The Formula for Finding Your New Rental Budget
Rental properties offer residents the advantage of having flexibility in their living arrangements. This is especially important for people who may move frequently, or someone who prefers to be free from worries regarding home maintenance. Additionally, a rental property can offer financial advantages such as not having to pay property taxes. However, rent prices fluctuate frequently and can lead to a tenant wondering if they are paying too much rent. Therefore, it is important for renters to take a moment to examine the following areas to ensure that they are paying a rent that they can afford.
Ideally, a person should be paying no more than 30 percent of their gross income on rent. If it is any higher, then a person may not have enough money left to pay utilities, car payments or to purchase groceries. In order to determine the percentage of their income that a person is paying towards rent, they simply need to multiply their gross income by 30 percent. The total that they receive will let them know the maximum rent that they should be paying. If their rent is more than this amount, then they could be paying more than they can afford.
Compare Rents for Other Properties
Renters may conduct an online search or may place a few calls to advertisements for rental homes and apartments. Apartment brokers are also an excellent way to find out the average rent within a given area. A person may wish to tour a few apartments and homes in order to get an idea of the types of floor plans and square footage that is available at a particular price. While the prices may vary a little depending upon the surrounding neighborhood and amenities, if a person finds that they are paying more money than the average home, then they are probably overpaying their rent.
Some properties may have higher rents, yet offer special perks such as swimming pools or gym access. If moving to a place with a lower rent payment might eliminate these perks, then a person will need to determine if it is worth it to move. For example, a loss of exercise room privileges may mean that a person will now need to pay for a gym membership. This could easily cancel out any benefits that would be gained from paying a lowered rent.
Determining the proper amount of their income that a person should be paying towards rent is an important step towards determining if a person is paying too much. Additionally, factors such as the rents from nearby properties along with amenities should also be considered. If a person does discover that they are paying too much rent, then they can attempt to negotiate with their property manager or may consider moving to a new location.