Making Your Life Budget Friendly

4 Things To Consider Before Deciding On A Rental Budget

What is the cost of rent?

Unless you’re rolling in dough, that’s likely the first question that comes to mind when looking at a new rental.

The best way to maintaining a healthy budget is to keep it.

Image from City of Wood Village

Between groceries, gas, car payments, and school loans, keeping a reasonable budget is key to remaining sane and financially secure.

Not to mention that spending too much on a rental can break your bank account, while spending too little can leave you in a less than desirable home.

Rent often makes up the bulk of a person’s monthly expenses, which is why it’s often factored into the budget above all else. Making each month’s rent ensures that you have a place to eat, sleep, and live, meaning that all other expenses are adaptable to the times. Because rental agreements often ask for a year lease, it’s important to take certain things into consideration (such as job stability). By keeping to your budget and being realistic about rental expenses you’re likely to find extra spending money lying around that you might not have realized was even there.

But how do you know how much to spend on rent? What factors do you take into consideration?

Job Stability

As mentioned above, job stability is a key factor in signing a lease agreement. While you might be comfortably making a few thousand a month now, there’s always a risk that you won’t be making that same amount six months from now. It’s a sad fact of life that people get laid off, injured, or even become ill, deterring them from continuing on with a well paying job. That’s not to mention the possibility of job relocation, or the company going out of business. No matter the reason, you can’t just rub a crystal ball and guess where you’ll be six months; you can take a realistic look at where you’re at in your job.

Ask yourself:

How long have you been in the position?

Is there a possibility of your job requiring you to relocate in the next year?

Does the company have a good track record and a promising outlook on staying open?

Consider your answers before signing for a lease. If you’re within your first six months of a job, for example, it may be best to skip the $1,500 two-bedroom, no matter how much you want it and opt for something more reasonable if you’re let go.

Image from Tax Talk

Current Debt

Renters come in all shapes and sizes. Many, however, are fresh out of school, new to the job market, and ripe with student loan debt. That’s not including those with car payments, which can easily add a couple of hundred extra dollars a month to an already tight budget. Even then there are those that simply have a credit card and are struggling to pay it down. No matter the category that you fall into, you should always take a look at your debt before you make a move on a new rental. Consider hidden fees that fall into the rental category—sometimes the cost of rental isn’t all it’s made out to be. Things like water payments, trash fees, and the price of pets can add hundreds of dollars quickly to what you thought was a reasonable amount. If you’re looking at a lot of debt that takes up a bulk of your budget monthly it may be best to consider a lower rental cost.

Unit Size & Location

When you’re looking for a new rental the first question might be about how much rent is, but the second is almost always related to the location. The location plays a huge role in not only how much rent will cost you, but also in how much bang you will get for your buck. Places in NYC, for example, will almost always fetch upwards of $800 for a shared bedroom or even less. Likewise, rentals in San Diego that sit on the beach might cost much more than those that are more inland. Take a look at where you want to live and then consider what the rent looks like in those areas. Is the size of the unit worth the amount in rent for you? Where a one-bedroom a few blocks from the beach may seem like the dream, it may be equal to as much as a three-bedroom elsewhere. Shop around, refuse to sell yourself short, and consider whether your budget can accommodate a smaller space for more amount of money.

Property Management

Professionals do not always run rentals. Many rentals are owned by previous owners who are looking to make some extra money, while investing little time and energy into the care and keeping of the home. Rentals run by a property management company, however, are often given around the clock coverage and care. Investing in a rental with a property management company behind it will not only save you lots of time but money as well. Reachability in times of crisis (the sink is flooding, the door lock broke, ect…) should be

Image from Growing the Money Tree

an important factor when deciding on a rental. While it may cost a little more, as it covers the cost of the management company, it will in the end pay for itself.

Choosing a rental should be about more than the money involved, but unfortunately it plays a large and important role. If you’re still confused, consider Move’s list of hidden rental expenses, as well as Metropolitan Life Insurance Company’s method of spending no more than 25% of your monthly income on rent.

What tips and tricks do you have for deciding on how much to spend on a rental?

Comment below with your tips and tricks for your fellow renters!