[Visual of TITLE: The true cost of renting a place]

So you’re thinking about renting your own place.

[Visual of signpost with several arrows. A pin moves from office building to group of friends, to picture frame of family]

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?

[Visual of couch with coffee table and pizza. Two girls sit on couch.]

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.

[Visual of MONTHLY EXPENSES, UTILITIES INSURANCE, AMENITIES, RENT on left.
MOVE-IN COSTS, CREDIT AND BACKGROUND CHECKS, FIRST AND LAST RENT, DEPOSIT, REAL ESTATE AGENT FEE, AND MOVING on right]

Now, the two biggest costs you’ll have are going to be your monthly expenses and your move-in costs. To start, you’ll want to figure out your monthly expenses, 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.

[Visual of BUDGET and INCOME]

So first you’ll need to decide what your budget will be.
A decent guideline for figuring out what you can afford is something called the “thirty percent rule.”

[Visual of 30%]

[Visual of INCOME (BEFORE TAXES) MONTHLY EXPENSES, UTILITIES]

Basically, you take thirty percent of your gross income—that is, your entire income, before taxes—and allocate that to your general housing expenses— that’s not just the rent, it’s also your utilities, insurance and other costs associated with your home.

It is set at thirty percent 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,

[Visual of 30% decreasing: 28%, 27%, 26%, 25%]

you might want to spend less on your housing.

[Visual of 40% HOUSING]

Or, if you live in a city where rents are higher, you might be able to afford more 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.

So, say we’re looking at an annual salary of forty thousand dollars,

[Visual of $40,000 x 0.3 with calculator]

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—

[Visual of $1000]

or that really nice place you see for ten fifty.

[Visual of $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.

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.

[Visual of LEASE AGREEMENT]

Electric bills can vary dramatically. The price of electricity fluctuates throughout the year, or even the time of day

[Visual of calendar below A/C unit inside window]

[Visual of $90]
But, for this exercise, let’s say this averages out to ninety dollars a month over the course of a year.

Your fuel bill (typically your gas or oil) can also vary dramatically throughout the year— but for now, we’ll estimate it to be about ninety dollars a month as well.

[Visual of $30 with water faucet]

And if you have to pay for water, that bill might be around thirty dollars a month.

[Visual of fire on building]

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.

Keep in mind, these are all general estimates— your local utility or insurance companies 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.

[Visual of parking sign, computer, washing machine and computer modem all with price tags]

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

[Visual of baseball crashing through window]

And again, depending on the lease agreement, you could even be responsible for additional things—like home repairs.

[Visual of MONTHLY EXPENSES / $225 EXPENSES]

In any case, adding this up gives us a total of two twenty five for general housing expenses.

So, we want to take this and subtract it from the original budget of one thousand, which leaves seven hundred seventy-five dollars for rent, which may or may not be enough. If it’s too low, one possibility would be splitting your housing expenses with roommates, 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.

[Visual of moving box video, frame and “The true cost of moving to a new place”]

Including the costs of just getting a new place which we’ll cover in another video.


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