This calculator helps you determine how much rent you can afford based on your income and expenses. Use it to calculate affordability for property rentals.
Rent risk levels defined
How to calculate rent affordability?
The rent calculator uses the following risk levels: if regular expenses are not given, low risk leases are 15%, medium risk is 25%, and high risk is 35% of the remaining income (net income minus recurring debt). These classifications are based on assumptions about monthly expenses and may not match your specific situation. If regular expenses are provided, low risk is 70%, medium risk is 80%, and high risk is 90% of the remaining income (net income minus recurring debt and regular expenses). The risk level increases as the income available for unexpected and irregular expenses decreases.
To use our rent calculator to determine your affordability, simply enter your net income after taxes, your recurring debt, and (if desired) your average monthly expenses for items such as food, transportation, utilities, and luxuries. The calculator will convert this information into monthly figures and then calculate the amount of rent you can afford based on the level of risk you are willing to take on. The calculation is a simple percentage multiplication, as outlined in the risk levels section. For a more accurate estimate, we recommend including your average monthly expenses.
The calculation for low risk rent is based on simple percentage multiplication. If monthly expenses are included, it is calculated as 70% of Disposable Income. If monthly expenses are not specified, it is calculated as 15% of Disposable Income. To get a more accurate estimate, it is recommended to input average monthly expenses.
The table shows the estimated monthly rent that can be considered affordable based on varying levels of net income, recurring debt, and regular expenses. Factors taken into account include net income, debt payments, and expenses for necessities such as food, utilities, insurance, and transportation.
|Variables||Scenario 1||Scenario 2||Scenario 3|
|Net Monthly Income||$3,000||$6,000||$9,000|
|Recurring Monthly Debt||$800||$1,200||$2,000|
|Regular Monthly Expenses||$1,000||$2,200||$3,000|
|Affordable Monthly Rent||$840||$1,820||$2,800|
Costs other than rent payment
When considering a rental property, it is crucial to take into account not only the cost of the lease, but also the additional expenses that come with it. These expenses can include utility bills, insurance, transportation, food, and other regular costs. It is important to ensure that these costs can be affordably met in addition to the lease payments.
When determining the affordability of a rental property, it’s important to factor in the cost of transportation. The cost of gas or public transportation for a daily commute can accumulate over a month, and it’s essential to include this in your budget. Additionally, location plays a role in the cost of recreational activities and traveling to school, shopping areas, and other events. To ensure an accurate assessment, it’s important to include these costs in the “Regular expenses” field of the tool being used.
Costs due to the size of the rental
Choosing a smaller rental property may save on rent costs, however, it may also come with non-tangible costs such as limited space for a home office or work area, which could limit income opportunities. Additionally, a smaller property may not provide enough space for children to do homework and study, potentially impacting their future earning potential. On the other hand, a larger rental may come with higher expenses such as heating and cooling bills. It’s important to weigh the pros and cons of property size and factor in both tangible and non-tangible costs when making a decision.
Other related expenses
When assessing the affordability of a rental property, it is important to consider not only the cost of the rent, but also other expenses that come with it. These can include security deposit, insurance, pet deposit or application fee, recurring bills such as water, gas, electricity, internet, and TV. Additionally, if the rental property is unfurnished, the cost of furnishings should be taken into account. To ensure an accurate assessment, it is important to include all of these costs in the “Regular expenses” field of the affordability calculator.
This can help you to make a more informed decision, and consider other options if the final costs are not within your budget.
This is a simple online tool which is a good starting point in estimating the rent you can afford but is by no means the end of such a process. You should always consult a qualified professional when making important financial decisions and long-term agreements, such as rental agreements. Use the information provided by the calculator critically and at your own risk.