Whenever we work with tenant clients, we start off by having a heart to heart about how it works.
We’ve previously written about how landlords think and what they look for in a prospective tenant and the three questions they ask themselves.
This is a useful starting point for a tenant to understand the perspective of most landlords and if you haven’t read it, please do! Today, we thought we’d get into how tenants can inadvertently make it very difficult to find a new rental property where the landlord wants them as tenants.
Below are the three biggest mistakes tenants make when looking for a new rental. If you avoid these mistakes, you’re well on your way to making it easy to find a new place!
Mistake # 1 – You can’t afford that place.
One of the hardest parts of being an adult is balancing what you want against what you can afford. This is particularly true when it comes to housing, both buying a place and renting a place.
On the buying side of things, we often have buyer clients who are approved for a mortgage (and monthly payment) that is more than what they’re comfortable spending. This is a good situation, as it means they can buy a place under their approved mortgage limit and be comfortable with what it costs them each month.
The renting side of things is unfortunately often the other way. Many tenants have a budget in mind that is feasible for their financial circumstances, but higher than the standard guidelines for rent to income ratios.
While it is not allowed to refuse a tenant on the grounds of a specific income to rent ratio, in practice many landlords follow the generally accepted rule of thumb where a tenant should not spend more than 30% to 40% of gross (before tax) income on housing costs.
The below chart has the “required” income based on monthly rent ranging from $1,500 to $5,000.
The green text columns are the annual, bi-weekly and monthly income needed at the 40% level, which is pretty much the lowest income a landlord would consider for the monthly rent in question.
The black text columns beside the green ones are the 30% level for the monthly rent. Put the two together and you have the range that would likely be acceptable to a landlord for your income.
As of March, 2025, the average rent in the GTA is just over $2,700 per month. We’ve highlighted that row in yellow in the chart above. We can see that if a tenant can “afford” $2,700 a month for their rent, they need to make between $81,000 to $108,000 a year. That’s $3,100 to $4,200 for the gross bi-weekly pay cheque, or between $6,200 to $8,200 a month.
If that seems like a very high income for that level of rent, you’re not alone in thinking so. It is often a big surprise to tenants that a landlord thinks they can’t afford a place. This is because tenants typically think that anything that is less than their monthly income is “affordable” to some extent. This makes some level of sense as you can pay that rent each month based on your income. There are of course, other significant expenses that people must pay for out of their income – food, transportation, personal needs and so forth.
With landlords looking to see someone spending 30% to 40% of their gross income on rent, and tenants willing to spend considerably more, you have the makings of a disconnect that causes problems.
If you’re a tenant setting your budget, set the number you’d be comfortable paying, that you’re confident won’t be an issue. At the same time, find your income in the chart above to see what level of rent you’d be able to afford based on that 30% to 40% ratio. If the number is similar, you’re in good shape to be able to show a landlord you can afford the place. If the number you “qualify” for in the chart is much lower than what you need to spend in order to get the type of place you want, then be prepared to show the landlord how you will be able to pay the rent.
Mistake # 2 – You can’t live comfortably in that place.
The second biggest mistake that we see tenants make is applying for a home where the attributes of the home don’t match the needs of the tenant.
The most common example of this is where a number of people apply for a smaller rental where there doesn’t seem to be enough space. This is a practical solution to the problem of affordability, where the rent being charged is too much for a single income, but possible for tenants who have multiple incomes amongst them.
Despite the property now being affordable based on the 30 to 40% ratio of rent to income, there is a disconnect between the size of the space and the number of people living there. While a couple can live in a 500 sf space with a similar level of comfort as a single individual, if there are three adults, or additional children who are going to be living in the space, landlords are concerned about how this will be addressed. Part of that concern has to do with wear and tear on the space from the additional tenants, but in some cases, it means changes to how the space was intended to be used. A one bedroom unit with three adults applying to live in the space will likely see the living areas subdivided into sleeping areas. Whenever a place is used in ways that are different to the intended use, accommodations are made to make it possible and they can cause damage to the unit. If a bed is placed in a hallway, damage to walls will likely occur. If a living room is converted to a bedroom and a bed located beside the kitchen, safety hazards can result.
It is illegal to charge a damage deposit in Ontario, so if you’re part of a tenant group that is trying to make a place affordable by having more people stay there, you need to be clear on how you’d respect the property. Given tenants cannot offer a damage deposit, offering a higher rent than asked may be a way to provide the landlord peace of mind that any additional wear and tear won’t result in out of pocket expenses.
Mistake #3 – You don’t have a good (or any) track record.
The third big mistake that tenants make is underestimating the impact of not having a good – or any – track record for landlords to review.
The first aspect related to this is credit history. Whether you’re a newcomer to the country, or just starting off into adulthood, a lack of credit history can be a challenge. Landlords are always trying to assess whether a prospective tenant will be a responsible occupant of the property on a mid to long-term basis. When there is a credit history showing responsible financial activity, with an accompanying good credit score, it makes landlords feel comfortable with the tenant.
While a limited credit history with no credit score is a challenge, it can be overcome by guarantors on the application who do have a lengthy credit history and a great credit score. A much more substantial problem is for tenants who have made some poor financial decisions and have low credit scores as a result. In such a case, we recommend tenants address the issue head on with their application, explaining how they got in that situation, and crucially, how it will improve.
Many tenants understand that a good financial track record is important, but they fail to realize that employment and rental history is also considered by a prospective landlord.
If you’re in a new role or industry, whether freshly graduated or simply in a new career, you need to be aware that landlords are uncertain as to whether you will continue to be employed in your current role. This is somewhat unfair, as an individual employed for ten years at the same company can be fired the day after they start a new tenancy, but it is still an issue if you’re applying for a place after starting a new job. In such cases, going above and beyond the typical job letter is important. If you can provide a personal reference letter from your employer talking about your prospects in the career, that can go a long way to making a landlord feel comfortable.
Finally, a red flag for many landlords is a history of multiple rentals in a short term. If you’ve stayed at your last three rental properties for a year at each, the question that arises is why you only stay that long. If there were issues with the properties or the landlord that caused you to decide to leave, be cautious with sharing those complaints, as it can make you appear to be a demanding or unreasonable tenant. If it was happening for reasons outside of your control, such as the landlords selling the property each time you were just getting settled in, share that story as part of your application.
When you are trying to find a new rental home, the above mistakes can make it very difficult to find a landlord willing to take you on as their new tenant. While you cannot change aspects such as your current income, your family or your track record for credit, employment and tenancy, you can make efforts to address them directly with explanations.
If you need an agent to help you find your next home to rent, or you’re a landlord who wants a good tenant, then we’re here to help. Get in touch with us to talk about the next steps!
