Figure Out How Much Rent You Can Afford With The 40X Rule

To live a comfortable life with money left over for other things, it's important to make sure we can really afford our housing expense, one of our biggest budget items. One guideline for figuring out how much rent you can afford is the "40 times the rent" rule.

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In some cities, landlords look for tenants who have an annual income that is at least 40 times the monthly rent. For example, if the rent is $2000 a month, you'd need to make $80,000 a year to be approved.

Even if your landlord does not prescribe to this vetting method, it's still a simple guideline to consider. In the example above, that $2000 rent price is 30 per cent of the monthly income of that $80,000 salary.

With rent prices rising, it might be difficult to meet either of these guidelines, but don't be afraid to haggle with the landlord to get closer to this 40 times rule of thumb. Also, as WiseBread points out, at the end of the day it's also about what you feel comfortable paying.

The Simple Way to Decide How Much Rent You Can Really Afford [WiseBread]


Comments

    That '40' rule is based on a pre-tax income using US tax rates. I imagine it would be different for Australian tax rates

    Shit, then I am paying twice as much rent as I can afford!

    Wow, I'm spot on. Within $150 of my annual salary.

    Stupid rule. I pay $600pw on single income of $60Kpa (with a wife and 4 kids). By your math I should be earning $104Kpa to rent where I have been renting for over 10 years. (Though I might use this to suggest I need a raise.)

      shit a brick. $600 in rent, that would get you a nice house in a nice suburb close to the city here in Adelaide.

        It is a nice house in an intercity suburb. Though looking at my comment, it probably is worth noting that when we moved in the rent was lower.

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