Here's a rule of thumb: Do your best to spend a fixed percentage of your after-tax income on rent. But how much, you ask? The general recommendation from ABODO rental experts is 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. It's important to remember that each person's financial situation is different. Speak with your family and those you trust with your finances to decide how much monthly rent you can afford.
Landlords and property owners often require proof of income before they will rent you their property. Why? Well, they need to know you can afford your monthly rent obligation. Don't be scared away by this. It's extremely routine and does not need to be intimidating. Here's a real-life example. Your landlord will likely need to see that you earn an income of at least 3 times the monthly rent. In this example, if you're looking to rent an apartment that costs $1,000 per month, you'll need to earn an income of at least $43,000 per year. To determine how much rent you can afford, first figure out the rent-to-income requirements of your potential landlord. Or if you don’t know the landlord’s requirements, 3 times income is a good assumption. This is a Rent-to-Income ratio of 0.3.
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 one or more rent payments. The most common Rent-to-Income ratio is 0.3, meaning you should earn 3 times your rent.
Federal minimum wage in the United States is $7.25 per hour, while some states have opted to raise minimum wage to more than $10 per hour. ABODO's data scientists and economists recommend that renters spend no more than 30 percent of your gross income on housing costs. With this in mind, minimum wage earns you a housing budget of $4,525 per year. All in all, you will have just under $400 per month to spend on rent. That said, if you have additional money saved, you may be able to pursue a lease on a more expensive apartment. No matter what, it's important to be aware of your individual financial situation.
Don’t worry! This is very common. If you’re struggling to find an affordable apartment in your city, consider moving to a less expensive city. Check out our Rent Reports and City Data to help locate an affordable city that meets your lifestyle and employment needs. You could also talk to some of your friends or family members about moving in as a roommate. It’s much more affordable to split the rent between 2, 3, or even 4 roommates. Some Landlords will rent individual bedrooms to tenants, helping them meet new roommates that are already renting the property.
Do you know how much rent you can afford? If not, ABODO can help. As the nation's leading authority on apartment rent prices, we've built a calculator to help you find an apartment that fits within your budget. Whether you're looking for a luxury unit in Chicago or a studio in Milwaukee, we've got you covered. In just a few minutes you can input your household financial information — as much or as little as you please — to uncover the truth about how much rent you can afford. Some things to consider are: monthly bills outside of your housing expenses, college tuition payments, food costs, social activity costs, discretionary spending and others. Be sure to check out our rent calculator for more info.
Renters seeking a lease renewal often face one common problem: rent price is going up. Let's face it, you're just fine paying $1,000 for your apartment in Madison, but as the number creeps up toward $1,200, your wallet is feeling a bit thin. Sometimes, your rent might go up just $10, because of property tax increases. But other times, you might see a lease renewal document stating an increase of more than $250 per month. Why? Well, it all starts with demand. If your apartment is in a fantastic lakefront location in Chicago's Lincoln Park neighborhood, then you surely have nearby residents — willing to pay $500 more than you do — eagerly awaiting your departure. Second, maintenance price increases and property taxes are rising. This means that the total amount paid by your landlord each month has simply increased; therefore, they need to collect additional rent money to break even or continue profiting from ownership. Keep in mind, everything is negotiable, so do your research of comparable units and see if they'll cut you a deal.
When you’re near the end of your lease, you’ll get a renewal letter from your landlord or property management company explaining your options. In some cases, that letter will share the news of a rent increase for the upcoming lease term. If you feel that the landlord's proposed rent increase is unreasonable or illegal and you want to keep your apartment, there are a number of ways you may be able to challenge or negotiate the proposed rent increase. First, look at comparables in your area to make sure the rent increase is reasonable, but remember that regardless of the proposed increase, everything is negotiable. For example, if your landlord proposed a $100 increase, kindly ask them if they’d be willing to accept a $50 increase instead. Get a feel for what they want, what they might be willing to accept and work to find a price you’re more comfortable with. Remember, enter the negotiation with an open mind and work to be as courteous as possible.
Tenants in the same building facing rent increases have successfully worked together to negotiate agreements with their landlords that keep rents affordable. As a tenant, you have important legal rights and you can beef up your bargaining position by joining with other people in your complex or building. If you’re having a problem, it’s likely that others are, too. If you suspect you are facing a rent increase as part of an unfair landlord scheme, the best way to protect yourself and other tenants may be by starting or joining a tenant group. Remember, everything is negotiable.
In addition to your monthly rent payments, you may encounter some of these household expenses:
Gas / Propane
Water and Sewage
Pet Fee [either one-time or per-month]
Internet, TV, and/or Phone
Late Fees if rent is paid late
Cleaning Fees if the apartment is left unclean after move-out