What’s Your Maximum Affordable Rent? Here’s How to Determine Your Rental Budget

Calculate-Max-Rent

Rents in New York City are notorious for being sky-high. That said, there’s little room for error when determining a budget for monthly housing costs. Landlords have rigorous financial requirements for prospective tenants when it comes to qualifying for an apartment. Here we’ve outlined the terms and fees to help you calculate the maximum rent you can afford.

Use the ’40 Times Rent Rule’ to Calculate Your Maximum Affordable Rent

Typically, landlords want to see that your income is more than 40 times the monthly rent. So take your pre-tax annual income — including annual salary, bonuses, dividends and any other income — and divide that number by 40. The result is the maximum amount of rent you can qualify according to most landlords.

Example: An annual income of $80,000 ÷ 40 = $2,000.

Some landlords, however, will allow you to combine your income with your roommates’ income to hit this 40-times rent threshold. See the chart below to examples of income and 40x rent costs:

Monthly Rent What You Need To Earn
$1,000 $40,000
$1,500 $60,000
$2,000 $80,000
$2,500 $100,000
$3,000 $120,000
$3,500 $140,000

Rent-to-Income Ratio

50 Times the Monthly Rent? That’s Crazy!

Some landlords will raise the bar even higher by requiring that prospective tenants make 50 times the monthly rent. Yes, it’s painful. Welcome to New York.

Don’t Earn Enough to Afford the 40 Times Rule?

When your income doesn’t meet the 40-times rent requirement, you may have one other option: a guarantor.

Budget for the Broker’s Fee

If you use an agent to find an apartment, you’ll likely need to pay a broker’s fee. Remember to budget for that cost, which will be between 8 and 15 percent of a full year’s lease cost. For example, if your rent is $2,000 per month, which nets out to $24,000 annually, and you assume a 15 percent fee,  you’ll owe the agent $3,600. Keep in mind that agents expect payment in full at the time of signing.