How much of your income goes towards rent?

[HamSandwich]

Hi Guys,
I just finished college and I'm thinking of moving out on my own now that I have a steady job. I was working with some numbers and a place that I have my eye on would cost 40% of my monthly income. Is that too much? How much of your monthly income goes to rent for you guys? Thanks in advance!

[am_vanquish]

Is the 40% based on gross income or net income? When I graduated from college last year, we got a place that was about 29% of our monthly gross income & that was still WAY too much for us. We've now cut that down to 18%, which has allowed us to focus on other, more important financial goals.

Remember that your first year out of college can REALLY make/break you. Living below your means can go a LONG way (compounding ... it's GREAT), while trying to impress people with your new "real" money can hurt you for years to come. I vote that you find something else. Here in ATL, there are TONS of deals on apartments because the economy has really affected vacancy rates.

[fruitbowlk]

Yes I think that is too much. Here's what I found.

One suggestion, provided by Metropolitan Life Insurance Company, is to spend no more than 25 percent of your monthly gross income on your rent. For example, if your annual salary is $30,000 per year, or $2,500 per month, you shouldn't plan to spend more than $625 per month on rent.

[red92s]

Until last month when I was laid off, my total monthly income after taxes was around $4,000. My rent is $704 per month, including heat and hot water.

[HamSandwich]

Is the 40% based on gross income or net income? When I graduated from college last year, we got a place that was about 29% of our monthly gross income & that was still WAY too much for us. We've now cut that down to 18%, which has allowed us to focus on other, more important financial goals.

Remember that your first year out of college can REALLY make/break you. Living below your means can go a LONG way (compounding ... it's GREAT), while trying to impress people with your new "real" money can hurt you for years to come. I vote that you find something else. Here in ATL, there are TONS of deals on apartments because the economy has really affected vacancy rates.

This is based on my net income. I live in Los Angeles and I would have thought that due to the economy, apartments would be cheap. But it's not. At least not something thats not a total **** hole. PS. Whats compounding?

[red92s]

Remember that your first year out of college can REALLY make/break you. Living below your means can go a LONG way (compounding ... it's GREAT), while trying to impress people with your new "real" money can hurt you for years to come. I vote that you find something else. Here in ATL, there are TONS of deals on apartments because the economy has really affected vacancy rates.

As a fairly recent college grad, I'll second the bold information above. The first few years out are pretty critical for laying the foundation to a solid financial future.

Also, I think the rental market in atlanta might be a little bit skewed since it is sooooo overbuilt with condos and townhouses. There are so many recent developments, and no one is buying, so rents are fairly competitive.

[Seeker]

This is based on my net income. I live in Los Angeles and I would have thought that due to the economy, apartments would be cheap. But it's not. At least not something thats not a total **** hole. PS. Whats compounding?

Yes, 40% of your income is too high.

Find a roommate and look nearer the UC and CSU campus. Don't limit yourself to an "apt".... look for a room and paying someone for renting the one bedroom.

Is your steady job in LA proper? And does it operate with the same std 9-5 type of hours?

Depending on the answers to those two questions, I might advise you to not look in the city proper and more toward the suburbs of LA county.

Alone, renting anywhere in Los Angeles is rather pricey. And, if you have transportation means (auto, bus, standard hours, etc), renting outside the city itself is very viable. Especially with a roomie whom can help with their half of expenses.

[kanjoh]

shouldn't be more than a third, and that's a little high. Generally 25% is a good benchmark to shoot for

[LuxLiving]

Go for the cheap seats or look for a roommate??

40% is absolutely too high!

[MonkeyMama]

When I rented, rent was always 40%+ of my income (California). This is why I don't rent!

How do you get around it? Rent with roommates. Find a place where the main renter has lived there forever and rarely has a rent increase. Sublet. Save money. Subletting/professionals with roommates is pretty common in the area where I am from since rent is so expensive. LA has got to be similar.

I did this through college - rent was high because my income was so low. The "Rent" on the apartment we eventually bought was more than my salary. I only rented a few months after graduating college - you see why. Though if I was single, I would have just lived with my roommates longer (I actually had a large room in a big house in a nice neighborhood, for about 40% of the price of a studio apartment). Would I rather live alone? Um, yes! But it was worth the sacrifice for financial stability. The reality is not everyone can afford to live alone.

[LivingAlmostLarge]

Depends where in LA you want to live. I've always paid in CA at least 50% of income in rent. So do most of the people I konw. IT's not cheap.

[Ima saver]

I agree, 40% is too high. It should be about 23%. I have never rented except for the first year of marriage. I saved my money and purchased a house a year after I got married. My house payment was not much more than my rent and I sold the house 9 years later for a good profit and built a new house.

[snafu]

Before taking drastic action, check with your work colleagues. They may know where to find more reasonable accommodation. There is more than rent to pay, food, utilities, laundry, personal care etc. It can get boring being on your own and being 100% responsible for every single detail.

Has been stated...1st year is critical to your success.

[Radiance]

I think percentages are a good guidance, but only to some extent.
For food for example, it doesn't matter how much you make, you don't need to increase your food budget everytime you get a raise.
Similar for rent. I will hopefully get back to renting soon. I looked up places and I can spend just 18% and live on a comfortable 3/2 on a convinient place. why would I go for 25% when I can do 18%? If I was buying I guess it is a different story.

I guess it goes down to cost effectiveness and what is important to you. Safety, convenient location, access to services, access to transportation.... Trying to get the best deal and under 30% of income... (unless you live in California where it seems the minimum is 40%)

[TBH]

Depends where in LA you want to live. I've always paid in CA at least 50% of income in rent. So do most of the people I konw. IT's not cheap.

I agree that it may not be realistic to pay less than 40% of your income in rent if you live in a high cost-of-living area. New York City, California, Boston--in many cases it just can't be helped.

This is a big reason why I haven't moved back to California, even though I wish I could. My friends in California who are my age (early 30s) are often either heavily subsidized by their parents or living at home still. Now more of them have moved out, but many lived at home into their late twenties.

If you can stand to live at home for a while longer, you can pay your parents some rent (which I believe you should do) and also pay yourself--putting money into a savings account to help you eventually buy or meet other financial goals.