We all want a place to call our own but if we don’t know how much we can afford, at the end of the day it can leave us with an inability to uphold a lease or to make repayments on a home loan.
For some of us, we could even earn enough to rent a bigger apartment or purchase a house closer to the city than what we initially thought but only with the right planning and preparation.
Home budgeting steps are what you need to afford your next home. While creating and sticking to a budget can be hard, it is the best way to prepare to rent or to save for a house. In this guide, we look at ways you can afford your rent, how much you can afford, and whether you can move forward with buying a new house in the future.
What is the Average Price of Renting an Apartment in the City?
Renting an apartment in the city is what all singles, professionals, and small families want in a home today. But city life can be expensive which means finding an affordable apartment to rent requires some work. To help you understand how much you can afford, let’s start by looking at the average rental prices for apartments in the city.
According to Business Insider the national average rent for a one-bedroom apartment in the most popular cities in the US is just over $1200. The national median rent has also risen by 11.4% which means that renting an apartment has become more expensive. Rent growth prices have risen the most in the last year making it more challenging for individuals and households to find places they can afford. Of course, moving further out of the city means slightly lower rental costs but this can quickly be overtaken by extra expenses for transport.
Interestingly, rent plummeted in expensive cities and coastal apartments with the start of the pandemic. Other high demand areas or neighborhoods also saw a demand for spacious apartments to rent with more people working from home. This meant rental reductions to accommodate more tenants; however, over the last 4 years, rental prices have seen a significant rise. Areas such as Tampa Florida, Fresno California, Glendale Arizona, and Spokane Washington have seen the largest increases in rent.
The problem with determining how much you can afford to rent is the fact that property prices continue to change. Budgeting becomes harder because your rent, your general living expenses, and even insurance cover increase every year. So how do you know how much you can afford and where do you choose an apartment to live?
Where Can You Afford to Rent an Apartment?
Renting and maintaining your lease for at least a year depends on how much you earn and what your expenses are. Your income less your everyday essentials, your transport or fuel costs, and things such as home insurance, car insurance, and medical should be accounted for. Also consider any outstanding debts or credit that you might be paying off. Only then can you see how much you’re left with and what you can dedicate to monthly rent.
If you can afford rent of between $700 to $1000 per month, learn whether it is guaranteed not to change for the rental period. You don’t want to budget and then find out that your rent is going up 6 months into the lease. Read your lease agreement and check that your rent will be the same every month for the year no matter the circumstance.
Also, budget so that you can cover your rent and have some money over each month. If your rent is emptying your bank balance every month, it is not a rent you can afford. You should be able to pay the rent and have enough left over to save or to use in case of unforeseen circumstances. Rather find an apartment for a little bit less, save that money that would have gone towards rent, and then you can upgrade the apartment the next year or start saving towards buying a house.
Knowing just how much you can afford is an individual thing and with careful consideration for your income, expenses, and other living costs, you can determine just how much to dedicate to a brand new home.