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How Much Percentage of Your Income Do You Devote to Housing/Rent?

HappyDude20

HappyDude20

macrumors 68040
Original poster
Jul 13, 2008
3,688
1,479
Los Angeles, Ca
I suppose I ask this considering I'm wanting to move out on my own. Further, I understand money is a bit personal but I would appreciate anyone wishing to elaborate their own situations if need be.


I heard somewhere that 30% (though 25% is considered optimal) of your monthly/yearly income should be devoted to your rent or house payments. More so, I've heard that when moving into an apartment that most places will need to make sure you're making at least 40 times more of than your monthly payment. Such as if rent was $1,000 a month, you'd need to be making at least $40,000 a year for a rental/apartment/condo complex to let you live there.

I'm sure many people coming across this thread will fall under different percentage brackets of not only monthly/annual income but (where my interest lies) also in how much of that you devote to your monthly bill for housing (i.e. apartment life) (I'm 25 and not quite ready to own my own home yet, i'm not even in a relationship).

Again, if you wish to elaborate I'd be all ears, as truth be told I'm befuddled at how people just so easily move out and live on their own without having much cash saved up. Though this last paragraph is somewhat off topic; i'm just saying it amazes me that so many people live paycheck to paycheck, spend money on stuff they don't need in their 20's and barely get by each month. Perhaps i'm starting this thread to get some info in hopes of preventing any of that. :D
 
My rent is ~ 17% of my pretax earnings

On top of that, I am able to save nearly 50-60% of my take home (after tax) pay....this is after the 10% pretax I devote to my 401k and 2% pretax for stock purchase
 
That thread from 2012 does have some good responses.

Between my wife and I, we budget 25% of our net income towards all housing related expenses (in this case - rent/electricity/gas.)

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dukebound85 said:
My rent is ~ 17% of my pretax earnings

On top of that, I am able to save nearly 50-60% of my take home (after tax) pay....this is after the 10% pretax I devote to my 401k and 2% pretax for stock purchase
Click to expand...

That's very promising. You're setting yourself up for a comfortable (or early) retirement.
 
I also currently can put about 50% of my income into savings each month. It's hard to estimate my yearly income because I'm self-employed and so far it always goes up. Right now the most conservative estimate for my income over the next year puts my rent at about 28% of my income.
 
Mine comes out to about 30% of my before tax income.

EDIT: That is taking into account that I am single and own my own house. No significant other to "combine" incomes with.
 
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I spend about 13% of after-tax household income on rent (two income earners). When I moved out of my parents' place, my income was significantly lower, rent ate up about 35% of it. All the extra cash I make with increased expertise in my work - I choose to spend on things other than real estate.

It certainly helps if you have someone to share the expenses with - be it a significant other, or a roommate. It definitely helps if you have a well set career path - something that brings you both the money and the satisfaction - and has growth potential. Everyone's preferences differ, but I personally don't feel like paying any more for housing than I have to - so even as my income increased, I did not feel like I have to upgrade.

Set up a budget for your expenses and see if you can follow it for a couple of months. That should give you some idea as to how much you can afford to pay for rent, while adding a bit of a margin for unexpected expenditures.

One note to make about savings. In a simplistic way, there are two kinds: saving for a large planned purchase (car, vacation, etc) and saving for emergency situations. If you are just starting out on your own, the emergency fund can be replaced or supplemented with a spare credit card, preferably with a low interest rate, that you just keep in your drawer and never use. I did that and while I never needed to use it, it was a peace of mind knowing that if something happens, I have those funds available while I get back to normal.
 
About 50% of my income is for rent/household stuff (groceries etc.).

But to be honest my parents help me out with everything else such as school and car payment. :eek:
 
About 35% of my monthly take home for a small SMALL room with roommates. Add in phone and internet bills, and student loans, and credit cards, and I have only 37% left to spend for the month on food and living. This thread made me depressed!:eek:
 
As far as qualifying for a mortgage goes, with great credit, the max total debt to income ratio (for the most part) is 50% of your gross income. Meaning, if you make $5k/month, you could technically qualify for a mortgage with a $2500/mo payment. Granted, this is if you have "A" tier credit. And obviously, just because you can "qualify" for a mortgage like this doesn't mean you should put yourself in this type of payment positon unless you make a pretty hefty salary (a 50% DTI for someone making $50k/yr is much different than a 50% DTI for someone making $500k/yr) or you are verrrrryy disciplined with your spending and budgeting. 25%-40% is a much more realistic and manageable monthly DTI for an average income person.
 
