Rent to Income Ratio:
How Much Can I Afford to Spend on Rent?
Before you start searching for your next apartment, you should know how much rent to income you can afford. These equation will help you set a budget and help ensure that you are approved when you apply for a rental house or apartment.
What percentage of monthly income or salary should be spent on rent?
Usually, it is best to spend a fixed percentage of your "after-tax" income on rent. You should budget this in as your primary expense.
The recommendation from rental experts and our office policy is for it to be no more than 30 percent of your gross income.
For example, if you make $3,000 per month, your rent should NOT exceed $900 per month.
Calculate your own figures by multiplying your income by 0.3.
Remember that each person's financial situation is different.
You will be pre-screened before being shown the property. And you will have to have proof of your income when applying.
What is a rent-to-income ratio?
Rent to income ratio; do you find yourself wondering what this means ... in real-life terms? In short, rent-to-income ratio will determine the monthly or annual gross income a tenant will need to earn in order to afford rent payments each month. If you don't earn enough income relative to your rent obligations, you're far more likely to miss or get behind one your rent or other obligation and payments. The most common Rent-to-Income ratio is 0.3, meaning you should earn 3 times your rent.
What expenses can I expect other than rent?
(You will have security and or pet deposits to pay for the home as well as the utilities.)
In addition to your monthly rent payments, you may encounter some of these household expenses:
- Gas / Propane
- Water and Sewage
- Trash Disposal
- Internet and/or TV
- Health and Beauty Products, Cleaning Products
- Clothing Allowance
- Rental Insurance
- Car expenses - may include payment, gas, oil changes, maintenance, insurance
*Late Fees if rent is paid late