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  • Property-a-holics

    Ready-made tenant affordability calculations



    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                         £67,500

    The 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 2019

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    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.

    https://www.bbc.co.uk/news/business-42179119

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    _________________________________________________________________________


    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.

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    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.

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    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.

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    _________________________________________________________________________


    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.

    _________________________________________________________________________

    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?

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