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The 30/70 Rule

When processing a rental application for a rental property, we are often asked “What do we take into consideration when assessing a tenant?”, which can be several different factors, including:

  • The tenant’s ability to maintain the property in a clean and tidy condition
  • The tenant’s ability to submit documentation to support and validate their application, such as employment, previous rental, personal or other references, bank statements, ID verification documents, and most importantly:
  • The tenant’s ability to maintain regular rental payments

To determine the tenant’s ability to maintain regular rental payments many experienced and professional property management agencies are adopting the 30/70 rule (similar to a bank’s 30/70% rule) where you take into consideration the household total net income, and then apply the 30/70 rule where the reasonable amount of rent the tenant could afford (with some exceptions*) is 30% of the net income.

For example: The total household income is $2800 per week. 30% of the net income (or affordable weekly rent) is $840 per week.

As your managing agent, it is our responsibility to assess and collect the tenant’s documentation, so that you can make an informed decision on the best tenant.

Choosing the right tenant from the outset, is important to reduce and avoid any ongoing tenancy breaches and disputes.

* There is always the exception to the rule, taking into consideration varying living expenses and market conditions.

 

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