One question that most people find themselves asking is; How much rent can I afford? Renting a house or an apartment is a significant financial decision, and knowing how much rent you can afford is essential to avoid rental stress.
Instead of applying for a rental and then trying to figure out how to get cheap rent, you should instead assess your finances first.
In this guide, we’ll provide actionable tips to help you determine an appropriate rent range, taking into account your financial situation and individual needs.
Check your finances
Your rent depends on how much you have to spend on it. So, having a clear picture of what you can afford is crucial. This includes calculating your gross and net income, examining your spending habits, and accounting for other costs associated with renting.
There are tons of advantages to renting, including freedom of choice. So, as long as you keep your finances in check, you can live comfortably.
Calculate your income
Your gross income refers to what you earn before tax deductions and other expenses. Net income refers to how much you have after you’ve calculated income spent.
To calculate your monthly or weekly income, check all your earnings. Keep in mind that above-average income and median income levels can vary across Australia, so it’s essential to research these figures in your specific location.
When you look at your income, you’ll understand what a good salary is in Australia according to where you’d like to live. If you’re questioning whether you can rent a house without a job, the answer is yes—but it’ll be a little tougher.
If you need extra assistance, you should look into NRAS, the National Rent Affordability Scheme, which could help you if you’re struggling to make rent.
Examine your spending habits
Understanding your day-to-day expenses is crucial for establishing a realistic rental budget. Monitor what you spend on essentials like food, transportation, and bills. Add that to non-essentials like entertainment, shopping, and eating out.
Account for other costs of renting
When checking how much rent your income can cover, incorporate additional costs that come with a new rental. These may include security deposits, bank account fees, real estate agent fees, and body corporate fees (if applicable).
Establish your rental budget
When you understand your finances better, creating a budget becomes easier.
Guide yourself with the 30% rule
If you’re wondering what percentage of your income to spend on rent, here’s a tip—consider allocating no more than 30% of your net income to rental payments. This percentage is considered a sweet spot, helping to avoid rental stress while still allowing for a comfortable lifestyle.
However, this is just a guideline, and your ideal rent range may vary depending on your income level and other financial circumstances.
Adjust budget based on individual needs
Everyone’s priorities and needs are different, so it’s essential to adjust your rental budget accordingly. Consider the importance of factors like location, living space, and amenities in your decision-making process.
Additionally, weigh the costs of non-essential items like car spots and gym memberships, and be prepared to make compromises to find a rental property that suits your budget.
Utilise rent affordability calculators
To help you determine an appropriate rent range, consider using rent affordability calculators available online. A rent calculator takes into account factors like your income, expenses, and desired location to provide you with a suggested rental budget.
Keep in mind that these calculators are just a suggestion and should be used as a starting point in your search for the perfect rental property.
Selecting the right rental property
With a rental budget in mind, you can begin searching for the perfect property that meets your needs and financial requirements.
Prioritise your needs and wants
It’s important to find a balance between your desired living space, location, and amenities when selecting a rental property.
You may need to make some compromises to find a rental within your budget, such as opting for a smaller apartment in a better location or choosing a larger living space further from the city centre.
Consider the impact of longer lease terms on your rental costs, as some landlords may offer a lower rent for longer commitments.
Research rental markets in Australian capital cities
Before you start searching for rental properties, it’s essential to research the rental markets and rental prices in your desired area. That way, you can understand what the average rent is in different suburbs.
Compare rental prices in different cities and neighbourhoods across Australia, and familiarise yourself with the property landscape in your chosen location.
This will help you identify rental properties within your rent range and ensure you’re getting the best value for your money.
In certain suburbs and cities, they have what’s called a rent crisis, with low vacancy and high prices making it harder for tenants to find rentals. Know that it’ll be more competitive in areas like these.
Consult with real estate agents
Real estate agents can be invaluable resources in your search for the perfect rental property.
They have the knowledge and expertise to find the right property using your budget. Don’t be afraid to consult with multiple agents and leverage their expertise to ensure you find the best rental property for your needs.
More tips on handling your rent
How can I save money on rent?
To save money on rent, consider negotiating for a rent reduction, sharing with a family member or friend, choosing a weekly rent option, or opting for a smaller living space in a more affordable location.
You can also research discounts and incentives offered by landlords for longer lease terms or good tenants.
Let’s say you’re looking for a cheap one bedroom apartment for rent in Sydney, you could also look for options in a sharehouse. Living with others can majorly reduce rent.
How can I avoid rental stress?
Rental stress occurs when a person spends more than 30% of their income on rent, leading to financial strain and potentially impacting their overall well-being.
To avoid rental stress, create a realistic budget, prioritise essential expenses, and cut unnecessary costs.
How do I determine the appropriate rent range for my income?
Use the 30% rule as a starting point, allocating 30% of your net income for rent. Adjust this figure based on individual needs and financial circumstances, such as expenses and lifestyle preferences.Utilise a rent affordability calculator for guidance and consult with real estate agents for expert advice on the local rental market.
