Does your rental search look something like this?
Maybe you're looking for your first place, or you want to move somewhere new. Regardless, one of the most important parts of your apartment search will be making sure that your new place won't break the bank.
Read on for 5 simple steps to follow to budget for your new place.
1. Determine Your Budget
To figure out what you can afford set some guidelines for yourself.
The standard rule is that you should pay no more than one-quarter (25%) to one-third (33%) of your monthly income in rent.
To figure out what this means for you, take your monthly income, and multiply it by .25 (for 25%, or one-quarter) or .33 (for 33%, or one-third).
For example, if your monthly income is $1,000, and you multiply it by .25, you get $250 as your rent budget. If you multiply it by .33, you get $330 as your rent budget.
Raffaello makes $1550 a month. He wants to budget no more than one-third of his monthly income for rent. Which of these monthly rents are in his budget?
2. Decide If You Will Live Alone Or With Roommates
There are many reasons why it might be a good idea to live with roommates. Maybe wages haven't kept up with rent inflation in your area or maybe you just like the company.
In any case, living with roommates can give you a lot more flexibility in your rent budget!
Let's say you are budgeting $500 a month for rent, and you found an apartment building you really like. They have several floor plans available.
The 1 bedroom is $900 per month
The 2 bedroom is $1000 per month
The 3 bedroom is $1200 per month
Even though you wouldn't be able to afford the 1 bedroom apartment on your own, you would be able to afford the 2 bedroom or 3 bedroom apartment by splitting the costs with roommates. The 2 bedroom would be $500 per person, while the 3 bedroom apartment would be $400 per person.
With Raffaello's monthly rent budget of $511.50, which of these places would he be able to afford?
3. Research Income Requirements
Some apartment complexes may run credit checks or have income requirements. This information may or may not be available on the apartment complex's website, so make sure you ask the leasing agent, broker, or property manager if there are any income requirements.
Examples of common income requirements:
Tenants must make twice the annual rent - common in many places
This means if rent is $1,000 a month, you should make $24,000 annually
Tenants must make forty times the monthly rent - common in major metropolitan areas like New York City
This means if rent is $1,000 a month, you should make $40,000 annually
There may be options if you don't meet the income requirements, like having a cosigner or guarantor on your lease.
There may also be affordable housing initiatives in your area. These apartments will have income caps, meaning you must make under a certain amount of money to live there.
4. Estimate Monthly Costs
There are many things you might have to (or choose to) pay for every month besides rent. Make sure you know which ones you will be responsible for before committing to anything.
Some common monthly payments for renters include:
Utilities like water, electric, and gas
Internet and/or cable
Coin laundry or a laundromat
5. Take Into Account Upfront Costs And Moving Costs
When applying for a new apartment, or right after your application is accepted, you will probably owe upfront costs. These can include things like:
Application fees (some places have restrictions on how much these can be)
Security deposit (a returnable deposit that is usually one month's rent)
First month's rent (and sometimes also last month's rent)
You will also probably have some upfront costs when you move, such as:
A moving truck/moving company (or you can ask your friends to help for pizza in return!)
Cable/internet installation and setup
Cleaning supplies, groceries, furniture, etc.
Take a look at your budget the next time you're searching for apartments. Make sure you have a good sense of the following information: