Skip to main content

How much can you rent?





Before you start searching for your next apartment, you should know how much rent you can afford, as well as the income you’ll need to get approved by a landlord.

Rent to Income

Landlords typically require that your annual income is at least 40 times the monthly rent. For example, if you and your roommate are looking at an apartment that costs $3,000 per month, the landlord would require a combined income of $3,000 × 40, which equals $120,000. To determine how much rent you (and your potential roommates) can afford, simply divide your combined annual incomes by 40.
image of rent to income ratio

How Much Rent is Affordable?

You may have also heard that you should spend no more than 30 percent of your annual income on rent.  Spending 30 percent of your yearly income on rent is widely believed to be an affordable amount, leaving enough money for all your other expenses.
What’s the difference between 30 percent and 40 times the monthly rent? Absolutely nothing, they’re just two different ways of deriving the same number.  The 40x method is just easier to calculate.
For example, let’s take $120,000 of income and determine how much rent you can afford.
Step 1: 30 percent of $120,000 = $36,000
Step 2: $36,000 ÷ 12 months = $3,000 per month.
Too much math? There’s an easier calculation, Just divide $120,000 by 40.
So: $120,000 a year ÷ 40 = $3,000 per month.
Voila! Math magic!

But Let’s Be Real: How Much Rent Can I Really Afford in New York City?

The cost of renting in New York City is notoriously high — so can you really expect to put only 30 percent of your income towards rent?
According to a 2016 report from StreetEasy, the typical household in New York City actually spends more like 65 percent of its total income on rent. That’s terrifying! But although it’s common to break the 30 percent rule and spend the majority of your income on rent, it is ill-advised.
Before you bite off more than you can chew and ink a deal for an apartment you can’t afford, remember that there are practical ways of reducing your rent burden — like bunking up with multiple roommatesor avoiding the broker’s fee.
Above all else, keep in mind the 40x trick. Use this a benchmark for what is truly affordable and what is exorbitant.
Again, to determine how much rent you (and your potential roommates) can afford, simply divide your combined annual incomes by 40. Don’t have a calculator handy?  Use the following table to look up your maximum rent.

So, let’s break it down one more time.

Question: How much rent you and your roommates can afford?
Answer: Simply divide your combined annual incomes by 40.
Don’t have a calculator handy?  Use the following table to look up your maximum rent.
Combined Annual IncomeMaximum Monthly Rent
$50,000$1,250
$60,000$1,500
$70,000$1,750
$80,000$2,000
$90,000$2,250
$100,000$2,500
$110,000$2,750
$120,000$3,000
$130,000$3,250
$140,000$3,500
$150,000$3,750
Labels:

Comments

Post a Comment

Popular posts from this blog

Coya raises $30 million to launch its insurance service in Europe

Coya , a Berlin-based insurance startup, has raised $30 million in new cash as investors around the world continue to see opportunities in modernizing the insurance industry. Founded by two early employees at the European credit and risk assessment unicorn startup Kreditech ( which raised €110 million from the Naspers subsidiary PayU ) and two seasoned executives from the European insurance industry, Coya is coming to market in Germany with a new renter’s insurance service. For  Coya’s   co-founder Andrew Shaw, the new company was an opportunity to apply his experience creating credit and risk assessment products to an industry whose cumbersome inability to use technology had affected him personally. The idea for Coya hit Shaw when he was traveling on the Gili Islands off the coast of Indonesia. It was there, while Shaw was trying to get information on his insurance as he recovered from an illness, that he decided to start his technologically enabled insurance...
Post a Comment
Read more

What is renters insurance and why do I need it?

Do You Really Need Renter's Insurance? When I was in college and got my first apartment, my dad told me, “Always be sure to get renter’s insurance.” And, like most college kids would, I promptly pushed this bit of parental advice out of my mind. Big mistake. When I got back from winter break my freshman year, my apartment had been broken into—my TV, my roommate’s computer, and other personal items were gone. And I was slapped with the bill to replace them. While  moving into a new place  can be a chore in itself, don’t forget to make sure you have the coverage and protection you might need in case of an emergency. Not sure what exactly it is you need to look for in your renter’s insurance policy, or still have questions? We’ve got the answers. Why do I need renter’s insurance? Most apartment complexes and landlords only have insurance that covers the damage to the actual dwelling, which leaves everything of yours—electronics, furniture, clothe...
Post a Comment
Read more