What percent of income on rent?

[CathyA]

DD has been living in a house with several others. She's really ready to live alone so she can have some peace and quiet. Her income is pretty low, as she's working in 2 jobs that aren't in her degree. She's slowly getting more jobs in her degree-related field (music). She's found a place she really likes, in a decent location in a big city, close to her friends and closer to her 2 jobs. But its a little more than she had planned on spending. She's taking it anyhow, in hopes of being able to afford it. I know that's a pretty iffy situation, but she figured she may not have an opportunity at this good location again. Its really important to her to pay her own way, but knows we are there for her, should things get too tight occasionally.

It used to be a rule-of-thumb to not spend more than 1/4 of your monthly income on rent. I'm sure that's much higher now. I realize there are alot of things that factor into how much one "should" pay for rent. But on average, is it more like 1/2 your monthly income now?
Thanks.

[lhamo]

1/2 is pushing it, unless you have a really high income and lots of wiggle room. I wouldn't feel comfortable with more than 1/3. Dave Ramsey recommends no more than 25% of take home on housing, I think. We're at right about that with our mortgage and management fees.

In some places where housing costs are high, though, people working entry level jobs really don't have much choice.

How many apartments did she look at? If she is making this decision after having seen 20 or more in one neighborhood, then I would say she really has a good sense of the local market and if this really looks like a good deal she might want to take it. If she's seen less than 10 apartments I would say she should definitely keep looking. Anything between those it kind of depends on what she's been seeing. Are places on the low end going quickly? Are places on the high end staying around longer? Factors like that can help you assess whether the market is on the way up, down or holding fairly steady.

It sounds to me like this is a bit of an impulse decision for her, so I would tend to advise caution, especially since her income is still pretty unstable.

And I would be VERY careful about commiting, even in a minor way, to making up the difference if she is coming up short.

That's just me.

lhamo

[iris lily]

Entirely depends on her debt. Does she have car payments? School loans?

When I was through college and had my first job (a low paying professional level job) I spent nearly 1/2 of my take home pay on rent, and then later when I bought a house, it was exactly 1/2 of take home pay. But I had no other debt so it wasn't a problem.

[Miss Cellane]

It's not just the rent. She needs to consider utilities, as well. If the rent includes heat, close to 50% of her income might make sense. But if she's paying heat, electric, gas, cable, phone, internet, etc. on top of the rent, she needs to work out just how much all that will cost her. Right now, she is splitting those expenses with her roommates. If she's going to have to pay to park her car, add that in, too. Add in more money for gas if her commute will be longer, or if she will have to driver further to stores.

Another option for her might be to find one roommate who shares her ideas of noise and quiet, messiness and cleanliness, etc. and find an apartment to share. The layout of the apartment makes a difference. A lot of modern buildings have the bedrooms right off the living room/kitchen, and that makes it difficult to control noise, or even feel like you are getting away from the other person. Older buildings, on the other hand, tend to have hallways, which can be wonderful dividers. If the bedrooms are at the opposite ends of a hallway of any length, you get a better feeling of separation and the noise doesn't travel as well, either.

Two people might be able to swing the rent for a three bedroom apartment, depending on the rents in her area. That would give two people a living room, a bedroom each and a shared office/tv room/craft room/sitting room. Usually the 3rd bedroom doesn't add that much more to the rent (it's a second bathroom that increases the rent a lot). I know two roommates who have a three-bedroom and the third bedroom is a shared office/tv room. There's also a tv in the living room, so they never have to negotiate what to watch when. It also gives them just enough extra space so that they can escape from each other when they need to. Neither one could afford as nice an apartment on their own, in as nice a part of town. They claim it's what's allowed them to stay roomies for the past 10 years.

[pcooley]

We spend about 40% of our monthly income on our mortgage, but we have no other debt. That includes an extra $685 to the principal, so we have that much wiggle room if something big comes up, and we also have about $6000 in our emergency fund.

[ApatheticNoMore]

You've been given good advice. I've seen a few shared apartment deals with lots of privacy (like you basically have your own whole walled off section and the only thing that is shared is the kitchen, a common living room). If I personally were to go into a roommate situation - yea I'd do something like that :) - although the prices are getting closer to having your own place for those type of places. They do BALANCE a desire to be with others (lots of people get lonely living alone) and save a few bucks (though not as many as more communial situations) with privacy though. Really for me, anything where I feel I have some privacy. And never roommates who party at all hours or anything, quiet little introverts thanks.

My own rent is 25% of aftertax. I do think 50% is pushing it for rent or mortgage, I doubt I'd do it unless I had to. But it is hard to be just starting out in the world, somewhere with a high cost of living and be told you must only spend some ridiculously tiny amount (25% and I've heard people say even less) on rent. Has Ramsey been in that situation, has he ever tried to live in a high cost of living area? (you know before you've made your first million :~)) Then maybe he just has no idea what he is talking about.

[Gregg]

I inclined to feel that 50% of take home pay for ALL bills is a logical amount. If she has no other debt and the 50% figure includes utilities and amenities then it would be high, but not outside the realm of reason. If she has other bills (per Iris: student loans, car payment, etc.) then she could be cutting it dangerously close if anything unexpected were to happen.

[jennipurrr]

I would try to keep the cost as low as possible but also consider other factors. For example you say its in a big city, close to her jobs. I have a friend who spends at least 40% of her income (mid level earner) to live in a major city...but she can walk to her work and take the train almost every where she needs to go. The reduced commuting time/costs would be something to consider in exchange to a bit higher rent.