Budgeting For Rentals In NYC
Renters must juggle multiple steps and make difficult decisions when renting an apartment in New York City. Between high rent prices, a multi-step application process, and a competitive market, it's easy to grow overwhelmed by finding a place to live.
One of the first things a renter must discover is how much rent they can afford to spend on their new home each month. RentHop has several tools and resources to help renters approach their next search, such as the interactive rent calculator on this page. This calculator can help a renter figure out how much rent they can pay monthly, given their yearly income.
The 40x / 30% Rule
There are many ways to calculate affordable rent.
Some people use the 40x rule since many landlords require that your annual gross income be at least 40 times your monthly rent.
To calculate, simply divide your annual gross income by 40 - if you make $120,000 a year, you can spend $3,000 on rent.
An equivalent is the 30% rule, meaning that you can put 30% of your annual gross income in rent.
If you make $90,000 a year, you can spend $27,000 on rent, and so your monthly rent will be $2,250.
More To Consider
While these rules are helpful, none of them factor in expenses. Renting an apartment can cost you more than you imagine.
For instance, some buildings charge a pet fee for each pet you have.
In New York City, your rent might go up by $35 for you to keep a pet.
Other amenities also play a huge factor. Some buildings charge monthly gym fees and some others don't.
If you live in a building that does not have a fitness center, you might spend more on gym memberships.
Nor do the rules mentioned above take into account your financial situation or lifestyle.
For example, a newly graduated student may be carrying a substantial student loan and have to set aside $200 to $300 per month to repay the loan.
An independent contractor might need to have a liability insurance policy in place and has to pay for health insurance himself/herself.
Inflated Costs Of City Living
Utilities, especially energy costs, have risen through the roof over the last several years.
If you make $120,000 or less per year, you can expect
to spend as much as 5% of your monthly net income on your electricity, water, phone, and internet bills.
Food budget takes up about 10% of your monthly net income, according to the U.S. Department of Agriculture.
Keep in mind that if you eat out often, or like to frequent bars and nightclubs, this number can rapidly balloon out of control.
Transportation is usually 5% of your monthly net income.
If you own a car, however, your costs will be substantially higher - you'll need
to shell out extra for gasoline, parking, car insurance, etc.
Bad / No Credit
Renting an apartment might cost you more than you imagine.
If you are renting with a bad credit score or no credit history, expect to put down more cash for security deposit.
You might also find yourself in need of a guarantor if your income does not meet the landlord's requirement.
Having a guarantor often means additional fees, but if chances are your family or friends will be willing to help out.
You might also spend extra $10 to $30 per month on renters insurance.
In short, keep in mind of all possible expenses when you estimate how much rent you can afford!
