How Much Rent Can I Afford?

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Maybe, your current rental agreement is coming up for renewal. Or, you’re moving to a new city. Before you sign the new lease, ask yourself this question, “How much rent can I afford?”

With seven years of rental experience in two cities, I’m well familiar with this question.

Renting has many advantages. But, one downside is that you must pay rent each month. In most cases, two factors dictate how much rent you can afford. The first factor is your salary. Second, is where you live.

All of us has a different work and family situation. Maybe, you have more options to lower your rent than most. Even if you don’t, you still need to make sure you don’t pay too much for rent.

I’ll even share a few ways you can save money on rent.

How Much Rent Can I Afford?

The easy answer is that your annual rent doesn’t exceed 30% of your pre-tax income.

With this rule, your monthly rent is less than $1,250 when you earn $50,000.

And, if you can find pay less, even better!

But, the 30% rule doesn’t apply to every renter. This is true if you live in expensive cities. You might pay $3,400 for a one bedroom apartment in New York or San Francisco. To follow the 30% rule, you need to make at least $136,000 a year!

In fact, the 30% rule originates from federal public housing policy. Since 1981, rent for public housing can’t exceed 30% of a tenant’s income. So, this number is now a baseline for most budgets.

Once you go above the 30% mark, you might struggle to pay your other bills. After all, you can only reduce spending so much. And, you might not be able to increase your income to offset higher rent costs.

If at all possible, stay below the 30% mark for rent payments. For example, my monthly rent was around 20% of my annual income. Each month, that’s an extra $500 for extra loan payments.

What is 30% of Your Income?

Below is the most you should pay each month for rent.

This list is for your pre-tax annual income:

  • $35,000: $875
  • $40,000: $1,000
  • $50,000: $1,250
  • $60,000: $1,500
  • $70,000: $1,750

If the average rent is higher than these figures, don’t worry. There are some tips further down.

While you can use a rent calculator, these two formulas work too.

Multiply the Rent By 40

Your potential landlord might use this formula to do some quick math.

Simply multiply the monthly rent by 40.

Example: $1,250 x 40= $50,000

Most rental applications require you to verify your income. The landlord can quickly compare your income to this formula. If your income isn’t at least 40 times higher, he might keep looking.

Multiply Your Annual Salary by 0.025

What if you know your salary and don’t have a property in mind yet? You find out what 2.5% of your annual salary is. This number is your maximum rent when it’s 30% of your income.

Example: $50,000 x 0.025= $1,250

So, 2.5% of $50,000 is $1,250.

Look for places with a monthly rent below this amount.

Use Your After-Tax Income Instead

Some people use their net income to choose their rent limit. This is your take-home pay after you withhold income taxes.

After all, your actual paycheck is how much money you can spend each month. Basing the 30% figure on this number forces you to spend less on rent.

Every person has a different tax situation. Even with the same pre-tax income, your tax burden can differ. Marrying and having children can lower your tax bill. And, more pretax 401k contributions can save you money at tax time too.

To figure your taxable income, look at your paychecks for the last three months. Add the net total income of all three months and multiply by 4. Then multiply that number by 0.025. This final number is the maximum rent payment for 30% of your net income.

Example: $24,000 net annual income x 0.025= $600

With this example, $600 should be your highest rent payment.

Don’t Forget These Rental Costs

Besides how much you pay your landlord, you must budget for these costs too.

To stay below the 30% target, you might find a cheaper place. And, you have a cushion for the below expenses.

So, $1,250 might be your 30% limit. But, you might find an apartment closer to $800. If so, use the $400 difference to offsets these extra expenses.

Renter’s Insurance

Some landlords require you get renter’s insurance. If not, it’s still a good idea to get some.

Renter’s insurance covers these three expenses:

  • The cost to repair or replace your personal property
  • Liability protection if a guest gets injured or you damage a neighbor’s property
  • Additional living expenses if your property is uninhabitable

PolicyGenius lets you compare the rates of several providers at once. In most cases, you only pay up to $15 per month. And, it can save you thousands of dollars if you need it.


You have to pay utilities as a homeowner too. But, some first-time renters forget these about expenses.

To save money, you may want to choose a smaller home that uses less energy. If you’re apartment hunting, try avoiding end units. You can also take it a step further and avoid a top floor unit too. The more exterior walls you have, the more energy it takes to heat or cool. As a result, your electric and gas bills are higher.

Some landlords include select utility bills in the monthly rent. If not, plan on paying for these services:

  • Electric
  • Natural Gas
  • Water and Sewer
  • Trash Pickup
  • Lawn Care

You first need to get a rough idea of how much you will pay. Ask the utility company for bills from the current tenant. And, ask the landlord if they can provide any details. With this information, estimate your monthly utility costs.

