Looking for a new apartment to rent is exciting. It’s also overwhelming. Asking yourself questions like how much should I spent on rent is a good starting point. You really should begin by asking yourself how much rent can I afford. These are all important questions to a successful apartment search. Another important question people forget to ask is How much is my new apartment actually going to cost me? Contrary to popular belief, there are other costs besides the rent….like insurance…etc.
There are SO MANY incidental costs that appear when you finally rent the apartment.
For example, when you rent an apartment in NYC it result in lots of other tangential expenses. For example, the price of goods and services in NYC is much more than the rest of New York. For example, NYC as a large number of local taxes that only apply inside of NYC.
When you’re looking to rent your first place, moving to a new city, or ready for a new house, understand not only the housing costs, but also the costs associated with residing in the new neighborhood. For example, if there’s no mass transportation – this is another added expense to consider which is like a hidden expense.
First and foremost: aim to spend 30-40% of your monthly income on rent
The most common guideline is that you should expect to spend 30% of your gross monthly income, i.e. your paycheck before taxes, on rent. If your rent exceeds 30% of your gross income, you might be over-leveraging yourself. If this is hard to calculate, then do a quick analysis and write down all of your expenses before rent.
The issue with the 30% rule isn’t doesn’t take YOU into account. Everyone has their own unique financial situation. If you are neck-deep in high interest student loan debt, then you really should prioritize paying that debt off first. As a result, you may want to spend less than 30% of your gross income on rent. If you make $10,000 a month, then that doesn’t mean you have to spend, or should spend $3000 a month on rent. Your financial goals must play a role in determining what your monthly rent allowance should be. If you want to contribute more of your monthly rent allowance to investments or 401k, then it might make sense to lower this to 20% or 25%. Bottom line, it might make sense to speak to a financial advisor who can speak to you at great lengths about this.
Think about property income requirements
It’s important to know how much you can spend on rent from a budget standpoint. Before you start searching, know that many landlords and property managers require your monthly income to be 2-3 times the rent, to qualify for an apartment. This income requirement is normally a comprehensive requirement for all of the occupants in the rental. If you’re moving in with another roommate – the two of you combined must meet this minimum.
Another factor to consider is moving, and move-in fees. If you’ve found the perfect apartment, and you can afford the rent, then all the fees of moving in will start to hit you. Your budget might get destroyed that first month. It’s important to keep these move-in fees in mind otherwise you might be financially stressed and unprepared for the big move!
Below are some guidelines on fees to consider before signing the lease
Deposit: You will need to put down one month’s deposit. Sometimes rentals will require first and last month’s rent, along with the security deposit. The deposit – is just that – a deposit. You should get it back as long as you move out, and nothing major is broken.
Application fees: Some places will expect an application fee. They range all over the place, and can be per application, per person. In some cases, they can be waived. Here’s a good summary of what the average application fee is nationwide.
Pet fees: Moving with a pet is costly. Some places will expect a pet deposit, which is paid back when you leave. Some places will charge you monthly, for having the pet. Some will ask for a nonrefundable pet fee, which is a one time cost for letting your pet live with you.
Moving fees: While not directly tied to the apartment for rent, all the money you pay to move can add up. If you’re using movers, this can cost hundreds of dollars. If you need new furniture, this too can add up. Ikea can be inexpensive, but it’s not free. All the money you pay to move, and to settle in, costs money. Moving companies charge thousands of dollars.
Time is money, and most people spend at least some time commuting to, and from, work every day. 1 in 36 commuters travel more than 90 minutes, one way, to get to work. You should consider finding a home close to your work so you can save those hours every day in the car.
Transportation is another huge issue. You should choose an apartment for rent, especially in NYC, close to public transportation.
Here’s a great article about how home prices skyrocket near subway stations. According to Property Shark, you are definitely paying a premium to live near a Subway Station. If you have a car, then you know parking isn’t cheap. You’ll want to take care of it.
Some apartment communities have a lot of extra amenities. For example, if you want to lay out by a pool, or want a quick workout, or want to host a BBQ for your friends, all of these amenities come with a price tag! Gym memberships in apartment buildings are often expensive and the fees are monthly. You need to consider all of this when choosing an apartment building, and creating a living budget for yourself.