How Much Rent Can I Afford?
When you are looking to rent an apartment, it is important to determine how much rent you can reasonably afford. A common rule of thumb is to look at how much you are making per month and compare the prospective rent to that figure. Are you making three times the amount of rent per month? While this is a helpful measure, it isn’t necessarily the whole picture. It’s true that renting is one of the lowest cost ways of living, all things considered. For example, homeowners have all sorts of maintenance costs that apartment renters don’t have to worry about. However, even apartment renters have other costs that they need to plan for in addition to their rent. Carefully and honestly evaluating your own spending capacity for the whole financial picture (including utilities, water, internet, and other costs) as well as leaving some wiggle room for comfort in your budget can help you understand how much rent you can afford.
Here are a few things to keep in mind when trying to figure out how much rent you can afford:
How much money do I make?
Many of the rental calculators online ask for your gross income. While this figure is important, of course, what can be more important is the net income that you take home each month. Your gross income is reduced by all of the things that may be withheld from each of your paychecks, such as taxes, retirement contributions, and insurance costs that you face as an employee. Be sure to look at your actual take home pay when calculating how much rent you can afford.
What are my other costs each month?
It’s also important to be honest with yourself about the other costs that you must cover every month without fail. These can include utilities (which can be affected by the rental property you choose; for example, larger spaces can cost more to heat and cool than smaller spaces, etc.) as well as internet, monthly subscription costs such as Netflix, car payments, car insurance, renter’s insurance, groceries, gas for your car, entertainment, and other costs that are bound to come up each month and should be planned for. Keep in mind that some rental costs can cover certain utilities–water, sewage, and trash are the most common–while other rental arrangements require the renter to pay for every single utility cost. These are important factors to consider when determining how much rent you can afford.
What is the general rule of thumb?
While many renters spend over half of their income on rent and utilities, an ideal scenario is to find a rental property that costs only thirty percent of your monthly take-home pay. This helps you ensure that you will have enough money left over for other regular costs each month. Utilities are the most important, but you also can’t go without transportation, food, clothing, and extra money for unexpected medical expenses.
If you still have questions about how much rent you can afford, or what rental situation may be right for your needs, don’t hesitate to contact Apartment Hunters. We can help you find the best fit for your budget!