The amount of rent you can afford can be determined in a variety of ways.
When looking for an apartment, it can be difficult to know where to start because there are so many price ranges and alternatives accessible in so many locations. The first thing to consider is your budget for rent. A rent affordability calculator is a wonderful place to start if you are unsure of the answer. Of course, each tenant has a different budget. Here's how to get a more specific estimate of your rentability so you can choose the best apartment listings for you.
How much rent can I afford is a straightforward question.
Experts advise tenants to limit their rent expenses to 25% to 30% of their monthly income. So if you earn $60,000 a year, for instance, the total of your rent plus renter's insurance shouldn't exceed $18,000, or $500 every month.
But as with any generalization, your specific situation may cause your optimum rental budget to be larger or lower.
Five steps to determining how much rent you can pay.
1. Examine your overall spending plan.
There are numerous ways to create a budget. But many financial gurus concur that the 50/30/20 Rule is a good one to follow. This rule states that your budget should be:
- 50% of your salary should go toward fixed expenses like rent, utilities, transportation, and groceries.
- 30% of your earnings wants such as memberships, entertainment, dining out, and shopping.
- 20% of your earnings goals, such as debt reduction and future savings.
With the help of this breakdown, you can see how, if your other expenses fluctuate, the 25%–30% rental rate guide may need to be adjusted. If it interests you, you might be able to afford rent that is closer to 40% of your salary if utilities are included and you have modest transportation expenditures.
2. Be honest about your costs.
Be honest about your lifestyle when considering cutting some expenses from your budget to increase the amount of rent you can afford. To determine how much rent you can truly afford, consider whether you can live without things like yoga classes or a Netflix subscription if you had to give them up to pay the rent.
3. Include furniture and other moving costs.
Consider all of the additional expenses you'll incur after moving. You might need to factor in new furniture expenditures if your previous residence included your roommate's sofa and you are now moving out on your own. You'll need money set aside for the following one-time charges in addition to equipping your new apartment:
- Security payment
- Rent from last month (depending on your lease)
- Any necessary pet deposit
- Shifting costs
- Any difference in rent between your current and past leases
Plan ahead and start saving for these costs as soon as possible. You won't have to use all of your usual funds to move into your new house, and you won't have to pay interest on a credit card.
4. Consider your local home market.
Additionally, a lot will depend on the rental market typical in your neighborhood. A smart rent affordability calculator will take your location into account. For example, if you live in a high-demand area like New York, Los Angeles, or anywhere close to Google headquarters, you may find that the rent is far higher than 30% or even 50% of middle-income budgets. To answer the question "How much rent can I afford?" in these situations, you might need to make changes to other parts of your budget.
5. Leave out credit and savings accounts.
You could be tempted to withdraw money from your savings and emergency funds, but resist the urge. You won't have a safety net for long after you start using these cash to pay rent.
Additionally, you ought to refrain from utilizing credit cards or personal loans to pay for your expenses, including your one-time moving costs. Similar to the last example, you should take a step back and reevaluate your budget breakdown if you find yourself charging food in order to pay your rent on time.
