If you’ve decided that you’re ready to rent, then there are many factors that you need to consider before you start looking for a rental home or apartment. In this article we will be looking at these factors as well as how you can calculate the amount of money you should be spending on housing on a monthly basis.
The first things that you will want to think about is your desired location and whether you want to be near your friends, family or workplace. You will also have to consider whether you want to live alone or if you prefer to have room mates for the company or to simply split the costs. Also, you should think about the type of home you’d prefer since many people prefer city life while others are happier in the suburbs or even country side. However, before you can start being specific in terms of what type of home you want, you need to know how much you can afford to spend.
There are two major costs that you will have to be concerned about and these are your monthly expenses and your move-in costs. Monthly expenses include your utility bills, insurance, amenities and the actual rent for the space. Move-in costs include your deposit, first and last rent, credit and background check, real estate agent’s fee, moving in costs etc. Your monthly costs will be the major determining factor in what you can and cannot afford.
So, in order to move forward, you will have to assess your current income and create a budget. When it comes to your housing allowance, the general rule that most people follow is 30% of your gross income should be allotted for housing. Note that this 30% is not just for your rent but should also cover your utilities, amenities and insurance. The main reason why 30% is generally recommended is because it will allow you to have the remaining 70% of your income for other expenses as well as some left over for saving.
Of course, this 30% rule is not set in stone since everyone’s situation is different. You may have student loans, credit card debt or other expenses which means that you may have to assign less of your monthly income to housing expenses. Alternatively, if you choose a property that is close to work and the landlord pays all of the utilities, you can spend more of your monthly allowance for a nicer place if you so desire.
So, for example, if your yearly income is 40,000 and you’re following the 30% rule, you should have $1,000 to spend on your housing. However, this doesn’t mean that you can get a rental for $1,000 since you have to add in the cost of your utilities, insurance and amenities. So, if all of those add up to $225, then you will have $775 for rent. Now, you can go looking for rentals within that price range.
In closing, we have just covered how you can determine the amount of money you have available to pay for rent and other housing costs. This is certainly not complete since you will also have to factor in moving costs and other miscellaneous costs as determined by your lease. So, with that said, I hope that this article has given you a better idea on what to expect and how much you can truly afford when it comes to renting a home.
