The Secret to Deciding How Much Rent You Can Actually Afford
When you want a place of your own but can’t afford to buy a house just yet, a home rental would be the best solution. But if you’re in the market for the best rental home, you may be surprised at how much your ideal apartment or condo cost.
If you still haven’t decided whether to spend too much or too little on an apartment, here are some general guidelines to help you determine the best rental fee for your income.
How much are you willing to spend for rent? The answer to this question depends on how much you bring in every year with all your sources of income. You can use online home budget calculators to help you determine your monthly budget. Generally, 60 percent of everything you earn should be allocated to the top three items people spend on: housing, food and transportation. The other 40 percent would be for emergency funds, savings, bills, insurance, etc.
30% income rule
Experts recommend spending 30 percent or less of your income on rent. This general rule doesn’t apply to everyone, but it can be used as a guide on how much you ought to be spending on your rental fee.
40 x rent
A lot of landlords require their tenants to have an income of 40 x the monthly rental fee. Assuming that the proprietor of the apartment you are eyeing on has this requirement, take your pre-tax yearly income and divide it by 40. The quotient would be the monthly fee you will be approved for.
Keep in mind that additional fees may apply if you’ll be working with an agent or broker. They typically charge tenants between 8% to 15% the entire year’s rent. Aside from that, you will also be required to make a deposit for several months, plus other move-in costs.
With all these factors to consider, you need to ask yourself how much you are willing and comfortable paying. Know your priorities and needs to determine whether you will be able to afford that gorgeous flat you saw down the street or not.