How much rent can I afford?

May 9, 2007 8:50 AM

Hello. I want to rent an apartment in a fairly high-priced market (Washington, DC) and don't know how much of my income I can allot to covering my rent, while still living comfortably in other areas.

Conventional wisdom (according to my mother) is that you should not spend more than 30% of your income on rent each month, but unfortunately I don't have many options if that is the case.
I am wondering how much of your income you would feel comfortable putting towards housing each month and any advice you have for budgeting for expensive rents. Basically, how much rent can I afford?

I know there are services online that give estimates, but I am looking for real world advice from real people. Thanks for any help!

posted by CAnneDC to work & money (21 comments total)

I should add that I'm also single without kids nor many responsibilities. I should add too that I enjoy going out with my friends and am fairly social
posted by CAnneDC at 8:56 AM on May 9, 2007

My first advice would be to find a roommate. That way your rent will be cheaper.

Have a look at craigslist for DC for this.
posted by fallenposters at 9:06 AM on May 9, 2007

I think half of my take-home pay, or 30% of my pre-tax pay, is the most I've ever paid. When I was making in the mid-$20k range, it was pretty tough. It's easier to get by paying a big chunk of your pay toward rent as your salary goes up.
posted by croutonsupafreak at 9:07 AM on May 9, 2007

How much rent you can afford depends on so many factors, and can't be answered based on the information you've provided (we have no idea what kind of debt you have, transportation expenses, how much you spend on entertainment rather than the fact that you do like to go out, whether or not you are willing to sacrifice the privacy of living alone for the less expensive roommate situation, etc).

For the record, 30% isn't just conventional wisdom, it is the formula used by landlords, rental complexes and property managers to determine whether or not the applicant is eligible to rent the unit.
posted by necessitas at 9:07 AM on May 9, 2007

The 30% suggestion is a benchmark. You can be above it and be perfectly healthy financially (but you need to be hyper vigilant).

The key here is to get in touch with your non-housing finances. The best way to determine how much you have to spend on rent is to do a quick budget of your monthly costs, focusing on necessities only (e.g., car payments, school loans, groceries, utilitiees, etc.). Estimate how much you will need for those things. Then, theoretically, anything left over is your housing maximum. Then, make sure you subtract from that going out expenses, savings goals, etc.

This is not the most rigorous financial exercise, and you probably should be saving some money, but it's probably more realistic for what you're trying to get at.
posted by redarmycomrade at 9:07 AM on May 9, 2007

This doesn't exactly address your question, but where I live (Los Angeles), most places will not rent to you unless your monthly salary is at least three times the rent, or if you have 18 months rent in savings. So, even if your budget would allow you to spend, say, 50% of your income on rent, you may have trouble convincing potential landlords that you would be able to afford paying the rent each month.
posted by kitty teeth at 9:07 AM on May 9, 2007

....what about your income?

what about your lifestyle? how often do you go out?

how much do you want to save? are you in a field with a low income now, but a really high income later?

are you single? in a relationship? looking for a relationship?

do you have a car? going to get a car? willing to do public transportation?
posted by unexpected at 9:08 AM on May 9, 2007

Hello, To clarify a little:

I have no debt and about $20k in the bank. Saving is not necessarily that important to me, but I would be concerned if I were eating into my savings significantly.

I go out often- I'd say at least 3 times a week and then maybe go out to eat twice a week. I'm not very lavish though and am also a girl, so I'd say I spend at the most $75-100 a week on "entertainment"

I am in a relationship with my college boyfriend who lives about 6 hours away. However, he usually visits me as I can't take very much time off of work. (not sure of that relevance :) )

I do have a car, but don't need to drive it often. DC has a great metro and I can walk/bike to most of the places I go. Also, my car is paid off

ps. You are all making great points, especially redarmycomrade, in that it's important to look at your other expenses.
posted by CAnneDC at 9:27 AM on May 9, 2007

I rent on Capitol Hill and pay about 40% of my income to rent. I recommend that if you do plan to rent in town, you might cut one day out of going out (no one goes out on M/T/W/Th/Su very much anyway save for right after work.)

You need to decide whether you want to live alone or with people. That is going to be a major factor to how much you are going to spend. You can also save a lot of money living right out of town near a metro stop.
posted by parmanparman at 9:32 AM on May 9, 2007

I live in MD, work downtown, and pay 35% of my pretax income towards rent (including utils). Although I'm in a short term, low-paid internship. Some of the people I met while apartment hunting in Columbia Heights were doing temp work and must have been paying 40% or more towards rent.
posted by gsteff at 9:51 AM on May 9, 2007

The only way you can decide how much of your income you can afford in rent is to serious examine your finances.
Get your last 3 months (at least) bank statements and take a serious look at how much you spend - most people are suprised how much those little extras add up.
Just making a list of bills and expenses is usually not enough, you have to look at the real numbers to see where your money is going.

Also consider how your expenses will change when you move, some may decrease and others will more than likely increase (especially if you're living with your parents) If you have friends living in similar circumstances to how you would like to live, ask them how much their utility bills are or use an online estimator to give you an idea.

Also consider how much time you're going to spend in your appartment and how important it is that is 'nice'. The house I live in costs around 17% of my total household income, its not very nice but its functional and it frees up money for other things.

Any landlord will want to look into your financial stability before they will consider taking you as a tenant, having $20k savings is good and will help prove that you have a pile of cash to dip into if you cant afford the rent one month.

Dont overstretch yourself, I would aim to have 10-20% of your income 'spare' for those unexpected, but inevitable and never-ending little expenses - the things that dont come under monthly expenses but there never seems to be an end to them - car repairs, household products, birthdays etc

No matter how nice your appartment is, if you're streched financially, it will take its toll on you in many ways.

