How much rent can I afford? Is this question lingering in your head? There are ways to determine how much rent you can afford. The easiest way is to set aside a certain percentage of your income for rent. However, no one rule fits all. Still, there are other factors you need to consider to make a realistic assessment of how you can afford it.
Rent price trend in the U.S.
As of July 1, 2020, the national average monthly rent for a one-bedroom is $1,229, according to Zumper. A two-bedroom apartment, on the other hand, has an average monthly rent price of $1,485.
Among the top five rental markets, San Franciso tops the list. The rental price for a one-bedroom apartment in San Franciso, CA, is $3,280. The two-bedroom rent per month is $4,340.
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New York follows San Francisco. In New York, the average rent for a one-bedroom apartment is $2,890, while the two-bedroom rent is $3,210. Boston ranks third on the list. The average monthly rental price for a one-bedroom apartment in Boston is $2,410. The average rent for a two-bedroom apartment is $2,900.
Oakland, CA, is the fourth top-ranked rental market. The average monthly rent in Oakland is $2,300. The two-bedroom average rent price is $2,850. The fifth-ranking rental market on the list is San Jose, CA. The average monthly rental price for a one-bedroom apartment in San Jose is $2,300, while the two-bedroom rent is $2,860 per month.
Read the full list here.
How much rent can I afford?
Here are guidelines or tips to help you determine how much rend you can afford.
Determine your entire budget
Most experts recommend the 30% rule. That means the amount of your rent should be around or no more than 30 percent of your gross income. However, this 30% rule does not apply to all. This is especially true in areas where the cost of living is high. But if you are living in an affordable area, you certainly can go below 30 percent.
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Others recommend the 50/30/20 rule. This method involves allocating 50 percent of your net household income for your basic needs, including rent. The 30 percent will go for your wants while the 20 percent for saving and payment of debts.
Sometimes, income would not be enough to cover for rent expense. Reducing allocations to some items in the budget is one way to put more money for rent. However, you need to be realistic and make sure that you really can afford to give up such expenses.
Factor in furnishings and other additional expenses
Often, people forget to factor in furniture and other moving costs when signing the lease. The new place you will be renting may not come with all the furnishings you need. Apart from furnishings, you may also need to spend money on other one-time expenses. These one-time expenses may include security deposit, moving expenses, pet deposit (if applicable), and last month's rent.
It would be better that you save up for such expenses than charge it on your credit card and pay high interest. If needed, one option is to apply for a personal loan to furnish your apartment. In general, personal loans have lower interest rates. Payments are fixed each month.
Also, do not be tempted to dig into your savings. Using your savings and emergency fund may one day leave you without a safety net.
