The true cost of renting a place

HOW MUCH RENT CAN YOU AFFORD?

So you’re thinking
about renting your own place.

There are lots of decisions to make,

like how close
do you want to be to work

or to your friends, or to your family?

How much space do you need?

Are you going to live
alone or with roommates?

Once you have a sense
of where you want to live

and how you want to live,

it’s time to start thinking
about what renting a place

will actually cost you
and what you can afford.
MONTHLY EXPENSES, UTILITIES
INSURANCE, AMENITIES, RENT

Now, the two biggest costs you’ll have
ELECTRIC, GAS/FUEL, WATER, SEWER
PARKING, STORAGE, LAUNDRY

are going to be your monthly expenses
and your move-in costs.
MOVE-IN COSTS, CREDIT AND BACKGROUND CHECK
FIRST AND LAST RENT, DEPOSIT

To start, you’ll want to figure
out your monthly expenses,
REAL ESTATE AGENT’S FEE
MOVING, BUDGET

which will help you determine
what you can afford to rent.

Then we’ll take a look
at what your move-in

expenses might be in another video.

So first you need to decide
what your budget will be.

A decent guideline for figuring
out what you can afford
INCOME

is something called
the “thirty percent rule.”
30%

Basically, you take thirty
percent of your gross income –
INCOME (BEFORE TAXES)

that is, your entire
income, before taxes -

and allocate that to your
general housing expenses –

that’s not just the rent,
MONTHLY EXPENSES, UTILITIES

it’s also your utilities, insurance
INSURANCE, AMENITIES, RENT

and other costs
associated with your home.

It is set at thirty percent
30% HOUSING

so you can still have some money
left over to cover your other expenses

and hopefully even save
something while you’re at it.

Now, everyone’s
situation is different.

For instance, if you have student
loans or credit card debt to pay off,
28%, 27%, 26%, 25%

you might want to
spend less on your housing.

Or, if you live in a city
where rents are higher,

you might be able to afford more
40% HOUSING

because you can use
public transportation

and won’t have the typical
costs that come with a car.

But for this example,
let’s stick to thirty percent.
30% HOUSING

So, say we’re looking at an annual
salary of forty thousand dollars,
30 % $40,000

in this case, your budget will be

forty thousand times point three,
40,000 x 0.3

divided by twelve is
one thousand per month.
= 12,000 ÷ 12 = $1000

Now, this doesn’t mean you
are going to go right out

and look at rentals listed
at a thousand a month—
$1000

or that really nice
place you see for ten fifty.
$1050

First, let’s think about some

other monthly expenses
you’ll have in addition to your rent.

The biggest monthly expenses you’re
probably going to have are utilities.
ELECTRIC, GAS/FUEL,
WATER, SEWER

That’s your electric, gas, oil, or
other fuels, water, and sewer bills.

In some cases the landlord pays
for some utilities, but not others.

What you’re responsible for

and what the landlord
is responsible for

should be spelled out in the lease.
LEASE AGREEMENT

Electric bills can vary dramatically.

The price of electricity
fluctuates throughout the year,
$30, $210 JAN, FEB, MAR, APR, MAY,
JUN, JUL, AUG, SEP, OCT, NOV, DEC

or even the time of day.

But, for this exercise,
let’s say this averages out to

ninety dollars a month
over the course of a year.
$90

Your fuel bill
(typically your gas or oil)

can also vary dramatically
throughout the year—
$40, $140

but for now, we’ll estimate it to be
about ninety dollars a month as well.
$90

And if you have to pay for water,
$15, $45

that bill might be around
thirty dollars a month.
$30, $210

You might also want to think
about getting renter’s insurance.

If there’s a fire,
a bad leak, or a burglary,

rental insurance can cover
the cost of your belongings,

and it can be as little
as fifteen dollars a month.
$15, $225

Keep in mind, these
are all general estimates—

your local utility
or insurance companies
LOCAL GAS COMPANY

are usually the most
accurate source for this information

if you want to figure it out yourself.

And, these are just a few
of the basic monthly costs

you might encounter with a rental.

You might run into extra charges
for other amenities as well.

And again, depending
on the lease agreement,

you could even be responsible
for additional things -

like home repairs.

In any case, adding
this up gives us a total
MONTHLY EXPENSES
$225 EXPENSES

of two twenty five for
general housing expenses.

So, we want to take
this and subtract it from the

original budget of one thousand,
$1000 MONTHLY BUDGET

which leaves seven hundred
seventy five dollars for rent,
$775 RENT

which may or may not be enough.

If it’s too low,
one possibility would be

splitting your housing
expenses with roommates,
75 EXPENSES, $925 RENT

leaving you more to spend on rent.

So, you can see there are a variety

of expenses you may want to
think about in addition to the rent.