Rent Affordability Calculator: How Much Rent Can I Afford Now?

Rent Affordability Calculator

If you’re not in the market to own a home, then renting is your next best option. You might have some hesitation and wonder, “How much rent can I afford?” Fortunately, we’ve got a Rent Affordability Calculator that can help you quickly figure it out to find your next apartment. 

Everyone would love to live like a rockstar, but you know, right now, you might have to put a momentary pause on those dreams. You can still live a lavish lifestyle without breaking the bank!

Rent Affordability Calculator

To see the fair market value for rental prices for a particular zip code, click here.

How Does the Rent Affordability Calculator Work?

The Rent Affordability Calculator first calculates how much money is available after deducting the monthly expenses, such as utilities, food, and transportation, from a person’s gross monthly income. If a person’s costs exceed their income, they cannot afford to rent.

Afterward, this rent calculator applies a percentage toward the available money left to calculate a monthly rent a person can afford. The calculator allows a user to adjust the percentage to their liking up to 40%. 

A person’s rent affordability depends on how much a person gets paid and how much expenses they may have. Additionally, powered by RentData, a person can enter a zip code to get an idea of the fair market value for rent.

Check out the various rent prices for popular cities and a 1-bedroom apartment

  • San Diego, CA (92173) : $1,642
  • San Francisco, CA (94016): $2,923
  • Los Angeles, CA (90210): $1,605
  • Omaha, NE (68106): $798
  • New York, NY (10007): $1,800
  • San Antonio, TX (78204): $1,642

If a person’s rent affordability is below the fair market value, they should consider renting in a different area and start apartment hunting again!

How Much Rent Can I Afford Based on My Income?

Below is a table showing a range of rent affordability for various gross annual incomes. It’s important to note that this table uses gross yearly income, which means that the table does not account for taxes or other deductions. Also, the table does not take into account the monthly expenses.

Gross Annual Income Level15% (mo.)25% (mo.)35% (mo.)
$10,000$125$208$292
$25,000$312$521$729
$50,000$625$1,042$1,485
$75,000$938$1,563$2,187
$100,000$1,250$2,083.$2,917

Which Should I Use: Gross Income or Net Income?

Monthly gross income is the income you receive before the government or your company applies taxes or other deductions. On the other hand, monthly net income is the income after deducting those items from your paycheck.

It’s easier for property managers to use the gross income to determine a tenant’s rent affordability. Property managers don’t have to worry about any deductions a tenant may have, such as contributions to a 401k or social security. However, net income is more accurate, and a tenant should use it to determine their rent affordability.

Landlords just want to make sure they get their rent payment and manage their risk by increasing the security deposit or having a guarantor signing a lease. Therefore, it is in your best interest to use the net income!

What are the Different Types of Leases?

Three to Six-Month Lease

This type of lease is also known as a short term rental, which is a good option for people who may need a temporary place to live until they find enough space. However, this lease will have higher monthly gross rent

Twelve-Month Lease

A twelve-month lease is a standard lease. However, many landlords require an 18-month lease if a tenant moved-in during the winter season. An 18-month lease starting in the winter will expire in late spring or early summer, which are the peak seasons of the year for new tenants.

Month-to-Month Lease

A month-to-month lease is for tenants who stay beyond their lease’s expiration date. These types of tenants are holdover tenants. The rent price is much higher than a short term rental because rent every month will account for when the tenant immediately leaves.

What Percentage of Income Should Go Towards Rent?

The recommended amount that a person should be spending around 30% of their annual gross income on rent. This percentage is considered the sweet spot and known as the 30% rule

For example, a person with an annual household income of $60,000 should spend no more than $18,000 a year ($60,000 x 30%) or $1,500 a month ($18,000 / 12) in rent.

However, there are other factors to consider when finding the right rent-to-income ratio. The number of monthly expenses could reduce your available income to go towards rent. For example, you may have student loan payments, credit card balance, or other living expenses to pay. 

For this reason, it’s essential to have a rent budget. A common budgeting strategy that many people often reference is the “50-20-30 budget.”

The 50-20-30 budgeting strategy applies three different percentages (50% 20% 30%) toward a monthly household income. The process budgets 50 percent for needs (i.e., rent, food, utilities), 20 percent for savings (i.e., emergency fund, college), and 30 percent wants (i.e., shopping, dining). 

Although my wife and I don’t use the 50-20-30 budgeting strategy, I acknowledge and praise those who do. The hardest part about budgeting is starting one and sticking to it. Therefore, if this kind of budgeting strategy continues to work for you and keeps your finances in check, there is no reason to change it.

We use a zero-based budget to manage and track our personal and business finances. Like the 50-20-30, it budgets for needs, savings, and wants. However, it goes one step further by breaking down those three general categories into individual line items.

It gives every dollar from your paycheck a purpose. It will help you identify where every dollar is going and if you’re using it efficiently. For example, there may be several services that you unknowingly subscribe to yet are on autopay. It sounds simple, but some charges can go under the radar

To learn more about a zero-based budget, check our post, “Zero-Based Budget + How I found $10k.”

Conclusion

By now, you’re in a position to know your floor and ceiling limits when it comes to rent prices. Spending 30% of your total monthly income is the accepted sweet spot.

However, just because you can afford something doesn’t mean you have to spend that much on rent. Instead, make better financial decisions

If you can’t afford to rent a place on your own, you have a few options to improve your financial situation. You can get a roommate and split the expenses. However, if one of you gets a larger room, it’s only fair that that person pays a little more of the “lion share” of the rent. 

Another option is to increase your monthly income by asking for a raise in your current position, finding a new job with higher pay, or having a side hustle. Aside from increasing your income, you can also reduce your debt and expenses. These are all tremendous financial goals!

Lastly, you can house hack” with your parents and live rent-free. It can be a temporary place you can call home.

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Jonathan

Jonathan is a husband and father to two crazy kids. He is an engineer, real estate investor, and personal finance blogger. He owns a small real estate business that operates a couple of investment properties in his local market. He has been featured in Business Insider, USA Today, FOX Business, The Simple Dollar, The Dollar Sprout, and more!Join him on FacebookInstagram, and Pinterest.