When looking for your next apartment, there is much to consider.
You’re asking yourself:
Where do I want to live?
How much space do I need?
How much rent can I afford?
Nobody wants to be stranded at home on a Saturday night because their rent check is breaking the bank! Careful planning and a solid budget can keep you living your best life without the stress of scraping the money together at the last hour to make your rent payment on time.
The rule of thumb when considering “How much rent can I afford?”: Keep it around 33% of your income or about one-third of your monthly income.
How Much Rent Can I Afford? | Calculating Your Expenses
When determining how much rent you can afford, it’s essential to take some time to calculate your expenses. These will be different for everyone but will generally consist of any recurring financial obligations like loans, insurance, etc.
Answering the question: “How much rent can I afford?” will require you to identify your income and all of your expenses. Depending on your income and regular living costs, a comfortable rental rate may be lower (or higher) than 33%.
Be honest with yourself. This is not the time to commit to changing your spending habits.
Be realistic about what you already spend. If you find yourself trying to figure out how to afford housing outside your rental budget, look more closely at where you can cut costs reasonably.
Step 1: Determine Necessary Expenses
Start by sorting out the necessary expenses from the non-essential expenses. Your essential expenses are bills and purchases that you need and are usually about the same each month:
- Loan payments
- Insurance
- Cell phone bill
- Childcare or education costs
- Groceries
- Gas for your vehicle
- Internet (probably essential for most people, but could be seen as non-essential for some)
- Utilities (gas, electric, water, etc.)
- Prescription medicine costs
You might be able to save on things a little bit here and there, but generally, these expenses are fixed and will not fluctuate much from month to month.
Step 2: Determine Non-Essential Expenses
Non-essential expenses are things you could do without, but you really don’t want to give up.
Cutting out all non-essential expenses to budget for a higher rent is not a great plan. While you might limit your non-essential expenses and hold yourself to a strict budget, make sure to include this in your planning, so you don’t find yourself feeling like you have to choose between an outing with friends and paying your rent.
Some non-essential expenses to consider when determining “How much rent can I afford?” are:
- Eating out
- Travel
- Clothing
- Concerts, movie tickets, other entertainment
- Streaming and/or cable service
- Subscriptions to non-essential items, such as meal kits, beauty boxes, regular deliveries of pet food, etc.
- Don’t forget to factor in putting away money for long-term goals! (like a downpayment on a house or contributing to your retirement savings)
Of course, the smaller your income, the fewer of these things you can afford. But you never want to overspend on rent to the extent that you have to give up on everything else you want to do.
If you are thoughtful about how much you spend in these areas, you’ll be able to feel comfortable with your budgeted rent payment and still be able to live the lifestyle you want.
Step 3: Create A Buffer
Give yourself a buffer. Unexpected costs come up, and you do not want to be scrambling to pay bills because you had an unplanned expense or an unusually high bill.
- Unexpected medical costs
- Your car tires need replacing
- You dropped your phone in the lake while taking a selfie
- A speeding ticket (oops!)
- It was unseasonably hot (or cold), and your electricity/gas bill is higher than normal
- Your Amazon Prime membership auto-renewed … along with five other forgotten, unused memberships
- Your dog got into the chocolate stash
- You just HAD to binge-watch that HBO miniseries—we get it!
- You decided you were ready to commit to fitness and bought a gym membership (you did not use it)
Unplanned expenses are bound to come up, no matter how much you try to avoid them. Unless you’ve found the magic money tree, these expenses could blow up your budget and leave you struggling to pay rent that month.
Factor in a buffer of at least $100 or more per month, so you always have a little extra cushion. If you don’t need it, put it away into an emergency savings account and save for a time when you really do need it (those vet bills are expensive!).
Step 4: Calculate Your Monthly Income
If you are paid on a salary, this is probably pretty easy to figure out. Take your yearly salary and divide it by 12.
If you receive bonuses or other incentive pay, do not include this in figuring out your monthly income. Bonuses are not guaranteed, so if you rely on them to cover your rent and other expenses, you may run into trouble if you do not get the bonus pay. Trust us, it happens.
If you happen to get paid every two weeks, things get a bit trickier.
First of all, if you’re getting paid bi-weekly, you won’t always have a paycheck when rent is due around the first of the month. Pay close attention to the timing of your paychecks and make sure you have money in the bank when your rent is due.
This may mean saving some money from each of your checks to go towards a large bill or rent payment.
Secondly, bi-weekly paychecks are often for hourly wage employees whose paychecks are never precisely the same amounts.
Your hours might fluctuate, and that makes your income less predictable. If you typically work between 35-40 hours per week, estimate your monthly income based on 35 hours per week rather than 40.
It is best to lowball your income because it is much easier to handle having extra money than not having enough! You should also only consider two pay periods in a typical month.
While you may occasionally receive three paychecks in a month, this is not how it typically works out. Only counting on two paychecks will ensure you have enough money to cover all of your expenses.
Step 5: Calculate Your Rent Budget
Now it’s time to subtract. Ready for the formula?
Monthly Income – All Expenses – Buffer = How much you can afford to pay for rent
There you have it!
Calculating your expenses is one way to get an idea of how much rent you can afford. However, we’ve got other tips and tricks for you to employ to find a happy balance between living in a home that encompasses your heart’s every desire and what you can actually manage financially.
How Much Rent Can I Afford? Creating Rental Wiggle Room
Prioritizing Rental Space & Features
Similar to looking at your budget, think about the space and features you need in your rental versus what you think would be ideal, and make a list.