0%. Paid off my mortgage about 6 years ago (I'm in my late 30's).
If you can go for a mortgage where you can make over payments. That way you can finish off as soon as possible.
 
Apple fanboy said:
0%. Paid off my mortgage about 6 years ago (I'm in my late 30's).
If you can go for a mortgage where you can make over payments. That way you can finish off as soon as possible.
Click to expand...

Agree completely! Also pay attention to the rates and if it makes sense refinance.

I started out with a 30 year fixed at 5.375. I would periodically look at the rates and I refinanced to a 20 year fixed at 3.8 about a year ago now. I dropped 7.5 years off my loan and my payment before and after are within $5 of each other. I make extra payment (as much as I feel comfortable) and I should have my house payed off in a little over 10 years if my maths is correct. That will put me in my late 30's and not having to worry about having a house payment at that point!!
 
The best advice I have heard - Get a 15 year conventional fixed rate mortgage where the payment is no more then 25% of your take home pay. That will leave you room for repairs, furniture, and that broken water heater you didn't see coming.

My house payment is about 20%, but that includes about $90 a month over payment. I refinanced back to a 15 year a couple years ago, but should easily have it payed off in 9 and possibly as short as 7 years. Would have had it payed off by now, but we added a kitchen addition that I could not see living in this house without!
 
Pre-tax...

21.5%

Not including utilities, food, etc..

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Apple fanboy said:
Everybody pays tax! Death & taxes, the only constants in every bodies life!
Click to expand...

Actually death is the only constant.

Tax is a variable as it changes (usually yearly). Plus you never paid tax until you moved out of parents and if you become homeless you don't pay the tax.
 
unplugme71 said:
Pre-tax...

21.5%

Not including utilities, food, etc..

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Actually death is the only constant.

Tax is a variable as it changes (usually yearly). Plus you never paid tax until you moved out of parents and if you become homeless you don't pay the tax.
Click to expand...

I paid tax long before I moved out.
Income tax
Car tax
Value added tax
 
HappyDude20 said:
Again, if you wish to elaborate I'd be all ears, as truth be told I'm befuddled at how people just so easily move out and live on their own without having much cash saved up.
Click to expand...

The first apartment I had out of school was shared with four other people and in a relatively cheap (at the time) neighborhood--I recall we each paid about $250 a month. This was about 25 years ago. I was working as a library assistant and had very little money. But it was better than going back to live with my parents. Not that I didn't like my parents, I just didn't want to move back in with them. I didn't want to live where they lived. My friends and I just did it figuring work would turn up and the rent would get paid. It usually did.

Now, after being in a variety of locations, my wife and I have a nice little house that we're trying to pay off early. But I wouldn't recommend buying a place for your first place on your own and you have no idea what's coming at you. But if you can save, that's good. When you are in a position to buy, having a substantial downpayment will make it a lot easier. Anyone who tells you to buy with little or no money down is a con man.
 
unplugme71 said:
Pre-tax...

21.5%

Not including utilities, food, etc..

----------



Actually death is the only constant.

Tax is a variable as it changes (usually yearly). Plus you never paid tax until you moved out of parents and if you become homeless you don't pay the tax.
Click to expand...

Sales Tax
Hidden Import/Export taxes

The only way you'd have never paid taxes is if you never bought anything.
 
velocityg4 said:
Sales Tax
Hidden Import/Export taxes

The only way you'd have never paid taxes is if you never bought anything.
Click to expand...


Not true. You can avoid sales tax by buying online. You can move to a state that doesn't collect sales tax.

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Apple fanboy said:
I paid tax long before I moved out.
Income tax
Car tax
Value added tax
Click to expand...

But these are still not constants. You don't have to pay it. And if you do, the value can change.
 
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