Affordability Checks: A Guide for Landlords

As a landlord, it’s important to ensure that your tenants can afford to pay the rent on time and in full. Affordability checks are a crucial tool for landlords to make informed decisions about their tenants, reducing the risk of rent arrears and increasing the likelihood of a successful tenancy. In this guide, we’ll provide you with a comprehensive understanding of affordability checks and how to carry them out effectively.

Why are affordability checks important?

Affordability checks are essential for landlords because they help to reduce the risk of rent arrears and ensure a successful tenancy. By checking a prospective tenant’s ability to afford the rent, landlords can ensure that they are selecting tenants who are financially stable and capable of meeting their obligations. This, in turn, reduces the likelihood of rent arrears and increases the likelihood of a successful tenancy.

In addition to benefiting landlords, affordability checks also benefit tenants by ensuring that they don’t take on more than they can afford. By assessing a tenant’s financial situation, landlords can avoid renting to tenants who may struggle to meet their financial obligations, thereby preventing the stress and financial hardship that can result from falling into rent arrears.

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How to carry out affordability checks?

There are several types of affordability checks available to landlords, including reference checks, credit checks, and income checks. Each type of check has its pros and cons, and landlords should carefully consider which type of check to use for each tenant.

Reference checks involve contacting a tenant’s previous landlords or employers to verify their financial stability and ability to pay rent. Credit checks involve looking at a tenant’s credit history, including any outstanding debts, defaults, or bankruptcies. Income checks involve verifying a tenant’s income and employment status to ensure they have a reliable source of income.

To carry out affordability checks effectively, landlords should look for patterns in a tenant’s financial situation and use their judgement to determine whether they are likely to be able to afford the rent. It’s also important to interpret the results of affordability checks carefully, taking into account any extenuating circumstances that may affect a tenant’s ability to pay.

 

Best practices for affordability checks

To ensure that affordability checks are carried out correctly and ethically, landlords should follow a few best practices. First, landlords should treat all tenants fairly and avoid discrimination based on race, gender, age, religion, or any other protected characteristic. Second, landlords should only use reputable sources for carrying out affordability checks, such as credit reference agencies or employers. Finally, landlords should keep all information related to affordability checks confidential and only share it with relevant parties.

Conclusion

Affordability checks are an essential part of the tenant selection process for landlords. By carrying out thorough affordability checks, landlords can reduce the risk of rent arrears and ensure a successful tenancy for both themselves and their tenants. With this guide, you now have the knowledge and tools to carry out affordability checks effectively and ethically. Remember to treat all tenants fairly and follow best practices to ensure that your affordability checks are carried out correctly and ethically.

Free Landlord Resources

Free Instant Valuation

See how much your property could get in rent.

Fee Saving Calculator

See how much you could save on property fees.

Yield calculator

Calculate your rental yield with our simple tool

Compliance checklist

Make sure your buy-to-let property remains legal.

Compliance Guide

Download your complete landlord compliance guideĀ 

Meet Sam your local Expert

Sam has a wealth of experience across the private landlord and Build to Rent sectors. He has advised a wide range of clients across the whole of London on how to find great tenants, improve their assets and effectively market their properties for the best returns.

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