Moving out for the first time can be difficult, especially if your parents have been reasonably well off - you may find that you have to lower your standards a lot. In the long run you will be happier being financially comfortable that having the nicest appartment you could squeeze out of your budget
posted by missmagenta at 10:13 AM on May 9, 2007

Many people I know in DC have solved this problem by selling their cars. The same budgeting formulas that say you should spend 30 percent of your income on housing also allots 10-15 percent of your budget for transportation. If you sell your car, even if it's paid off, you no longer have to pay for gas, insurance, or DC's exhorbitant registration and parking fees. That can free up a lot of extra cash, which will allow you to boost your housing budget without going over the overall guidelines for living expenses.

Unless you need your car on a regular basis for commuting or something, which it sounds like you don't, having it in DC may very well be more trouble than it's worth. You'll either have to pay through the nose for parking, or you'll have to park it on the street, which will mean moving it at least once a week, sometimes more often, for street cleaning. Depending on where you live, parking can be a nightmare. I'd dump the car.
posted by decathecting at 10:16 AM on May 9, 2007

Since you won't need to drive that will cut a big part of the cost.

Also, don't forget the cost of switching your title, registration, plates etc to DC and then the (likely) higher insurance you'll pay as a result of living here.
posted by jare2003 at 10:31 AM on May 9, 2007

Percentages are a really bad way to calculate this. It really depends what your income is. Things like food, transportation, utilities, etc are relatively constant. If you're making 60K/year, you could easily spend 40-50% on rent and still make out fine. If you're making 25K, probably not.

Make a budget that excludes housing if you don't have one already. Figure out what your expenses are, and how much you want to be saving (if any). Anything left is the maximum you can spend on housing.

In the end it depends on what affects your quality of life. If the location enriches your life dramatically, it is probably worth spending quite a bit on as long as you don't go into debt for it.
posted by chundo at 10:33 AM on May 9, 2007

Some landlords (eg, the decent ones) will insist that your rent not exceed some fraction of your income. When I was a kid, it was 25%. By the time I was working a property of my own, it was 33%. These numbers were based on gross, not net earnings; wages were normally verified with your employer's HR department. Because this is a rental requirement -- often handed down from the management company -- it is not necessarily yours to decide how much of your pay you will spend on rent. In certain circumstances (such as college students) we would allow Dad to be on the lease. This of course made the rent/income numbers work right, but also meant Dad had legal rights and obligations.

Nthing the "get a roommate."
posted by ilsa at 10:46 AM on May 9, 2007

The 30% is a nationwide thing. When I moved to DC I was at around 50% (same for most people I knew - however, a few of my friends had parent-subsidized apartments, which is how they were able to survive entry-level hell with a lot less stress). Five years later in the same apartment I'm around 35%. And I think I do okay and have a decently priced apartment. However, part of the cost of my place is location. I was fine with that, but it may or may not be a priority for you.

Start budgeting (I prefer You Need A Budget) and then you'll really be able to see what you actually have to spend. It sounds like you might be living at home still, which may make it tricky to tell how much you'll need for things like food, utilities, etc. Are there friends that you can ask to see what they spend? Anyway, that might help you see if you can afford to to this, if you need a second job, etc.

Some things that will help mitigate the impact is to not live in DC itself, but Silver Spring, Arlington, Alexandria, etc. Getting roommates will help too (though my figures are with roommates).

Another thing is that a good deal of building-based units will have free or some covered utilities. You might not be thinking about utilities, etc in your percentage, but if the rent includes them, that might help. I hope that made sense.

A random note, but if your boyfriend is driving to see you, make sure there are some parking arrangements for him wherever you end up renting. If you're in a zoned area and he's staying during a weekday, that could be an issue. If you're in a building with a garage and you can pay for guest parking for him, then not so much. I know that sounds random, but I was in a similar boat once and I never realized what a PITA it would be to deal with guest parking.

You run a real estate blog? We should be asking you these questions, not the other way around! :)
posted by ml98tu at 10:53 AM on May 9, 2007

I'm in DC and unfortunately, after some rent increases and whatnot I think I'm around 60%. I am horribly, horribly underpaid though... It is a struggle. I do not have cable and I've tried to cut corners where I can. Ultimately, I pay that much because I need to live close to work and so location is everything. The burbs can be VERY cheap and most employers have a metro benefit program (provided you don't have a parking space). If you're looking for advice? I'd say 'burb it, if you can handle it.
posted by indiebass at 12:00 PM on May 9, 2007

Most employers have a metrobenefit program, but that doesn't mean the employer is going to pay for the metrocard - most just opt for the version where they take it out of your paycheck automatically. (pre-tax)

and still, the burbs,unless you're faaaar out aren't that much cheaper than a lot of DC. Arlington and Silver Spirng, for example, are about as bad as DC itself. and you'll need a car unless you're living in the inner burbs.
posted by jare2003 at 12:21 PM on May 9, 2007

In DC, the best way to circumvent high rentals is to get in on a group house. Yes, it has its issues (you may want to check out this thread about roommates as a starting point), but you'll see a 20-30% reduction in your monthly rent expenses by going this route. I found you can also save money on food and entertainment (if you really get along) by making dinner together, renting a movie, and going in on a 30 pack of beer.

Helps if your roommates have hot friends.
posted by redarmycomrade at 12:32 PM on May 9, 2007

Find out how much you would be paying for a reasonable home, affordable on your salary, take the mortgage payment, and cut it in half.
posted by blue_beetle at 1:04 PM on May 9, 2007

blue_beetle: There are no "reasonable homes" left in DC. They're pretty much overpriced or in dangerous neighborhoods.
posted by croutonsupafreak at 2:06 PM on May 9, 2007