How Much Rent Can I Afford?
Use the rent calculator below to estimate the affordable monthly rental spending amount based on income and debt level.
Increasingly more and more young adults today are living with their parents, siphoning their parental goodwill for as long as possible until the time comes to grow up and move out. When it comes, it is rare that anyone immediately becomes a homeowner right away. Between this point and the eventual day of their homeownership, renting is usually the sought-after short (or long) term solution.
The belief that renting is the equivalent of throwing money away is not necessary a valid claim. By that logic, homeowners also throw money away when they pay for property tax, mortgage interest, maintenance, or insurance.
However, sooner or later, many people will reach a point in their lives where they are faced with the decision of becoming a homeowner while renting. Use our Buy vs. Rent Calculator to evaluate the financial feasibility of doing so. Our House Affordability Calculator or Mortgage Calculator can then help to determine an affordable home and subsequent monthly mortgage payments.
Finding a Place to Rent
It can be easy or terribly difficult to find a place to rent depending on many factors, and one of them is location. Rural areas tend to be easier; many times, it's as simple as driving around searching for "For Rent" signs or apartment complex. Then, just schedule a viewing or simply ring the doorbell of the leasing office. On the other hand, in or near some but not all major metropolitan areas, rentals can be scarce due to factors like population density or local policy. In such situations, finding a vacant place takes a lot of hard work. Renters have to scan the Internet sites like Craigslist often or paying an agency to do the search. Once a place becomes free, the renters may have to race to view it, and then, if it's practicable, put in an application right away.
How to Determine Affordability
There are many methods for determining what is considered affordable rent. Affordable is a relative term and carries a different meaning for different people. Some people think a front-end debt-to-income ratio of 25% is considered affordable, while others might think 1/3 of income is the plausible judge of that. However, most people just do ballpark calculations in their heads.
It is important to be aware that the cost of rent is only one of many things to consider financially. Don't forget emergency funds, insurance, and other house-related expenses.
Ideas to Decrease the Cost of Rent
According to a report by Harvard's Joint Center for Housing Studies in 2015, nearly half of renters in the U.S. are struggling to afford their monthly payments. Half! It is very possible to decrease the cost of rent in many ways concerning many different situations.
- Consider living with parents, families, or friends in the meantime, if possible. Just remember to pay them back kindly in the future, during more financially stable times.
- Several things that go without saying regarding apartment shopping: do diligent research, give ample time to decide on a place, and walk away from bad deals.
- Find areas with lower rents. Not everyone can afford condos in Upper East Manhattan overlooking Central Park.
- Always, always, always negotiate the rent and terms of the lease. Worst case is, they say no.
- Find roommates. On average, shared two-bedroom apartments are ~30% cheaper than one-bedroom apartments. Roommates are not as bad as people make them out to be, only the horror stories get circulated. There are many good roommates to be had everywhere, they just require rigorous searching and evaluating for. The best prospects are usually the ones found through friends and family who can vouch for them.
- Negotiate with landlords. Some allow maintenance work in exchange for lower monthly rents.
- It is very possible to live in a mobile home or vehicle. While mobile homes might be costly upfront relative to monthly rent, many people already own vehicles. Some very successful people use their place of employment as a 'home', where they shower, change, eat, and do many daily activities (along with work, of course), just to revert to their vehicle at night as a place to sleep and repeat the next day.
- HUD rental assistance programs exist for people who have the direst needs for housing. They are very selective and qualified applicants are rare. Typically, only families, people with disabilities, or the elderly are given subsidized, public housing. The waiting lists can take years, and even then, available apartments are in different locations, requiring relocation. Rent is usually 30% after accounting for necessary expenses. As for private housing, also called Section 8, it can be even more difficult than public housing because the income and eligibility restrictions are tougher. Waiting lists will be longer because approval is required from both housing agencies and landlords.
- As a last-ditch resort, seek help from local communities. Good places to start are welfare programs located inner city who provide various aid to the underprivileged. They can point in the right directions for local housing assistance.
- Get everything in writing, such as promises made by landlords or renter responsibilities. They can become crucial during legal disputes over grey areas.
- Take pictures of the property that best convey the condition of it in case landlords try to charge for damages. The pictures can then be used as proof that damages were preexisting.
- There is such a thing called tenant insurance. In the case of a fire or theft, the responsibility of personal assets falls on the renter. For additional peace of mind, it can make sense to purchase tenant insurance.
- For fixed leases, landlords cannot raise rent prices on existing renters during the life of the lease.
- Check for cell reception.
- Call a nearby pizza place that delivers. If they don't deliver to a certain address after a certain time, it's a pretty good indicator of the neighborhood.
- Call utility services, they can provide information on what the average monthly bill might look like.
- If there are train tracks nearby, ensure that the decibel level of passing trains aren't enough of a disturbance to lead to sleepless nights.
- Be nice to landlords. The relationship between landlord and renter contains a lot of grey area, and it will only work to the renter's favor to appeal to them, whether it's by always making timely payments, or treating their property with the utmost respect. Who knows, maybe the landlord will return the favor by not charging for the hole in the wall punched out of anger or exorbitantly increasing a monthly rent after a lease ends.
- Be nice to neighbors. Introduce yourself, bake them a cake intentionally while exclaiming there was simply too much, or invite them over for dinner every once in a while. They will be more accommodating regarding loud music during parties or rabid, yapping dogs.