Renting is often the first step to living on your own, away from family and school. Depending on your location, preferences and budget, the cost of renting an apartment can be overwhelming. It’s important to create a budget, be realistic about that budget and be honest with yourself. Here’s some tips to help determine whether or not you can really afford to rent.
Only Spend 30% of Your Income on Rent
Though this is an older rule of thumb in the world of real estate, it’s a good place to start when deciding if you can afford the cost of rent. Review your yearly income and compare this to your total current debt. You want to ensure you have about six months of emergency coverage. Though this is an individual choice, spending only 30 percent of your income is the smartest strategy. For example, if you earn $50,000 a year, you should spend no more than $1,250 per month on rent.
Factor in All Other Rental Expenses
Though some rental properties offer to cover or include certain utility costs, you will likely have an extra bill each month in addition to your rent. Be sure you’re able to set aside at least the amount needed for utility bills such as electric, gas, water, oil, cable and internet. Because some of these utilities can fluctuate depending on usage and weather, factor in a ten percent cushion for coverage.
Save up for the Initial Security Deposit
The average security deposit for a rental property is one months rent, but some apartments can charge up to three times that amount. This payment is usually required at signing, and depending on the condition you leave it in, will be returned to you at the end of your lease term.
Consider Other Applicable Fees
With rental properties, there may be fees outside the typical cost of rent and utilities. If you have a pet, talk to the landlord or agent about a pet deposit or fees. These are usually in place to ensure that if any damage is caused due to your pet, it is already covered. The lease may also state that you are required to have renter’s insurance. Talk to your insurance agent, get a quote and factor this into your initial budget.
Don’t Forget to Furnish
If this is your first home away from home, you’ll most likely need some furniture. Anything from beds to couches, coffee tables to end tables, will be necessary for your new home. Unfortunately, furniture isn’t always cheap. To start out, check out tag sales, estate sales and for-sale listing in newspapers or online for gently used pieces. You’ll be able to furnish your home and stick to your budget!
After you review your income and potential spending, you will be ready to determine not only if you can rent, but what types of properties you can afford. Once you know your budget and feel comfortable to start your search, contact a local real estate agent to guarantee that you’ll get the best deal possible.