Okay, you’ve analyzed the numbers and decided that, for now, buying a home isn’t going to happen. No problem, renting is fine! Sometimes renting is really the best option. You may have only started after moving out of your parents’ home, or you may have spent 20 years doing all these adult things and working hard to get out of debt. Whatever your reason for renting, you’re in good company: Over 100 million people in the United States are renters.
Once you know you are going to rent, the big question is, how much rent can I pay? Let’s take a look at how much you should spend on rent and why you shouldn’t feel bad about renting.
How Much Rent Can I Pay?
Your rent payment, including renter insurance (more on this later), cannot exceed 25% of what you pay when you take over.
This means that if you take home $4,000 per month, your monthly rent will cost you $1,000 or less. And don’t forget that this figure accounts for 25% of your net salary, which is what you bring in after taxes. We know that 25% may seem like a low number to you. After all, most people spend more than that on their housing costs, averaging almost 36%2.
But if you spend more than 25% of your net salary on rent, your budget will be tight. Sure, you can still pay for food and gas for your car, but you won’t have a lot of money to spend on other life necessities (and, no, goat yoga is not in demand).
Worse yet, it will be difficult to earn enough money to get out of debt or save up for a down payment on a home if you are already debt-free. We call this “the poor in the house”. Aka broke. Don’t volunteer to go bankrupt by overpaying your rent.
How To Calculate The Rent You Can Afford
Get out the calculator you haven’t used since 10th grade algebra. Just kidding, it’s not complicated at all!
To calculate how much rent you can afford, you need to know how much you’ll pay each month, equal to your total wages minus any tax or health insurance deductions. You can find out by looking at your pay stubs or (if you have direct deposit) by simply looking at your bank account to see your monthly deposit from your employer.
Multiply your take-home pay by 0.25. Ta-da! This is the rent you can afford.
Here Is An Example :
Let’s say you make $56,000 a year.
Your monthly net salary will be around $3,734.
If you multiply that net salary by 0.25, you get $933.50. So with a salary of $56,000, the maximum you should spend on rent for a month is $933.50.
What About The Rent Increase?
You may be wondering how the rent increase affects all of this. Let’s talk about this. First, you should know that the state you live in may have laws that your landlord must follow if they decide to increase your rent. Most states require landlords to give notice of a price increase – usually 30 days – and some local governments even set limits on how much landlords can increase your costs.
The important thing to remember about how to negotiate a rent increase is that landlords want good tenants and don’t like bad ones. So if you’re a good tenant (for example, you pay on time and don’t break anything), you should remind your landlord. Keeping you in — and not risking your rental at a standstill — may just be the incentive your landlord needs to be more sensible when it comes to rent increases. You can also talk to your landlord if you are offering an extended lease, such as 18 months instead of 12. Or if you do some research and find your new rent is above market value. school, then you will have a convincing argument. On your hand.
If you’re still stuck with a rent increase and the new payment is too expensive for you, it’s time to find a new place to live.
What Can I Afford To Rent?
If you have decided to hire, you probably know that there is still a decision to be made:
whether you need to rent a house or an apartment. The answer depends on a number of factors, most importantly what you can afford. Mind:
When trying to figure out what you can afford to rent, keep that 25% figure in mind.
Rent A House Or An Apartment
Traditionally, renting an apartment is almost always cheaper than renting a house. But as prices continue to climb, that may not be the case for you.
The median price of a one-bedroom apartment in the United States has risen to $1,1904. Although the cost of rent also goes up, this can still be the most affordable option if you have roommates to share the payment with.
For example, a three-bedroom house with a monthly rent of $2,400 will only cost you about $800 if divided into three. That’s nearly $400 cheaper than the cost of an average one-bedroom apartment. Of course, if you live alone, renting an apartment may still be the cheapest option.
Also, the cost difference between renting a house and renting an apartment will vary depending on where you live. For example, moving to a house in central New York is not necessarily a realistic option for most people. Therefore, when deciding to rent a house or rent an apartment, you need to understand two things:
1) how many people will you live with and
2) where will you live. Once you figure this out, do some research and see which option makes the most sense. It all depends on your individual situation.