How much of my income should I spend on rent?
Maintaining the right balance of your income spent on rent is crucial when getting involved in the rental market.
By sustaining this balance, you have a better chance of creating financial stability and retaining a comfortable way of living. One-in-five of the UK’s residing tenants spend more than half of their income on rent, reducing their overall financial freedom dramatically.* Renting a home allows you to have a freer, enhanced lifestyle; it’s not meant to burden you financially.
Why should you rent?
Renting is a great way to create your own safe space from the outside world without becoming permanently tied down. When renting, there are some well-known guidelines to help steer people in the correct direction on how much of your income should be spent on housing per month. There is no one-size-fits-all situation when it comes to your home, you should rent whatever property suits you and your lifestyle.
What affects the price of rent?
Multiple surrounding factors of the property affect the price of rent, and you need to ensure that these align with your lifestyle and overall budget. Considering these important factors can help you navigate through the rental market and discover what price and property is right for you.
Location – When choosing your new home, location will always have the largest impact on the price. Choosing to live in a city increases the monthly rental cost because the property will be close to a variety of shops, activities, and opportunities.
Type of property – More space leads to a higher price, so deciding how many bedrooms and bathrooms you require can help you discover a perfect budget. Having access to certain amenities, such as the rental property being furnished, or parking can also influence the price. It is important to recognise your needs in a property before committing to your new home.
Rental market trends – Local and national trends easily influence the cost of rent, especially supply and demand. It is important to observe all rental market trends constantly, allowing you to stay in the loop and enter the market at the right time. Renting through a letting agent can help you identify good opportunities in the market and make well-informed decisions.
The infamous rental guidelines
Finding a place to call home can sometimes feel overwhelming, but proactively planning your income with one of these guidelines can help you feel confident about how much you can afford. These are some well-known rules to help guide you to the correct cost you should potentially be spending on housing.
- 30% rent rule – This renting rule has been a very popular model since its establishment in 1981. This rule suggests spending 30% of your gross income (before tax) on housing costs, as over 30% could create a strain on your monthly finances. This is the best guideline to use when starting out in the rental market, as it helps you identify an affordable budget.
- Under 30% rent rule – Commonly used, this rule is for people able to live in more affordable areas, allowing a larger increase in financial flexibility. This rule is in place to show people that they don’t have to spend the full 30% of their income on rent and still get their desired home. This allows you to save and live a more luxurious lifestyle.
- 50/30/20 rent rule – This rule is a great guide to use when you begin to have a steady monthly income and allows you to maintain a stable budget. 50% of your income should be spent on your needs, which would include rent, bills, and any constant outgoing monthly costs. 30% can be spent on your wants, allowing you to continue to enjoy life outside of work hours, and 20% should be placed in savings for a potential house deposit or any debt that needs to be covered.
What’s your end renting goal?
When renting a property, you want to ensure that it is the right property for you. It is a personal decision based on your individual preferences and needs. These rules have been put in place to provide vague guidelines, ensuring that no one becomes lost when entering the rental market. Make sure you have identified your budget, monthly expenses, and what kind of lifestyle you want to lead, before entering the rental market.
Get in touch today and rent the right way.
Propertyeye*
This article was originally published by BriefYourMarket and is reproduced here with their permission.
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