How much rent can I afford?
Landlords will approve you for more than you can comfortably pay. Here's the difference, in dollars.
How the numbers work
Comfortable rent is the lower of two limits: 30% of your gross monthly pay, or 40% of your take-home pay after debt payments. The second limit is the one that bites for most new grads, because loan payments come out of take-home pay, not salary.
The 3x rule is what many landlords screen for: gross monthly income of at least three times the rent. It's an approval test, not a budget. Renting at the landlord limit usually leaves nothing for savings.
Left each month is what's left for food, transportation, phone, insurance, savings and fun after rent and debt payments. If it's under about $1,000, the plan is fragile: one car repair and you're on a credit card.
Example: $54,000 salary, $350 in loan payments. The 30% rule says $1,350. A 3x landlord would approve $1,500. But with about $3,420 of take-home pay, the comfortable number is closer to $1,230.
Questions
What percent of my income should go to rent?
The old rule is 30% of gross (pre-tax) pay. For a new grad with student loans, that's often too much. A safer target is about 40% of what's left of your take-home pay after debt payments, which is what this calculator uses as the comfortable number.
What does 'earn 3x the rent' mean?
Many landlords require your gross monthly income to be at least three times the rent. On a $54,000 salary that's $4,500 a month, so the most a 3x landlord will approve is $1,500. Passing that test doesn't mean you can afford it.
How much cash do I need to move in?
Plan on first month's rent plus a security deposit, often one month's rent, plus application fees, utility deposits and furniture. This calculator shows rent plus the deposit; keep a few hundred dollars on top of that.
Should I get a roommate?
If the comfortable number is well below the rents in your area, yes. Splitting a two-bedroom often costs less per person than a studio, and the savings in year one compound into an emergency fund.
Next: should the money left over go to your loans or into investing?