Two optional expenses include cable tv and home internet. Instead of paying full price, click on the links to save money on these two items.

Tip: To save money, watch cable tv on Sling TV for $25 a month!

Pet Fees

If you own a pet, you may have to pay a pet deposit. Most apartments charge between $200 and $300 per pet. For most landlords, this is a one-time fee per pet. But, it’s more money you need to pay before you can move in.


Some complexes charge a fee for parking. You might get two spots for free. But, you may have to pay for guest parking or extra vehicles. So, if you also own a boat or motorcycle, you may have to pay extra.

Commuting Costs

Unless you’re moving down the street, you need to update your commuting costs. You may now pay more or less in tolls, public transit and gas than before. These are costs you can’t really control. So, make sure you can afford your new rent and the new commuting costs.

How to Save Money on Rent

Thankfully, you have several options to save money on rent.

Below are a few tips to help you stay below the 30% mark.

Before we begin, let’s remember one rule. Never sacrifice safety to save a few bucks.

Avoid Special Amenities

A hard decision most Americans have is learning to say “No.” Most of us have a disposable income. So, it’s easy to spend more on luxuries than we should. As a result, we struggle to pay for our basic needs.

Remember, your apartment or house needs to be safe. But, it doesn’t have to be the Taj Mahal.

To save money, you might avoid complexes with these extra amenities:

  • Clubhouse
  • Fitness Center
  • Tennis Courts
  • Swimming Pool
  • Game Rooms
  • Dog Parks

While all these amenities are nice, they add to rent costs. Even if you don’t use any of the on-site amenities, your rent includes the costs. So, you’re “losing money” if you don’t use them.

For instance, I was home on weekends for ten months of my first 12-month lease. For eight nights a month, I slept at my own place. Otherwise, I was out-of-town. Paying for a luxury apartment would have been an unwise use of cash. If this is you, pick a basic apartment. You can always move into a better apartment later.

Also, avoid units that overlook the pool or have a garden. Or, have in-house laundry hookups. Select units might also have vaulted ceilings and crown molding. For these amenities, you most likely pay more.

Some amenities can help you save money. For example, an apartment fitness center saves a gym membership. You just have to what amenities are worth the extra rent.

Don’t Get a Rental Property That’s Too Big For You

Most of us want the biggest place we can afford. After all, you have more space to relax. And, you have more square feet to keep your stuff. If you’re not careful, your buy items to fill the space. These items cost money and you don’t really need them.

As we all know, larger units cost more money. So, find a place that’s big enough for you, but not too big. If you’re planning on getting married or having a baby soon, it can be better to stay. It can be cheaper and less stressful than moving in a year.

And, a spare bedroom means you can get a roommate to help split the rent.

Compare Apartment to House Rental Costs

Don’t assume a small apartment is always the cheapest option.

There are many factors that determine rental costs.

Some of these factors include:

  • Amenities
  • Quality of Neighborhood
  • Size of Waiting List
  • Is the complex kid or pet-friendly?

If you rent a home, you may have to mow your own lawn. But, you can save money. And, you can also have more privacy than an apartment.

Also, some landlords rent apartments and townhomes. Both of these properties may have the same number of bedrooms and bathrooms. Compare the price and see which is the better deal.

Costs can vary more than you think for nearby rental properties. So, it pays to compare prices for at least two different properties. And, take the time to tour the complex or meet the landlord. If possible, bring a friend to get a second opinion.

After all, rent is probably your single largest expense each month. The last thing you want is to live in an inferior house. Or, to have a bad landlord. Many renters have horror stories. There’s no need in creating another one.

Once again, don’t be afraid to walk away if you don’t like something. Sometimes, you don’t realize an issue until you tour the property. It’s better to find these things before you sign the lease.

Sign a Longer Lease

Sometimes, you need to sign a longer lease to get the lowest rent. In most cases, this is a 12-month lease. Any agreement shorter than a year means you pay more.

Landlords use this policy to find committed tenants. They only make money when a tenant lives in a unit. They charge more for short-term rentals to hedge against vacancy. And, to offset cleaning costs in-between tenants too.

Get a Roommate

Sometimes, it makes sense to get a bigger place. For example, the rent for a two-bedroom unit might only be $100 more than a one bedroom unit. That’s the case at my old complex.

A second option is renting an entire house. Depending on the neighborhood, a house can be cheaper than an apartment. And, you get more living space!

Getting a roommate is a common hack to save money on rent. In an expensive city, this might be your only way to afford rent.

Live in a Cheaper Neighborhood

Moving to a cheaper neighborhood is an easy way to save money. But, make sure the commuting costs don’t exceed the rent savings. Living downtown is nice, but it’s not necessary. Your house doesn’t have to be a status symbol.

After all, you can always call Uber to get back home on a Friday night.

