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A tenant's ability to afford the rent is the most important consideration when referencing a tenant, and most agents deem that the rent should not be more than 30% of their salary or 40% of their take-home pay.I have created some ready made calculations to show what level of rent a specific monthly salary would need to be in order to meet affordability criteria:Rent Annual salary£300 pcm £ 9,000£400 pcm £12,000£500 pcm £15,000£600 pcm £18,000£700 pcm £21,000£800 pcm £24,000£900 pcm £27,000£1,000 pmc £30,000£1,250 pcm £37,500£1,500 pcm £45,000£1,750 pcm £52,500£2,000 pcm £60,000£2,250 pcm £67,500The 30% is conservative so you can take a view on this, especially if the tenant qualifies for rent guarantee insurance and/or they can provide a home-owning guarantor.All landlord insurance products including buildings, landlord liability, holiday let, HMO, portfolio, and rent guarantee are available from Property Tribes insurance partner, the award-winning Alan Boswell Group. Contact the friendly team on 01603 649736 for all your landlord insurance needs!Do you use any other ways of assessing "affordability"?SEE ALSO - Smart Landlord Guide 2019UP NEXT - Ready-made deal stacking calculationsDON'T MISS - Equity Release Formula NOW WATCH:
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
It's an interesting guide.
Though does not reflect the picture according to ONS data. Which shows Tenants in London spent 49% of their salary on rent, where those in the North spent just 23%.
That'd be a lot of Londoners declined properties if following this 30% rule.
_________________________________________________________________________My posts are not financial advice, just a rambling guy passing time on a coffee break.The team at Bespoke Finance offers advice, including Limited Company Buy-to-Let , HMO Conversion and Cheap Life Insurance._________________________________________________________________________
I guess couples can afford a place together in London, and those that can't rent a room or commute into the city?Affordability in London is definitely stretched though.
Agreed - though London wages on average are double those outside London - so even allowing for fiscal drag the London Tenants should have more net cash left over after paying rent - in absolute terms.
That is a mathematical fact, 60% of a small number is not as much as 60% of a large number.Then again another cost of living in SE is higher, Gregs for example? Had to refinance my home to get a sausage roll.
It's a good rough guide, I think if it reaches over the 30-40% as outlined. It should be cause for Landlord to look more closely rather than a black/white decline rule.
Thanks for these. Are these the kind of ballpoint figures insurers use for RGI?
Am just thinking what if you have a reasonably good tenant (no debts, f/t employed etc), you want to rent for 1050pcm, they're on 27k. Would you bend the affordability rules to accomodate an otherwise stellar tenant. If you did, would a LL still be able to get RGI on them on that basis?