How Much Should You Spend on Rent?
When I first moved to Manhattan in 2002, my monthly rent was a mere $500 a month - or 15% of my take-home pay. Granted, I was sharing an apartment with a married couple and living north of 100th street (far from the cool, clubby downtown scene). But for this underpaid, fresh-out-of-graduate-school, entry-level journalist, it was worth every penny - and more to the point, it was all I could comfortably afford.
For many young workers, budgeting for that first apartment can be a major battle, considering starting salaries have remained flat over the past decade, while living expenses have soared. For those living in expensive cities like New York and San Francisco, it's not unheard of for some young adults to spend close to half their monthly take-home paycheck on rent. (My broker tells me that in New York City, most landlords require a maximum of 25% of one's pre-tax income go toward rent. But apparently some landlords don't do a proper income check, or they rely on the income of a guarantor - usually a parent.)
That 25% limit is a decent rule of thumb for anyone budgeting for rent; expect another 3% to 4% to go to utility costs. Any more and you risk running under the rest of the month, considering you've still got your car payment, food, student loans and credit card bills to address.
Here's some advice for saving on your rental costs.
Ask for a Free Month (or Two)
Negotiation is key when trying to budget for an apartment. Landlords are used to being asked for all sorts of perks and financial accommodations to seal a deal. Your first bet is to ask for a free month. I did that last summer and my landlord and I met halfway, so I got the first two weeks free.
Add a Room
With your landlord's permission, you may be able to put up a wall in your apartment (around $1,000) to create a second room. That way, you can rent out the space to a roommate.
Search Near Schools
Come to think of it - I wasn't just lucky to nab a $500-a-month deal back then. I was also looking in a neighborhood near Columbia University.
Here's my tip - search rental locations near college or university campuses in your area. Those listings are often much cheaper, since landlords know the majority of applicants are either students or recent grads without deep pockets. The accommodations may not be as fancy, and you may have to shack up with a few roommates, but you'll make up for it in savings.
Some schools may also have their own off-campus housing Web sites, where neighboring landlords post listings. For that, you'll need to find a friend who goes to the school who can help you gain access to the site's listings.
Sublet listings sometimes come furnished and are more likely to be negotiable, since you're dealing with a lessee - who may be trying to sublet his or her apartment quickly. Just make sure you get a written letter from the building manager acknowledging your sublease; you don't want to wind up getting evicted.
Search "No Fee"
Fee-free listings usually mean you don't have to pay a broker's fee on top of rent. In New York City, this fee can be as high as 15% of your annual rent.
Photo Courtesy TurkeyChik from Flickr
More on MoneyWatch:
Popular on MoneyWatch
- Amy's Baking Company: Post-meltdown PR campaign
- How to stop the mediocrity pandemic
- Reverse cell phone lookup service is free and simple
- 4 Things Not to Buy at Costco
- Top 10 professional life coaching myths
- Powerball: What to do if you won
- Fired for violating an unwritten policy
- Facebook's first year on Wall Street 5 Photos