Determine How Much Rent Can You Afford with These Three Simple Options
Simplify your rental home search by using these simple formulas to figure out exactly how much rent you can afford each month.
How much rent can you afford? This is an important question to ask yourself before starting your search for rental homes in North Carolina. There are many considerations to take into account, including paying monthly expenses, saving for down payment and investing for retirement. These are all important factors that should be considered when determining how much rent you can afford. Sitting down and planning out how much you should budget each month for rent can be a daunting task. That’s why we provide three simple ways to determine how much monthly rent you can afford.
Is the 30% Income Rule Valid?
Should you go by the rule of thumb offered by experts over the years which states that you should not spend more than 30% of your income on rent? Not according to a Bloomberg Business article which says that rule is “almost meaningless now” for today’s renters. While the 30% income rule may no longer be valid, you can still use it as a guideline to help you budget for your next rental home.
A Rental Application Rule
You could use an often-used rental application rule to come up with a dollar amount you should budget for your monthly rent. How do property management companies and landlords determine whether or not you can afford to pay the required amount of rent on a rental property? In many cases, landlords and property managers will require that your income is 40 times the monthly rent.
To determine how much rent you can afford under this guideline, take your pre-tax annual salary and divide it by 40. Remember, this “40 Times the Rent” rule is not always used. To learn more about Red Door Company’s rental application and tenant screening process, please do not hesitate to contact us.
Rental Budget Guideline
If you are still finding it hard to formulate how much rent you can afford to pay each month, then try the following rental budget guideline. It is called the 50/20/30 budget guideline. Here’s how it works.
- Set aside 50% of your monthly income for fixed monthly costs. This would include items such as rent, car payment, utilities, renter’s insurance, college loans, other monthly bills, etc.
- Set aside 30% of your monthly income for day-to-day expenses. This would include items such as dining out, entertainment, weekend getaways, shopping, coffee, etc.
- Set aside 20% of your monthly income on financial goals. This would include items like saving for a down payment to purchase a home, investing for retirement, paying down debt, and creating an emergency fund.
So, based on this rental budget guideline, once you determine 50% of your monthly income and subtract all fixed expenses out of that amount, then you will have the amount of monthly rent you can afford.
Now that you have three ideas for determining how much rent you can afford to pay on your next rental home, it is time to start your search. Check out our North Carolina rental property listings in Raleigh, Durham and Chapel Hill. Feel free to contact us at Red Door Company and let’s get you moved into your next rental home in North Carolina.