You’ve finally found the perfect apartment which is close to work, near good schools, is the right size and has a great layout. However, before you sign the lease and obligate yourself to a year of rent payments, deposits, fees, and utilities, you need to determine if you can realistically afford these costs. Use the following tips to help you weigh this important financial decision.
Not All Property Management Companies Have the Same Requirements
Most property management companies conduct a credit, income and background check on you before agreeing to rent you an apartment. These checks not only help the property manager and owner assess levels of risk, but they may also help determine if your monthly income is sufficient to comfortably afford the apartment. Keep in mind that you may need to save up to help cover initial move-in expenses which may include:
- Moving costs
- New furniture
- Move-in, pet and utility deposits
- Necessities for your new apartment
- First month’s rent
- New cleaning supplies
Use caution, though, when you receive the property management company’s decision as not all use the same criteria to determine your qualifications. When in doubt about your ability to afford the rent and other associated costs of your apartment, use the income guidelines explained below.
General Rule of Thumb to Determine If You Can Afford the Apartment
To help determine if your income is sufficient to cover your rent and other bills each month, use the general rule of thumb where you multiply your monthly rent by three. For example, if your rent is $1,000 per month, you would need to earn approximately $3,000 a month to afford the apartment. Keep in mind, though, that this calculation is a general guideline. Your financial situation may vary considerably. However, as a general rule, by multiplying by three times your rent costs, you leave room to cover other bills including, but not limited to:
- Car payments
- Car insurance costs
- Utilities (water, sewer, electricity, gas and cable)
- Cellphone bills
- School loans
- Credit card payments and more
Make a Budget in Advance to Determine How Much You Can Spend on Rent and Utilities
Although multiplying your rent costs by three provides a rough estimate of your ability to cover all monthly expenses, including rent and utilities, it is often more helpful to use a budget. A budget helps you refine your numbers, determine actual living expenses and should take into account every cost you incur each month. When used correctly, your budget will incorporate the bills listed above as well as your estimated expenses for items such as:
- Dining out
- Savings and emergency funds
- Clothing and more
Before starting the apartment hunting process, sit down and map out your monthly budget to determine what you can afford. With a little pre-planning and foresight, you can help avoid the fear of coming up short on the monthly rent and, instead, focus your attention on enjoying your new apartment.