- Number of bedrooms
- Number of bathrooms (differentiating quarter-baths from half-baths and full-baths)
- Outdoor space
- Heating/cooling
- Laundry (onsite vs. in-unit vs. none)
- Parking
- Storage
- Office space
- Layout
- Square footage
- Finishings (flooring, countertops, etc.)
- Other community amenities like a pool, workout room, door person, etc.
Do you really need a guest bedroom?
Do you have a place to store that bicycle you will be using to get to and from school?
If you find yourself with a too-tight budget, you may have to be more strict with your needs and wants list.
Onsite laundry would be a blessing, you’d love to have a pool for the summer months, and a gym would be amazing! But the added cost of these amenities might be a luxury you can live without.
Analyze your current space. What do you have that you can’t live without? These items should be on your needs list.
What are you missing that is making your life more difficult? Maybe you’ve started working from home, and working at your kitchen table is slowing your productivity, so you need a dedicated office space.
Consider what you need from a space versus what you would love to have, and be willing to let go of some wants to fit into a comfortable rental budget.
The Perfect(ish) Location
Location, location, location!
When choosing where to find your next apartment or rental property, be mindful of how close it is to places you’ll often visit, like school, work, or family. Sometimes being close in miles isn’t close in time, so make sure to factor in how long it will take to get to these places during times you will most likely be traveling.
Think about these when choosing your housing location:
- Proximity to work, school, family, etc.
- Proximity to essential stores (grocery, pharmacy, etc.)
- Do you prefer a suburban, urban, or rural setting?
- Proximity to restaurants and entertainment
- Crime and safety
- Location-related costs (like insurance premiums)
Location isn’t just about convenience and lifestyle; it’s also about cost.
Things like car insurance and homeowners insurance are affected by your address. To avoid unexpected increases in these payments, call your insurance provider to find out what the change in premiums might be.
You may find that your costs could increase as much as double if you move to a zip code with a volatile housing market. Yikes.
You may already know where you want to live, but the rent in that area is high. You need to consider which is more important between space, square footage, amenities, and location.
People worldwide sacrifice physical space to live in an area they love (hi there, NYC walk-in closet apartment). But there are also plenty of people who choose to live outside of their desired location in order to have room to roam or a scenic view.
Which is more important to you? Read through a few considerations below.
My Physical Space Is The Most Important!
Great! Our physical spaces can have a considerable impact on how we live our lives, so it makes sense to prioritize this.
You will still need to determine your wants and needs for your space. If you cannot find what you want, expand your search area until you find something that fits your price range and desired amenities.
I’ll Live In A Shoebox If It Means I’m In The Right Location!
That’s great, too! Your challenge, then, will be to figure out what the most critical features in your physical space are and determine your non-negotiables.
If you prioritize your location, you may have to be very flexible with the square footage, modern amenities (who needs an elevator when a seventh-floor walk-up will do?).
This is especially relevant if your region is highly desirable (read: expensive) and your budget is relatively small.
If you can’t find what you’re looking for in your price range, start removing some of the wants from your search criteria until you find something in the desired location that has your basic non-negotiable space requirements.
“How Much Rent Can I Afford?” Frequently Asked Questions
How much should I pay for rent?
Rental rates vary from city to city. Do your research to know what typical rental prices are going for in your area so you don’t overpay. Rule of thumb: Spend around 33% of your income on rent.
How do I choose the best neighborhood to rent in?
Think about what is important to you and your housing needs. Decide what your priorities are with proximity to work, school, family, essential stores, and your go-to entertainment spots, parks, church, etc.
It’s always a good idea to look into crime in the area to make sure you choose an area where you and your family can feel safe.
What’s the first thing I should do when looking for a place to rent?
Set your budget. Know what you can afford to pay for rent and stay within your budget. Once your budget is set, consider what you want and need in terms of space and location.
Can a landlord raise my rent?
Landlords can adjust rent once a lease is over. That means if you sign a one-year lease, you may have a rent increase at the end of that one-year lease. If you want to sign another lease, you may need to consider if the new rental rate is affordable.
Some areas restrict how much rent can increase, so make sure to look into regulations for your specific area for more information.
Am I responsible for any kind of maintenance as a renter?
A renting tenant’s maintenance requirements will vary based on the landlord and the specific lease agreement.
Typically, in an apartment rental, most maintenance items will be handled by the landlord or the management company, but house rentals may require the tenant to do more upkeep. Generally, expect that you’ll need to replace your burnt-out lightbulbs, but probably aren’t responsible if the 1960 stove finally goes kaput.
Make sure to carefully read your lease agreement and ask your landlord specific questions about who is responsible for different maintenance-related items.
Can You Finally Answer The Question “How Much Rent Can I Afford”?
Renting and the ever-changing specifics around it can be stressful.
- Changing housing markets can alter what’s affordable to you year by year.
- Landlords have varying leasing agreements that dictate whether you can have pets, paint the walls, or blow your nose without getting hit with a noise complaint.
- The searching process can be tedious, and it’s difficult to know whether the landlord or even your potential roommates are decent human beings if you’ve only met them through email.
But renting also has its perks.
- If you don’t love it, you’re not stuck with it forever.
- That 35th-floor highrise with city skyline views is a living experience you’ll never forget (and one you might not be able to afford to own).
- Life plans change. It’s easier to take new opportunities when you’re not tied down to a 30-year mortgage.
As with any significant adulting responsibilities, renting requires a budget and some financial discipline. Our rental affordability calculator can help you determine what you can take on.
Once your renting budget is clear, you get to do the fun part: Find your perfect-fit rental.
Have fun, and as your nosy downstairs neighbor will soon say: Keep your entryway clean, son—This ain’t the Bellagio!
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