Taking on a rental property is a huge responsibility, and you’ll need to know beforehand whether it is within your budget. Rent isn’t the only cost you’ll need to factor in, and there are many other monthly payments that are easy to forget about if you don’t take the time to plan carefully.
To help you get a good grasp on your rental home affordability, here’s a handy guide.
How should I budget for a rental home?
Figuring out how much rent you can afford is more complex than comparing the cost of rent to your monthly income, you will also need to consider:
The estimated cost of bills
- · Utilities
- · Wi-Fi
- · Water
- · Council tax
- · TV license
- · Parking permit
- · Food and drink
- · Transport
- · Clothes
- · Other
- · Rent deposit
- · Moving costs
- · Furniture
How much of my salary should go towards rent?
This will largely depend on your location, but the 30% rule of thumb might be a good place to start. This well-known rule dictates that you should spend around 30% of your salary on rent each month, but this is before factoring in the other costs mentioned above. The ONS deems a property affordable if a tenant or household spends 30% or less of their income on rent.
Of course, this is only a guideline and will differ from person to person. Only you know how much of your income you can comfortably devote to rent.
How will I know if I can afford to pay rent?
Budgeting is imperative when finding a new home to rent, and it’s a good idea to take a look at your regular monthly spending to gain a better overall understanding on your affordability.
Make a list of your existing direct debits, such as car payments, phone bills, and any outstanding debt balances, for example. These are the fixed costs that you will not be reducing, and they must be included in your monthly budget.
Then, by reviewing your previous month's transactions, you can estimate how much you typically spend on less important items such as takeaways. Once you have a good idea, you can start pinpointing areas where you can cut back - or if there are some things you simply cannot give up, they must be factored into the budget.
Finally, look at your monthly take-home, and subtract rent and all the extra costs discussed. It’s important that you have some leftover money set aside each month, as it’s difficult to live comfortably without at least a small amount of leeway for savings and unexpected expenses.
If paying rent would leave you with little or nothing left over, it could be worth comparing other properties on the market instead. Having a buffer in your budget could help you avoid having to borrow money on credit cards or using an overdraft, which could intervene with your future prospects. Another great option is to consider renting with a roommate or a partner, as this will substantially diffuse the cost of rent, utility bills, and council tax.
Looking for more advice on finding a rental home? Contact our expert agents.