When it's time to get your own place to live, one decision you'll have to make is how much you can afford for rent. Landlords often place a ceiling of how much rent you can have relative to your income. That can set an upper limit on what you spend. However, just because you can get approved for a given rent doesn't mean it's affordable.
The 30 Percent Rule
One rule of thumb, established by the federal government's Department of Housing and Urban Development, is that you shouldn't spend more than 30 percent of your gross income on housing. This means that if you have a job paying $2,000 per month before taxes, you can afford up to $600 a month including rent and utilities.
While the 30 percent rule works well as a general guideline, it breaks down in some high-cost areas. Living in a place like San Francisco or New York City will probably make it hard to hit that target. The average rent on a studio apartment in San Francisco was $2,434 at the time of publication according to real estate broker Cassidy Turley. You'd have to make at least $8,114 per month for that rent to be 30 percent of your gross income and that leaves out utilities. Further complicating matters, landlords in some of these areas sometimes require higher income levels. Some landlords in New York prefer that your annual salary is as much as 50 times the monthly rent. Again, that excludes utilities.
Dollars and Sense
Just because you can get approved for an apartment doesn't mean that spending that amount of money is a good idea. Renting an apartment that will cost you $600 per month with utilities when you make $2,000 per month might not be a struggle if you don't have other expenses. However, if you're making a $200 car payment and paying $300 a month on your student loans, you'll only have $900 left every month and that's before taxes. To find out what you can really afford, set up a budget that has all of your expenses so that you can see how varying rent levels affect you.
Find a way to cut your rental costs if they're out of hand. One is to have roommates. In San Francisco, for example, a three-bedroom, two-bathroom apartment has an average rent of $4,392. Dividing that three ways leaves a monthly rent of $1,464, 60 percent of what that $2,434 studio costs. Leaving San Francisco but staying in the Bay Area nets you an average rent of $2,606 for a 3 bedroom unit, or $868 per month if three people share it. These costs are based on Cassidy Turley's data at the time of publication. Another option is to live at home with your parents for a while if you can, lowering your housing cost even further.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.