How to Calculate Your Rental Budget
Have you ever been driving down the road and see what you would consider to be the “perfect home” for you and your family? Then you start thinking about how much it would cost. You may even go so far as to run a few numbers in your head to see if it would ever be within the realm of possibility. It doesn’t matter if it is an apartment or a house, knowing how much you can afford is a very important first step before getting in to any lease agreement. You may also be shocked that after you spend the time running the numbers that “perfect home” may be closer than you think.
What Landlords Look For
Normally, a landlord will look to make sure that an individual or group of renters is able to afford the monthly payments that will be laid out in the rental agreement. It isn’t unheard of to see a landlord expect your annual income to be 40 times the monthly rent. So if you’re looking to afford a house for rent that is $1,250 per month in rent, the expected combined income would be $50,000 for the year. However, not all landlords charge the same amount, for example, Buckeye Northwest Realty only uses a 3 times the monthly rent calculation. Which means if you are looking to afford the same $1,250 apartment through Buckeye Northwest Realty you would be expected to make $3750 which is considerably less strict that many other landlords. This is a pretty simple calculation that anyone can do, but make sure to take in to consideration whether or not you will have roommates or if you will be handling the monthly rent all by yourself.
Affording Rent
If a landlord is looking for your annual income to be 40 times (instead of Buckeye Northwest Realty’s 3 times) the monthly rent amount, then where does this leave you in your budgeting? It is said that you should never spend more than 30 percent of your annual income on rent as this is the amount believed to be the most affordable and leaves some income for other expenses. So with some simple calculations you can find what your “sweet spot” would be for rent. If you make $50,000 a year, 30 percent of that would be 30 percent of $50,000 which equals $15,000. The next step is to find out how much per month you will be paying. So $15,000 / 12 months is $1,250 per month. An easier version of this is just like the landlords math, simple $50,000 / 40 which equals the same $1,250 per month.
At Buckeye Northwest Realty we make home renting simple. So just refer back to our “3 times rent” statement from earlier, and you will be able to see how we make renting a snap!
Applying What We’ve Learned
We have learned what the landlord is looking for, and we have also learned what we should be looking for. Now comes the biggest part of the equation, where is the property that fits our perfect mold? Sometimes people will opt to pay less in monthly rent so that they can have a little more of that proposed 30 percent than others. This could lead to purchasing more things for the family, or needs taken care of, etc. While some may opt to pay more than 30 percent of their annual income and have a much nicer house. It all boils down to what you feel is best for you and your family.
To learn more about our houses for rent in Toledo, Ohio, or questions about renting, contact us today!
