Budgeting For Rentals In NYC
Renters must juggle multiple steps and make difficult decisions when renting an apartment in New York City. Between high rent prices, a multi-step application process, and a competitive market, it's easy to grow overwhelmed by finding a place to live.
One of the first things a renter must discover is how much rent they can afford to spend on their new home each month. RentHop has several tools and resources to help renters approach their next search, such as the interactive rent calculator on this page. This calculator can help a renter figure out how much rent they can pay monthly, given their yearly income.
The 40x / 30% Rule
There are many ways to calculate affordable rent.Some people use the 40x rule since many landlords require that your annual gross income be at least 40 times your monthly rent.To calculate, simply divide your annual gross income by 40 - if you make $120,000 a year, you can spend $3,000 on rent.
An equivalent is the 30% rule, meaning that you can put 30% of your annual gross income in rent.If you make $90,000 a year, you can spend $27,000 on rent, and so your monthly rent will be $2,250.
More To Consider
While these rules are helpful, none of them factor in expenses. Renting an apartment can cost you more than you imagine.For instance, some buildings charge a pet fee for each pet you have.In New York City, your rent might go up by $35 for you to keep a pet.
Other amenities also play a huge factor. Some buildings charge monthly gym fees and some others don't.If you live in a building that does not have a fitness center, you might spend more on gym memberships.
Nor do the rules mentioned above take into account your financial situation or lifestyle.For example, a newly graduated student may be carrying a substantial student loan and have to set aside $200 to $300 per month to repay the loan.An independent contractor might need to have a liability insurance policy in place and has to pay for health insurance himself/herself.
Inflated Costs Of City Living
Utilities, especially energy costs, have risen through the roof over the last several years.If you make $120,000 or less per year, you can expectto spend as much as 5% of your monthly net income on your electricity, water, phone, and internet bills.
Food budget takes up about 10% of your monthly net income, according to the U.S. Department of Agriculture.Keep in mind that if you eat out often, or like to frequent bars and nightclubs, this number can rapidly balloon out of control.
Transportation is usually 5% of your monthly net income.If you own a car, however, your costs will be substantially higher - you'll needto shell out extra for gasoline, parking, car insurance, etc.
Bad / No Credit
Renting an apartment might cost you more than you imagine.If you are renting with a bad credit score or no credit history, expect to put down more cash for security deposit.You might also find yourself in need of a guarantor if your income does not meet the landlord's requirement.
Having a guarantor often means additional fees, but if chances are your family or friends will be willing to help out.You might also spend extra $10 to $30 per month on renters insurance.In short, keep in mind of all possible expenses when you estimate how much rent you can afford!
FAQs
Some people use the 40x rule since many landlords require that your annual gross income be at least 40 times your monthly rent. To calculate, simply divide your annual gross income by 40 - if you make $120,000 a year, you can spend $3,000 on rent.
How much can I afford to spend on rent? ›
One popular guideline is the 30% rent rule, which says to spend around 30% of your gross income on rent. So if you earn $3,200 per month before taxes, you could spend about $960 per month on rent. This is a solid guideline, but it's not one-size-fits-all advice.
Is making 3x the rent enough? ›
Some communities use a 3 times rent calculator formula, meaning a renter's monthly income should be at least 3 times what goes to paying rent. At REE, we recommended that your income is at least 2.5 times your monthly rent amount.
How much rent can I afford on $70k? ›
So you're looking at somewhere near $3791 after tax per month. To be safe, a rule of thumb is that you should aim for 1/3 of your salary or less on rent. That will leave the appropriate amount for spending money, insurance, transportation, etc etc. So my suggestion is to look for $1263 per month or less.
How much rent can I afford making $45,000 a year? ›
As a rule of thumb, your monthly rent shouldn't exceed 30% of your gross monthly income. This leaves 70% of your gross monthly income to cover other expenses. For example, if you make $50,000 per year and follow the “30% rule,” you'd have $15,000 annually - up to $1,250 per month - to spend on rent.
Is $1,500 rent too much? ›
According to the 30% rule, a person earning $5,000 gross per month could reasonably afford to spend $1,500 per month on rent. However, it's important to remember that this is only a guideline.
Is $2000 rent too much? ›
Following the 30% rule might look something like this: If your gross income is $10,000 per month: You can afford a $3,000 monthly rent. If your gross income is $6,667 per month: You can afford a $2,000 monthly rent. If your gross income is $5,000 per month: You can afford a $1,500 monthly rent.
Is 1200 rent too much? ›
A popular rule of thumb is to spend no more than 30% of your income on rent. So if you gross $4,000 per month, your rent should ideally be $1,200 or less. Unfortunately, that's not always realistic.
How much should rent be of net income? ›
It is recommended that you spend 30% of your monthly income on rent at maximum, and to consider all the factors involved in your budget, including additional rental costs like renters insurance or your initial security deposit.
How to figure 3 times the rent? ›
How to Calculate 3x Rent? Calculating the 3x rent is pretty straightforward. You simply multiply the monthly rent by 3. For example, if the rent is $500 per month, you would need to earn at least $1,500 per month (500 x 3) according to the rule.
You may be able to live comfortably off $70,000, depending on where you live and how many people are in your household. If you're single and live in an area where the cost of living is below average, you can likely live well on $70,000.
Is 70k a good salary for a single person? ›
If you are a single person in Los Angeles making around $70,000 a year, you are still considered low-income, according to a new statewide study. The California Department of Housing and Community Development released the report in June and found that income limits have increased in most counties across California.
Can I afford a 300k house on a 70k salary? ›
If you make $70K a year, you can likely afford a new home between $290,000 and $310,000*. That translates to a monthly house payment between $2,000 and $2,500, which includes your monthly mortgage payment, taxes, and home insurance.
Can you live off 50k a year? ›
What Can I Afford With $50,000 a Year? The answer depends on where you live. For the top 30 most populated cities in the U.S., you need between $20K and $35K a year to cover basic expenses, including food, medical costs, housing, transportation, taxes, and other expenses.
How much is 25 dollars an hour annually? ›
Frequently Asked Questions. $25 an hour is how much a year? If you make $25 an hour, your yearly salary would be $52,000.
Can I afford a house making 40k a year? ›
How much house can I afford with 40,000 a year? With a $40,000 annual salary, you should be able to afford a home that is between $100,000 and $160,000. The final amount that a bank is willing to offer will depend on your financial history and current credit score.
What is the 50 20 30 budget rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
Is 50% of your income too much for rent? ›
Spending more than 50% of your income on rent isn't recommended, as you'll be living paycheck to paycheck. You won't be able to save or invest money for the future. If you're currently overspending on rent, solutions include raising your income, finding more affordable housing, or getting a place with a roommate.
Is 30% too much to spend on rent? ›
Is 30% of your income too much to spend on rent? Yes. You should spend no more than 25% of your monthly take-home pay on rent. Spending 30% or more will mean not having enough room left over in your budget to put toward other important financial goals like saving for a down payment on a home.
How much should you make to afford 1500 rent? ›
The traditional rule of thumb is that you should try to spend no more than 30% of your gross income on rent. According to this rule, you should be making $5,000/month to afford a $1,500 apartment. With a 40-hour workweek, this works out to $28.85/hour.
