Rent Affordability & Credit Checks

[adonaghy]

With more than a tad of assistance from this forum I’ve rented two properties successfully and thank you for assistance thus far. I have only one rental now and have it on the market right now. Can I ask for advice on rent affordability calculations. For example if dad is the only earner with two kids and similar family with  say one how do you factor this in? I’m using Openrent to advertise and have never    undertaken credit checks on someone myself. What companies do you recommend and what information do I need?  I’ve taken advice from forum and have rent and malicious damage insurances but they will only be valid if I do this correctly 

[Melboy]

I always do a few of my own calculations first before going to the credit check companies. First and foremost is affordability. Can the prospective tenant(s) afford to rent your property and that boils down to their annual salary.  What employment are they in? How long?

Next comes monthly outgoings.  Debts?  Car on finance? Maxed out credit cards?  Any CCJ's outstanding?  Paying out for partners & children from the past? The list goes on.  Once you have done this preliminary check factor in Council tax and Utility Bills etc.. It's not just the rent that has to be affordable.

I always give my prospective tenants a calculation sheet asking for the details and backed up with bank statements etc. for a start.

Am I doing this correctly? I must be doing something right as I have not had any problems with tenants unaffordability of what they are renting in well over 20 years now. You get a "nose" for it in the long run.  😀

 

[Grampa]

I understand for certain insurances you need to do this and if so try Rent4Sure who can do the ref checks and also offer a rental insurance policy if the tenants passes the criteria.

However, as a agent I have never taken used these affordability calculations. We base our decision on good old references, bank statements, wage slips, previous landlord refs and a very detailed application form.

Bank statements tell you a lot about a tenant and how they manage their finances. For a start if the tenants have rented previously what was the rent  amount and was it paid on time which can be  cross referenced against bank statements and payment dates. Are they living within their means or regularly going overdrawn?  That alone will give you a good starting point to judge a tenant.

Remember if something doesn't sound right during referencing it likely isn't right and if a tenant tries to push you at a pace you are not happy with there is normally a good reason for that and that isn't  normally good for the landlord.

[adonaghy]

Can you include things like child benefit, child tax credits in the overall calculation of income?

[Richlist]

I don't see why not, total income can be made up from many sources......employment in 1 or more jobs, investment income, self employment, pensions, any sort of state benefits, even FIT payments etc.

[Carryon Regardless]

Tbh more relevant than any affordability check to my mind would be their financial history.

Do they have a history of bad debt and missed payments?

Is their guarantor capable of picking up the tab in the event. Does the guarantor actually have assets to threaten? Those that don't have little to lose by signing anything, much like most tenants.

[Galisurgon]

It looks like you need to know the family's total annual income to know whether they will be able to afford the place and if there will not be any difficulties with payments.  At first, you can ask for some bank statements that would confirm that one or several family members earn enough and have a stable enough job position to ensure that there will be no unpleasant surprises. And then, you can take the papers to Mortgage Broker Hull or a similar company to make all the exact calculations and make a contract with the tenant(s). It doesn't sound very easy, but it gets easier when you do it more than once.

[Richlist]

Wrong......you don't need to do any of that.

What you need is rent guarantee insurance and they will do it for you !