9 ms·

I have been kind of struggling with this question lately. As a rule of thumb, what percentage of your income would/should be spend on rent? I can totally unders

I have been kind of struggling with this question lately. As a rule of thumb, what percentage of your income would/should be spend on rent? I can totally understand there are many variables but I'm assuming the cost of buying a new house could be one on that list.

phyalow 9y ago
1/3 max
frede 9y ago
From a landlord's perspective, they prefer if you do not spend more than 1/3 of your income on rent.
- DaiPlusPlus 9y ago
  Keep it affordable for people to live in, but too expensive for the tenants to save-up to buy their own place. Devilish.
  - umanwizard 9y ago
    Renting is an ultra-competitive market -- landlords aren't personally deciding what your rent should be.
    - deleted 9y ago
      [deleted]
  - poooogles 9y ago
    Pretty much. Hilariously the rate of house price increases in London is almost outpacing the rate I can save for a home. So even if you can save up, you still can't buy a house.
DaiPlusPlus 9y ago
The rule of thumb is 1/4 of gross income before tax, 1/3rd of net income after tax - reasoning that 25% of your income is lost to taxes. Another approach is to take your salary, max out your pre-tax retirement contributions, find out what dollar amount you need to maintain your current lifestyle in non-accommodation costs, set aside at least a few hundred $ monthly buffer, then whatever's left will be your budget for housing.
- closeparen 9y ago
  I've found it useful to consider transportation + housing in aggregate. It can cost the same to have a centrally located apartment vs. a suburban apartment + car. Also, your commute time and sanity (avoiding transit, avoiding rommmates) may be worth some sacrifices to lifestyle/entertainment expenses.
jaclaz 9y ago
In theory it should be between 1/5 and 1/4 of your net income, to be increased to a maximum of 1/3, as DaiPlusPlus stated, in "high density" or "high value" cities or areas. These "rules of the thumb" have been accurate for decades, lately the numbers "went crazy", partially because of the increase of costs for new houses, partially because of the lowering (or stagnating) of income, partially because of increases in taxation (either on personal income or house related taxation). The phenomenon is not restricted to the UK, or to the London metropolitan area, here is a data point about Italy (the article is in Italian but the leading graphic is clear enough): https://www.idealista.it/news/immobiliare/residenziale/2017/06/21/123308-quanto-incide-laffitto-sul-reddito-lanalisi-delle-principali-citta https://www.idealista.it/news/immobiliare/residenziale/2017/... which is not that bad in Google translate. The three bars are respectively employees (dipendenti), independent professionals (autonomi) and retired people (pensionati) which represent roughly three different levels of income, average, high and low.

phyalow 9y ago

1/3 max

frede 9y ago

From a landlord's perspective, they prefer if you do not spend more than 1/3 of your income on rent.

DaiPlusPlus 9y ago
Keep it affordable for people to live in, but too expensive for the tenants to save-up to buy their own place. Devilish.
- umanwizard 9y ago
  Renting is an ultra-competitive market -- landlords aren't personally deciding what your rent should be.
  - deleted 9y ago
    [deleted]
- poooogles 9y ago
  Pretty much. Hilariously the rate of house price increases in London is almost outpacing the rate I can save for a home. So even if you can save up, you still can't buy a house.

DaiPlusPlus 9y ago

The rule of thumb is 1/4 of gross income before tax, 1/3rd of net income after tax - reasoning that 25% of your income is lost to taxes. Another approach is to take your salary, max out your pre-tax retirement contributions, find out what dollar amount you need to maintain your current lifestyle in non-accommodation costs, set aside at least a few hundred $ monthly buffer, then whatever's left will be your budget for housing.

closeparen 9y ago
I've found it useful to consider transportation + housing in aggregate. It can cost the same to have a centrally located apartment vs. a suburban apartment + car. Also, your commute time and sanity (avoiding transit, avoiding rommmates) may be worth some sacrifices to lifestyle/entertainment expenses.

jaclaz 9y ago

In theory it should be between 1/5 and 1/4 of your net income, to be increased to a maximum of 1/3, as DaiPlusPlus stated, in "high density" or "high value" cities or areas. These "rules of the thumb" have been accurate for decades, lately the numbers "went crazy", partially because of the increase of costs for new houses, partially because of the lowering (or stagnating) of income, partially because of increases in taxation (either on personal income or house related taxation). The phenomenon is not restricted to the UK, or to the London metropolitan area, here is a data point about Italy (the article is in Italian but the leading graphic is clear enough): https://www.idealista.it/news/immobiliare/residenziale/2017/06/21/123308-quanto-incide-laffitto-sul-reddito-lanalisi-delle-principali-citta https://www.idealista.it/news/immobiliare/residenziale/2017/... which is not that bad in Google translate. The three bars are respectively employees (dipendenti), independent professionals (autonomi) and retired people (pensionati) which represent roughly three different levels of income, average, high and low.