Could a couple with no car living in a 1-bedroom apartment in Center City do okay with a household income of $60,000? (Philadelphia: student loans, safe neighborhood)

[jazzy jeff]

Originally Posted by rotodome

A landlord rule of thumb, which IMO is also a good personal benchmark of affordability, is that they like your income to be at least 40x your monthly rent, which would mean $1500. Seems pretty do-able.

The general rule of thumb is you should be able to afford 35 percent of your monthly income on rent. So in the case of 60k per year that breaks down to 5k per month, they can afford 1750 per month. The fact they have no car, no parking expense, insurance, mechanical wear and tear, I would say they could even go higher.

[ElijahAstin]

Originally Posted by jazzy jeff

The general rule of thumb is you should be able to afford 35 percent of your monthly income on rent. So in the case of 60k per year that breaks down to 5k per month, they can afford 1750 per month. The fact they have no car, no parking expense, insurance, mechanical wear and tear, I would say they could even go higher.

Really? I've always heard 25% was the way go to. A lot of apartments I'm looking into won't even let you go above 30%.

[jazzy jeff]

Originally Posted by HeavenWood

Really? I've always heard 25% was the way go to. A lot of apartments I'm looking into won't even let you go above 30%.

Guess it depends on the building. I have heard the "rule of 36" which is your annual income divided by 36, which equates to a third of your monthly income, and I have also heard of 35% of your monthly income, both of which are pretty standard for the area. That is what my oldest son encountered when apartment hunting here in the city, unless it has recently changed. If it was me and could get by without a car I would definitely go for as high as they would allow. I would also recommend managed apartment buildings over landlord owned properties. I have heard some real horror stories with maintenance issues and insects in those type of properties.

[rotodome]

You must be talking about take-home income, not pre-tax salary.

[ElijahAstin]

Originally Posted by rotodome

You must be talking about take-home income, not pre-tax salary.

That makes more sense.

[jazzy jeff]

Originally Posted by rotodome

You must be talking about take-home income, not pre-tax salary.

No, it gets based on gross salary. Hell when you purchase, a mortgage lender usually will qualify you to afford up to 2 and a half weeks of your salary per month. Of course a mortgage usually brings tax breaks, but would never advise anyone to take on that much.

[ElijahAstin]

Originally Posted by jazzy jeff

No, it gets based on gross salary. Hell when you purchase, a mortgage lender usually will qualify you to afford up to 2 and a half weeks of your salary per month. Of course a mortgage usually brings tax breaks, but would never advise anyone to take on that much.

IDK, spending 35% of your gross pay on rent sounds like the road to living paycheck to paycheck (though a lot of Americans certainly do just that).

[Cnote11]

Originally Posted by HeavenWood

IDK, spending 35% of your gross pay on rent sounds like the road to living paycheck to paycheck (though a lot of Americans certainly do just that).

Yeah, honestly, that is far too high in my estimate. I'd look only to spend 10% or so of my gross pay on rent.

[ElijahAstin]

Originally Posted by Cnote11

Yeah, honestly, that is far too high in my estimate. I'd look only to spend 10% or so of my gross pay on rent.

One definitely doesn't have to go that low, though that's a great money-saving plan. My goal is to stay around 20% of my gross pay. When you're young and don't have any financial obligations to anyone else, that's the time to start building a nest egg.

[Cnote11]

Originally Posted by HeavenWood

One definitely doesn't have to go that low, though that's a great money-saving plan. My goal is to stay around 20% of my gross pay. When you're young and don't have any financial obligations to anyone else, that's the time to start building a nest egg.

I should note that my 10% figure comes from the fact that I split my rent, so 20% is exactly where I'd be otherwise. Too bad most young people seem to see their youth as their opportunity to live reckless because they don't have said obligations.