Sell Items You Don’t Need

Many people move into bigger rental units every few years. This isn’t because they have a growing family. It’s because they buy more stuff. So, they must either find a larger place. Or, they rent an off-site storage unit. Either option costs more money than staying small.

Instead of spending more money, sell items you don’t need. This way, you can fit into a smaller place. And, it’s fewer items you need to move.

You can have a garage sale. But, you can also try these tricks to sell your items too:

Plus, Craigslist can be your best friend too!

Start a Side Hustle

For a season, having a side hustle to make rent is a great idea. This side hustle can fill the gap until you get a raise at work. Or, until you can find a roommate to share rent costs.

However, you shouldn’t rely on a side hustle to pay rent long-term. This is the equivalent of living paycheck to paycheck. Most people can’t sustain this lifestyle long-term.

Instead, find a cheaper place to rent. Then, use your side hustle to pay off debt or to build your savings.

Change Jobs

Life events like marriage and job changes affect how much rent you can afford. The cost of living influences my own career path and which city I live in.

If you struggle to pay rent, maybe moving is the best answer. If you enjoy your employer, see if you can change office. Or, find a new employer in another city.

And, don’t forget about telework. Many jobs are online-based and location independent. You may still have to drive into the office once a quarter. But, you can work remotely the other weeks.

One benefit of paying rent is that you can move when your lease ends. If you own a home, you might not be able to move until you sell the home. This way, you don’t have to pay two mortgages until your old home sells.

Become an On-Site Property Manager

If the leasing office has an open position, maybe work there. You can work for cheaper rent. As an on-site property manager, you can enjoy lower rent. Although you may have to work after hours, you save money on rent.

Depending on the landlord, maybe you can lower the rent by doing certain tasks. For example, you can do your own repairs. Or, mow the lawn yourself if the landlord usually does it. You may need an easygoing landlord for this to happen. But, it happens more than you might think.

Challenge Yourself to Pay Less Rent

Do everything possible to stay below the 30% mark with your monthly rent.

Beyond having more money each month, lower rent has several benefits.

Hedge Against Future Rent Hikes

Each time you renew your lease, there’s a chance your rent can increase. In general, rent rates increase more often than they decrease.

If you want to live in one place for several years, find a cheaper place. Renting at the top of your price range means you might not afford next year’s increase.

Your income might not increase as fast as your landlord raises the rent.

Rent prices increase with your local market rates. But, there are a few other reasons your rent can increase:

  • New on-property amenities
  • Remodeled units
  • Costly repairs

As a renter, you’re not responsible for maintenance. But, your landlord recoups maintenance costs from the rent. As a property ages, these costs increase. And, the current tenants can pay a higher rate.

Live Within Your Means

Paying less rent helps you spend less than you earn.

One popular budgeting method is the 50-30-20 Rule.

Here’s how to divide your paycheck:

  • 50% for needs like housing, food and insurance
  • 30% for “wants”
  • 20% for saving and extra debt payments

Rent falls into the 50% category. At 30% of your income, rent is most of your “needs” spending. Depending on your income and expenses, only spending 50% on needs might be tough.

Tip: Get control of your money with the Awesome Money Course!

Make Extra Debt Payments

Less rent means you can focus more money on getting out of debt sooner. One reason why I didn’t choose the most expensive rent I could afford was to repay my student loans sooner.

Knowing you don’t have to make a debt payment each month is a relief.

Increase Your Net Worth Quicker

To an extent, rent is like throwing money away. You will never get any of your rent money back.

Instead of paying more rent than you have to, build wealth for yourself. Personal Capital has a free tool I enjoy using. In real-time, you can track your own saving progress.

You should save and invest your rent savings. This way, you have money for short and long-term goals.

For example, maybe you want to buy a house in the future. Maybe, you don’t own a house because you can’t afford the 20% down payment. Paying less in rent helps you save for the down payment.

Build a Better Credit Profile

Paying rent doesn’t usually help your credit score. But, RentTrack can help build a credit history.

If you don’t have other ways to build credit, this can be a good option.

There are times when you may have to report your monthly rent to creditors. For example, you may want to refinance your current loans. If your rent is too high, you might not get the best interest rate.

With a small rent payment, you tell others that you can manage money well.

Plus, less rent decreases the odds of having to borrow money in the future. By saving your extra income, you can pull from savings for large bills. Then, you pay yourself back!

You Can Work Less

Maybe, your only option right now to afford rent is to work extra hours. Or, both you and your spouse must work to make ends meet. Moving to a cheaper apartment reduces your monthly expenses. Since you spend less on needs, you can afford to make less money.

The Takeaway

In most places, you can find a rental that’s less than 30% of your income. As always, look to spend as little as possible. Paying less rent means you have more disposable income. In turn, you can use this extra money to improve your finances.



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