With so many price points and options available in many places, it can be hard to know where to begin when apartment searching. The first question to ask is, “How much rent can I afford?” If you don’t know the answer, a rent affordability calculator is a great place to start. But of course, every renter’s budget is unique. Here’s how to get an even more detailed answer to how much rent you can afford so you can decide which apartment listings are best for you.
The simple answer to “How much rent can I afford?”
Experts recommend renters spend no more than 25% to 30% of their monthly income on rent. So, for example, if you make $60,000 per year, your rent and renters insurance shouldn’t go higher than $18,000—or $1,500 per month.
But like any rule of thumb, your individual circumstances could make your ideal rental budget higher or lower.
5 steps to answering, “How much rent can I afford?”
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1. Look at your entire budget.
There are many different budgeting methods. But the 50/30/20 Rule is one that many financial experts agree upon. In a nutshell, this rule says your budget should be:
- 50% of your income: fixed costs, like rent, transportation, utilities, and groceries
- 30% of your income: wants, like dining out, entertainment, shopping, and memberships
- 20% of your income: goals, like paying down debt and saving for the future
Using this breakdown, you can see how the 25%-30% rental rate guide can change if your other expenses are different. If utilities are included and you have low transportation costs, you might be able to afford rent closer to 40% of your income, if that’s of interest to you.
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2. Be realistic about your expenses.
When you’re thinking of shrinking some parts of your budget to maximize how much rent you can afford, be honest about your lifestyle. If you have to give up yoga classes or a Netflix membership to cover rent, decide if that’s really something you can really live without, so you can make the most realistic decision on how much rent you can afford.
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3. Add in furnishings and other moving expenses.
Think through all of the additional costs you’ll have once you move. If your last place came with your roommate’s sofa, and now you’re venturing off on your own, you may need to include some new furniture in your costs. In addition to furnishing your new apartment, there will be other one-time expenses you’ll need to have cash to cover as well:
- Security deposit
- Last month’s rent (depending on your lease)
- Any applicable pet deposits
- Moving expenses
- Any overlap in rent from your old and new leases
Ideally, plan up and save for these expenses ahead of time. You’ll avoid having to pay interest on a credit card, and you won’t have to drain your regular savings just to get into your new place.
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4. Factor in your housing market.
The rental market norm where you live will make a big difference, too. For instance, if you are in a high-demand market such as New York, Los Angeles, or anywhere near Google headquarters, you might find the rent far exceeds 30% or even 50% of middle-income budgets (That’s why a good rent affordability calculator will consider your location.) In these cases, you might need to adjust other areas of your budget to determine, “How much rent can I afford?”
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5. Don’t include savings or credit accounts.
You may be tempted to grab some cash from savings and emergency accounts, but don’t. Once you start draining these funds to cover rent, you’ll be without a safety net in no time.
You should also avoid using credit cards or taking out personal loans to cover your expenses — even your one-time moving expenses. Similarly, if you find yourself charging groceries in order to pay your rent on time, it’s a sign that you’ve overstretched your budget, and you should step back and relook at your budget breakdown.
Now that you know how to answer the question, “How much rent can I afford,” here’s another: How long do you want to stay? Check out our guide on short term rentals to decide if a limited-time arrangement is right for you.
