tenants most recent payslip and run a check on TICA to determine whether they are appropriate for the property.

Having said that, assuming what TICA says is hunky dory, it's not particularly difficult to falsify a payslip. So, I would say it's best to rely on a few additional trustworthy metrics.