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How to get approved for a rental property with low income

How-to's

Applying for a rental property but don't earn enough?

The real estate industry norm says you must earn 3 times the rent to show you can afford the rent. For example, if the rent is $500 per week, your total household income should be atleast $1500 per week on average.

The objective here is to help you get approved for a property if you don't meet the above criteria.

Overall there are many factors an agent takes into consideration when reviewing your application but it all boils down to the following.

They need to verify (or get high confidence) you will:

  1. Pay the rent on time
  2. Look after the property

and to a slightly less degree, not disturb the peace of neighbours (eg Noise).

Here, we're only looking at paying the rent on time because looking after the property has sweet nothing to do with your income.

If you want to learn what you can do to get approved for a rental property (or beat the competition) based on your entire situation click here.

Challenges when applying with low income

It's hard to fight against an ingrained industry standard (3x rent). You'll need to show everything you can to get past a property manager on 'industry standard autopilot'. Don't skip reading any of the recommendations below.

Agents have a deep need to protect themselves. If in the event you don't end up paying rent, they may need to prove they did their due diligence before approving or recommending you to the homeowner because it will reflect negatively on them, cost the homeowner money, and cause a lot of additional work. It may even have consequences on insurance claims but let's not go there.

Most Homeowners in Australia have very tight cash flow. They don't have a buffer in the event you don't pay rent, so their bills don't get paid if you don't pay. It's no secrete, it's the most important part of screening a tenant application.

Recommendations

So what do you do?

Fake it till you make it doesn't work here. Paying rent is a numbers game so you need to be critical of yourself first. You need to think about if you can afford the rent based on your budget.

If you can't, I suggest looking for a cheaper home or apply for an NRAS property. It's affordable rental housing for low and moderate income earners.

Assuming you're not about to change your mind...

So far we've only talked about your income, not your bank balance, not your expenses and not your likely future income. All these greatly impact your ability to pay the rent on time.

Let's take a look.

Healthy Bank Balance

Your income will determine what a healthy bank balance is in this situation.

There are no hard and fast rules here but if you had zero income I would like to see the equivalent to 3 years rent as your bank balance. Meaning if the rent was $500 per week, your weekly income was $0 but you had $78,000 in the bank I could get enough confidence you can pay the rent on time. This is with the additional provision I have confidence you don't have any big expenses coming up in the next year (roughly speaking).

If you believe your bank balance influences your ability to pay rent on time - show it (and even explain why in one sentence, because they won't read it if it's two)

You got other income

Income is income, it doesn't matter where it comes from. As long as you're not doing anything illegal of course.

Make sure you're considering every bit of money that comes into your possession. Here are some things people sometimes don't consider as 'income' in their application:

  • Rent support from parents
  • Shares, dividends, interest
  • Child support from an ex-partner

The key is to show evidence of this income. If you can't prove it, it does not exist.

The more unique income it is, the more likely you should show the actual funds going into your bank account. If you don't think they will understand what this 'other' income is or where it comes from, keep it simple. Show them the money hitting your bank account (not a complicated document your mum won't understand).

You can do this by showing a screenshot of your bank statement filtering income only or you could get a Rent Affordability report that you can attach with your application.

Future one-off payment (sale of property)

Perhaps you're due a large one-off payment, for example, you are selling or have sold your property. Show evidence of how much (or likely) you will get and when you believe you'll get it. For example, if you're selling your property you could show the Contract of Sale, a link to your advertisement or a reference from the selling agent. This may not be hard evidence but it should give enough confidence to the agent that money is coming in.

Super strict spenders

Everyone is different. Some people spend beyond their means and some people are super strict spenders.

What I'm trying to say is, if you are a good budgeter the industry standard (3 times the rent) may not apply to you. In this case, you'll want to show your expenses are low. The best way to do this is to get a Rent Affordability report, they will see that your expenses are lower (or relatively the same) as your income, meaning your household runs on a profit or atleast breaks even.

If all else fails

Show a history of on-time rent payments - Rent Payer.

If you can show you have paid your rent on time in the past (at the same rent amount) the industry standard can go fly a kite (if you know what I mean).

Everything above this paragraph talks about your ability to pay the rent on time, not mentioning the two other ingredients to building trust - Care and Integrity.

Showing your ability to pay rent is the most important part but don't forget to show small acts of kindness and be honest in your dealings right from the beginning, when you send the first enquiry or turn up to an open for inspection. It makes a difference.

Just in case you missed the above link and have not completed the quiz click here.‍

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