UK Landlord Forum / Life

As a soon-to-be first time landlord, I'm just wondering if I'm about to be overly cautious with my tenant selection...

I see that most tenant affordability checks are based on a salary being at least 2.5 times rent.  Rent is going to be around £1,000/mth, but based on a single income of £30,000/yr (2.5 x rent) the tenant isn't going to take home much more than about £1,900/mth.  After council tax, utilities, car, food and other basic living expenses, the tenant is going to be skint!  My residential mortgage is only about 15% of my income and I'm always skint, so can tenants really keep up with their rent if it's 40% of their income (perhaps >50% of their net income)?

I'm thinking of asking for at least 3 x rent in my advert, or do you think I'm being overly cautious?  I don't want to waste time showing around tenants who I don't think can afford the rent, but equally don't want the advert to put off prospective tenants if there aren't any 'perfect' tenants around!  I guess if I get rent guarantee insurance I don't need to be so cautious, but would still rather not have the hassle of getting rid of tenants in arrears. 

Does anyone else ask for tenant income of more than 2.5 x rent?  Any opinions would be much appreciated... : )

You want 3 months?  1 in advance and 2 as deposit?

Any tenant can find themselves in arrears, they could be perfect for 2 years and then something happens that leads them to be unable to/choose not to pay the rent.

I personally take 1.5x rent for deposit and one month rent in advance, so if your rent is £1,000, request £1,500 deposit and £1,000 in advance.

You could insist on a guarantor, in addition to rent guarantee insurance.

If you issue a section 21 notice with the initial 6 month AST then it should reduce the hassle of evicting them if they are not suitable.

It's the tenants household income that I was thinking about (ability to pay each month, long term), rather than the money up front.

All other things being equal (credit checks etc), I'd have thought it would be better to have tenants who only pay 1 month deposit but have good salaries coming in, rather than tenants who can scrape together 2 months deposit but are going to struggle paying the rent each month (i.e. incomes on the 2.5 x rent limit)...?

It's not the income you need to worry about, it's the outgoings.  Someone on £60k could have less NDI than someone on half that.

Just seen your post thanks firefly (and Riptide).

Maybe I'll drop any request for income to be at least 3 x rent from my advert, and just request 1.5x rent for deposit (+month in advance).  I guess I can always bring it up at the interogations (I mean viewings!), and the credit/affordability checks will tell me what their income is.

Whilst reading up on this being a landlord lark, I've been surprised by peoples understanding/use of guarantors.  Some landlords, like "The Landlord", seem to insist on it for every tenancy, whilst others seem to have never heard of the term before!  I was originally going to insist on one, but then, having seen that RGI is actually quite reasonable (equivalent to about 1% of rent) am now of the opinion that RGI will do the job of a guarantor...

Riptide, but 'all other things being equal', the tenant with the higher income has got to be better.

I take your point though, me asking for income of 3 x rent in my advert isn't going to stop someone on £60k but up to their neck in debt from viewing...

Do people really ask for this?

My feeling is that you should be able to let to someone who wants to live in your place.

If they earn 60k a year why the hell would they be renting?

I am a yokel when it comes to these things it seems. But if I was earning £60k a year and someone started questioning it, I would tell them to stick there flat up there Khyber.

I think newbies really do try to over egg the pudding on referencing, as basically it means bugger all. But that is my opinion only.

Yes, when I was browsing similar properties for let in my area I noticed a couple of landlords asking for income of 3 x rent.  Thought I also read about someone suggesting to do this, but might be imagining things...

I'm sure most newbies like myself do over-egg the referencing, but at least it's some sort of check.  And surely the route cause of tenants falling into rent arrears is because they can't afford it.  Banks would never lend to someone who's mortgage was going to be 40% of their income, not even 5 years ago when they were at they most irresponsible!

The 60k example isn't a good one.  Stick with the 30k one I opened the topic with.  Is £900 a month after rent enough for a tenant to pay all of his bills, running of a car/transport, any loans, support the wife and kid maybe...  I couldn't do it, that was the only reason I was contemplating more stringent affordability requirements.  I appreciate though that plenty of tenants would be able to afford it, if they have a modest enough lifestyle.

No I agree.

To pay £900 a month rent, you need a couple, each earning £30k.

Its interesting, as I am in the South West, and I have never seen this, it may be the future, who knows.

Prior to becoming a property owner and landlord, I used to rent.

I personally would not be happy with someone telling me what I could and could not afford to do (and still don't especially when it's a bank hehe).  I didn't have holidays and was extremely careful with my money.  I also never fell into arrears despite earning pittance.

You cannot assess a persons priorities with figures, they could earn £30k a year and blow it all on a fast car instead of rent...

2.5x rent is pretty standard. Rent guarantees are OK but generally will only be given where the tenant has been able to prove their salary and not available for those with a perceived shortfall in affordability. Been doing lettings for years and find that in cases where a rent guarantee would be really useful it isn't available....

Yes awkward questions need to be asked about income but how would a landlord know whether tenants can pay the rent?

I agree that good figures are no clue as to someone's priorities, but at least they can weed out those who haven't got a chance in hell of keeping up with rent payments. 

Take your point though that by requesting 3x rent you're going to alienate some people, and perhaps miss out on potentially good tenants.  But then again, you're probably only going to alienate people who couldn't of afforded your property anyway.  I guess rental demand will dictate how picky a landlord can be...

I'm thinking of using Upad to get tenants and I saw an example of their credit/affordability check report.  It tells you what their income is, if their references are ok, etc. At £50+vat for the tenant it must be much cheaper for them than going through a high street letting agent.  And if tenants don't want to pay it, they've probably got something to hide! If I understand correctly, if Upad's checks come back ok then you'll be able to take out the rent guarantee insurance.