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 expectto 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 needto 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!
FAQs
The 40x / 30% Rule
How much to make to afford $1500 rent? ›
30% Income Rule
According to the rule, you can multiply your gross monthly income by 0.30 to determine the maximum rent you can afford. For example, if your gross income is $5,000 a month, your rent should be a maximum of $1,500 (5,000 x 0.30 = 1,500).
Can I afford an apartment making $4,000 a month? ›
The 30% rule says that no more than 30% of your monthly gross income should go toward your rent. According to this rule, if you make $4,000 a month, you should spend no more than $1,200 per month on rent. Sticking to the 30% rule helps ensure you have enough money left over to save or put toward other expenses.
What rent can I afford making 40k a year? ›
If you make $40,000 a year, you can afford to spend $1,000 a month on rent. If you make $50,000 a year, you can afford to spend $1,250 a month on rent. If you make $75,000 a year, you can afford to spend $1,875 a month on rent. If you make $100,000 a year, you can afford to spend $2,500 a month on rent.
Is 50% of your income too much for rent? ›
Spending more than 50% of your income on rent isn't recommended, as you'll be living paycheck to paycheck. You won't be able to save or invest money for the future. If you're currently overspending on rent, solutions include raising your income, finding more affordable housing, or getting a place with a roommate.
Is $1,500 a month enough to live? ›
A couple can live comfortably for under $1,500 per month, including rent, utilities, dining out and incidental expenses.
What is the 50 30 20 rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
What is $60,000 a year hourly? ›
A $60,000 annual salary is equivalent to earning a $28.85 hourly wage, or $230.80 each day. This is based on the employee working for eight hours a day, 52 weeks a year.
How much is $18 an hour annually? ›
If you make $18 an hour, your yearly salary would be $37,440.
How much is 20 an hour annually? ›
If you make $20 an hour, your yearly salary would be $41,600.
However, an individual making $40,000 a year would likely qualify as middle class.
How much is 23 dollars an hour annually? ›
If you make $23 an hour, your yearly salary would be $47,840.
How much is $500 a week annually? ›
If you make $500 per week, your Yearly salary would be $26,000.
Is the 30 rule outdated? ›
1. The 30% Rule Is Outdated. The 30% Rule has roots in 1969 public housing regulations, which capped public housing rent at 25% of a tenant's annual income (it inched up to 30% in the early 1980s).
How much of your paycheck should go to rent? ›
Generally, experts recommend spending no more than 30% of monthly pre-tax income on housing. However, it's not always that simple. According to the U.S. Census Bureau, between 2017 and 2021, over 40% of renter households (19 million) spent more than 30% of their income on rent.
What is the rule of thumb for rent? ›
It is recommended that you spend 30% of your monthly income on rent at maximum, and to consider all the factors involved in your budget, including additional rental costs like renters insurance or your initial security deposit.
How much rent can I afford making $45,000 a year? ›
The general rule of thumb is to budget 30% of your gross monthly income for rent. (Hint: Your gross income is how much you make before taxes.) If you make $40,000 a year, divide this by 12 and you have your gross monthly income (3,333). Take 30% of 3,333 and you're left with a little under $1,000.
How much rent can I afford making 100k a year? ›
This means that if you make $100,000 a year, you should be able to afford $2,500 per month in rent. Another rule of thumb is the 30% rule. If you take 30% of $100,000, you will get $30,000. Divide that figure by 12 (the number of months in a year) and the answer is also $2,500 per month.
How much is $5000 a month annually? ›
$5,000 monthly is how much per year? If you make $5,000 per month, your Yearly salary would be $60,000.
How much should rent be of income? ›
Spending around 30% of your income on rent is the golden rule when you're trying to figure out how much you can afford to pay. Spending 30% of your income on rent can help you reach a healthy balance between comfort and affordability. On a median income, 30% should get you an apartment you can truly call home.
