How Much Should You Spend on Rent?
Budgeting for an apartment can be tough if you're just starting out on your own, especially in a down economy when salaries are flat and rents continue to rise. When you fill out a rental application, the landlord takes into consideration your total take-home pay against the cost of the apartment when determining eligibility. You can find guidelines to help you consider this rent-to-income ratio.
Range
To keep your finances under control, it's best to keep your rent to a low percentage of your paycheck. According to Farnoosh Torabi of CBS MoneyWatch.com, you should pay approximately 25 percent of your net take-home pay, with another 3 to 4 percent added for utilities. In many cities, landlords use this limit when selecting you as a tenant. According to the Trulia website, the U.S. Department of Housing and Urban Development and other state housing authorities recommend that you not spend more than 30 percent of gross pre-tax income on rent and utilities.
Salary and Location Variables
Depending on the location you live in or where you are in your career, the percentage of income that you put toward rent will vary. In a large metropolitan area, where rents are expensive and apartments are in high demand, you may pay a higher percentage of your salary toward rent. Yet, consider that in some large metropolitan areas you may not need a car. This savings alone could be hundreds of dollars a month that you can place toward your rent and help you stay within your budget. On the other hand, you may live in a rural area and pay 20 percent of your income for rent, but also have to pay for gas and automobile expenses due to a long commute to work. The amount of your salary is also a consideration. If you are in a high-paying position or further along in your career, the percentage of income you can put toward rent may be less of a factor.
Monitor Your Monthly Spending
Maintaining a budget is about more than rent and utilities. Take a close look at your income, bills, living expenses, groceries and entertainment spending. Factor in health care costs. Monitor what you spend on everything each month. Regardless of what the suggested rent-to-income ratio is, only you can determine what you can comfortably spend on rent.
Considerations
When looking at rentals, ask the landlord or property manager about the qualifying rent-to-income ratio. The landlord may be able to look beyond this factor if you have other assets in your favor, such as a good credit score and stable employment. If you're just starting out and have low income, you may need to get a roommate to satisfy the requirements. You may also be able to use a co-signer who doesn't live with you, but who promises to shoulder the burden if you fail to make your rent payment.
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