So, you have set your plan to move to a distant place and it is now time to plan the budget. There are several things that you must keep in mind including the cost of long distance movers as well as the rent you can afford for a house in a new place. Whether you are moving due to family reasons or have landed a job opportunity in a new city, it is recommended that initially you must rent an accommodation. Renting a house allows you enough time to judge the city, find the best neighborhood as well as a house that is perfect for you to start your new life.
While renting a house is a great option, most of the people find it tough to decide how much rent should they be paying. If you too are planning to rent a house in a new city and aren’t sure about the rent you must pay, here is a complete guide to help you with the decision:
Search an apartment online:
There are a number of factors that influence the rental prices. These factors primarily include the location, facilities & amenities as well as the season you are moving in. One of the best ways to find out how much you should pay for a rental accommodation is searching online. There are various sites where you can find a myriad of options in a decent price bracket. Make a list of properties that fit into your budget and neighborhood preferences.
Consider your funds:
Financial planning as well as the availability of funds make a significant effect on how much you should pay as rent. There are a number of things you must consider while planning your rental expenses including:
- Your spending habits:
The rental expense will be a part of your unavoidable expenses and hence you must consider the cash flow before you decide how much rent you can afford. To assess the cash flow, you will have to keep an eye on you spending. A detailed assessment of your monthly income against your expenses will help you identify how much cash you have readily available to spare for rent.
While assessing cash flow is important, you must also consider your cash flow. You must be paying your rental on monthly basis but when you sign a rent lease, there is a clause for upfront payment. In most of the cases, you will have to pay a minimum of one month or 12-15% of the annual rent as a security deposit. This is where your savings come into play as you will have to pay the rent from the money you have saved.
Know the 40x requirements:
The 40 x requirements are nowadays a benchmark for the landlords to judge that the tenant will be able to pay the monthly rent on time, without default. The landlord assess your monthly income and ensure that for being a credible tenant, you have an annual income that is at least 40 times more than your monthly rent.
In case, you do not qualify for the 40x requirement, you can always ask a family member or friend to help you out and become a guarantor in your rental lease agreement.
Allocate a percentage to the rent:
The best way to identify how much rent you should pay is to assign a percentage to the expense. Usually, people prefer two types of rent percentage- 30% threshold and 50/20/30 guideline. In the 30% threshold, you will limit your rental expense to 30% of your gross income.
However, in 50/30/20 Guideline, you will have to break your income in three different categories- needs, savings and dents and wants. Under the needs category, you will keep the cost of utilities, transportation, groceries and rent, savings and debts are unique to individuals and wants are any additional expenses that you want to do for your pleasure or fondness.
The definition of ideal rent is different to individuals. While these tips give you a great aid in deciding how much rent you should pay, the ideal rent for you must depend on a number of personal factors and preferences, You can certainly get the best rented accommodation by compromising on a few amenities or choice of neighborhood and enjoy your life in a perfect home that is affordable for you.