Join Australia's most dynamic and respected property investment community

Income to rental amount ratio

Discussion in 'Property Management' started by Johnny Cashflow, 30th Jun, 2016.

  1. Johnny Cashflow

    Johnny Cashflow Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    739
    Location:
    SA
    Hey PMs

    When selecting a tenant do you follow a specific ratio when deciding if tenant can afford to rent the house?

    Like if their income is $1000 pw they can rent a house for $300 per week etc
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,584
    Location:
    Adelaide, SA
    About a third is good in theory.

    Depends on the asking rent, overall strength of application, whether they have kids / pets, whether both partners are working and a little discretion as well.

    I have a tenant in one of my own personal properties that is closer to half ratio and has never dipped below 14 days in advance once. She just manages her money well, whereas that'd ruin another person. Have to read deeper into applications and actually talk to people at home opens to understand them.
     
    Bayview and Nick Valsamis like this.
  3. Nick Valsamis

    Nick Valsamis Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    504
    Location:
    Sydney
    As DT said it will depend on many factors. But generally the rent should not be more than 50% of income and 25-30% being a good amount.
     
    Bayview likes this.
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,099
    Location:
    Melbourne, Nationwide
    I've actually considered getting a full fact find and running them through some of my serviceability calculators to ensure they can afford the ongoing commitment. If I had my way we'd do credit and employment checks as well. Do a full financial work up.

    Fortuantely for our tenants the property managers do a great job, they tend to follow the 30% rule. It's been rare that we've had a problem with any of our tenants.
     
    Bayview likes this.
  5. Blacky

    Blacky Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    1,104
    Location:
    Bali
    As a landlord how much do you review a tennant?
    From memory I recieve an email with the family composition. Income, employer and that's about it from the agent. With their recommendation.

    I know I don't recieve the application.
    Mostly it is up the the agent to run the checks.
    Admittedly I have only 'higher' socio economic IPs.

    Blacky