How Much Rent Can I Afford and Other First Decisions?

You may not know how much rent you can afford, but your government does. The US Housing Department guideline says that your rent should be no more than 25-30% of your gross salary. The way landlords in major cities interpret this is by requiring you to make annually at least 40 times your monthly rent. This makes figuring your rent budget easy – just divide your annual salary by 40. Translated to real jobs, this means that an editorial assistant making $30,000 can spend $750, an accountant starting at $41,000 can spend $1,025 and a new engineering graduate making $54,000 can budget for $1,350.

If you do not meet the 40-times-rent salary level, you may need to get a guarantor* for the lease. The guarantor will have to bring in a much higher salary, up to 80 times your rent in New York City, for example. Another way around the 40-times-rent requirement is to prepay rent up to a year.
*guarantors are often parents/guardians.

Looking to save up some money? Figure out what your take home pay is in a week, keep your rent to that and you will then have three week’s salary for bills, living expenses and something left over to go straight into your savings account.

TIP: Looking to sock away some money? Figure out what your take-home pay is in a week, keep your rent to that and you’ll have three week’s salary for bills and living expenses, with something left over going straight into your savings account. (Check the internet for highest interest rates on savings.)

After you determine that you can afford the rent, you typically also have to be able to cover a security deposit of one month’s rent up front. In other words, you’ll have to pay two months’ worth of rent before you move in and you don’t get the security deposit back until you move out.

Remember, landlords can check your credit rating, and some may even require that you have a grand or two stashed in a savings account. This mainly applies to large apartment buildings run by management companies and is less common if you’re moving into a smaller building.

What’s a credit rating?

Here’s the deal: A credit rating is a so-called FICO score calculated by the three major credit bureaus (Equifax, Experian, and TransUnion). It is based on your credit history (credit cards, student and auto loans, paying bills on time, etc.) Scores range from 300 to 850 and if yours is under 620 it could spell trouble. (The average FICO score in the U.S. is currently 678.) Your credit rating may decide where you’re able to rent or how many months of security deposit your landlord will require.

If you are maxed out on your credit cards and your FICO score is below 620, your options are limited. You won’t be able to rent in most large apartment buildings, unless someone is willing to co-sign your lease and meets the co-signer income requirements – or someone is willing and able to prepay several months of rent on your behalf. In this case you are better off in looking in small buildings or private homes, since they rarely check the credit rating. Just be sure that you can actually afford your rent so you won’t knock your credit rating down even lower and hurt yourself in your next move.

How do you find out your personal credit score? Start by visiting Under a new law, you are entitled to get a free credit report from each of the major credit bureaus once a year. The FICO score is not part of the report, but can be ordered for a small fee (currently $6.95) at the same time. You can also get your score by going to, where it will cost you $14.95.

TIP: There are many scams on the internet offering your free credit report only to steal your personal information. The and sites are safe.

For more about selecting roommates, read, Roommates: The Personal Stuff

Alone or with roommates?

If you’ve figured out how much you can afford but can’t find anything within that range in your preferred area, the decision may already have been made for you. A $600 monthly rent budget will only get you a roommate share in most major cities. But even if your rent budget is high enough to cover a place without getting someone to go in dutch, you may still want a roommate to defray some costs, get bigger digs, or improve your social network.

When choosing a roommate, keep in mind that living with someone is different from just hanging out with them. If you room with a friend or your boyfriend/girlfriend, living together may be the end of the relationship.

Location, location. location

The location of your apartment is really the key to your social and financial wellbeing. If you have a great place but it’s too far from your work, friends or the places you hang out, the cheap rent you are paying will be a cold comfort.

Some neighborhoods have a Jekyll/Hyde effect. They may be fine during the day, but change after hours. A quiet office-y neighborhood may turn into a hooker alley at night or on the weekend. If you usually get home at 5 a.m. on weekends, stop by at that time on a Saturday morning in the neighborhood you are considering — but drag a friend along just in case you need back-up.

Must-have services

Make a list of things you cannot live without, Parking? Pet-friendly? Air-conditioning? Doorman? Health club? Laundry in building? Super on premises? Each additional service limits your apartment choices and might increase the rent. You’ll probably start with a long list of “must-haves” and whittle it down as you start pricing things out.

Print out our Apartment Hunting Checklist. Use this as a guide as you visit each apartment. Apartment Hunting Checklist

Furnished vs. Unfurnished

If you’re not going to be around for too long, consider looking for a furnished apartment to sub-let. But when you find one, check it out carefully. People who let others to live with their stuff may not be the most fastidious housekeepers. Also, furnished places, no matter how dismal, usually costs more than a comparable unfurnished apartment and are often harder to find.

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