A very common question when beginning the search for a new apartment to rent is “how much rent can I afford per month?” While every renter’s situation is unique and there’s no exact formula to calculate what will make you comfortable moving forward, there are a few places to start. Take these suggestions into consideration and use them to calculate your desired scenario.
As you begin your search for condos for rent in Chicago, you may come across property specific income requirements. These requirements should be your first place to start when deciding if you can afford a particular property or not. You should be able to quickly rule out any homes that have an income requirement higher than your current level of pay.
For example, many landlords require tenants make at least 3x the rent per month in income. So if the average cost of an apartment in Chicago is $2,000 a month, the landlord may likely require a tenant to make at least $6,000 a month in income. You will also likely need to be able to prove this level of income by providing pay stubs from your employer.
Just started a new job? Don’t worry, most landlords will accept an offer letter stating the agreed upon salary amount to be paid once you begin working.
The 33% Rule
Another aspect of the preferred rent equation should be how much you can comfortably spend on rent, not just what the landlord requires. A good rule of thumb is known as the 33% rule.
The 33% rule states that you should aim to spend no more than 33% of your monthly income on housing. This rule acts as a budget to allow for the other necessary expenses that come from outside the housing realm.
We’ve all heard the term “house poor”, meaning spending so much on your housing that you can’t afford other necessities. This rule helps to build a budget structure that will keep you from becoming house poor and keeps you on a responsible financial path.
Make Sure To Look At The Whole Picture
While the monthly rent is the biggest portion of the housing expense, it’s often not the only expense. Make sure to look at the entire picture when using the 33% rule to calculate your housing budget.
Utilities, internet, parking expenses, and other housing related costs should be considered within this 33% and not just the rent payment itself. Compare apples to apples by looking at every property individually and create a list of what each monthly rent includes and what additional costs would be incurred.
A major mistake many renters make is forgetting or ignoring these costs and assuming they won’t make much of a difference in the long run. But even a difference of $100 a month costs $1,200 over the period of a year long lease.
Taking some time before your home search to calculate what you can afford for rent will make the home search much easier. Making the most informed decision possible now, will help make your time in your new home as stress free as possible and will set you up for success in the future. Use these suggestions and you will be in your new rental before you know it.