If New York is famous for one thing, it’s the cost of living. While rental discounts abound nowadays, however, it is important to know what you can afford. In essence, your key to financial happiness understand your relationship between income and income. It will help you create a sustainable budget that leaves money left over for fun things like travel, eating out, and multiple broadcast services. Below real estate experts share tips to secure your dream apartment.
Say Hello to the 40-Time Rental Rule
Many landlords, brokers and landlords administer this rule. Typically your gross annual income should equal 40 times your monthly rent. The following example fulfills the numbers: For an apartment that costs $ 2,500 a month, the gross income must be $ 100,000 a year. And of course proof of salary is required to qualify for said unit.
Are you still a little confused about the numbers? Just take your annual income before taxes and divide it by 40. That’s your sum.
Another way to look at the math, you have to pay no more than 30% of your income for rent. To calculate, multiply your gross annual income by .30 and then divide it by 12. You will end up with the same number as the 40-time rule.
Are There Exceptions to the Rule?
If you have a great credit history, some landlords will bend the 40-fold rent rule. At the back, some buildings require an even higher income, sometimes 50 times the monthly rent.
“In many cases where an apartment is independently owned or owned by a smaller entity, there may be some flexibility,” said Ivana Tagliamonte of Compass. “For example, many cases have occurred where the tenant may not meet the income requirement of 40 times the rent but has excellent credit, no liabilities and a solid amount of money in the bank. Often at smaller tenants, applications are seen on a case-by-case basis.”
When to Get a Warranty
What can you do when you can’t get around the 40-fold rule? It’s time to find a guarantor. A guarantor is someone who will legally have to pay your rent if you can’t. This person has to pay between 80 and 100 times the monthly rent.
Getting a guarantor is extremely helpful if you lack credit, have no rental history, are a recent graduate or are a non-resident.
Lauren Feldesman of Compass advises tenants to make sure your landlord will work with your specific guarantor based on their geographic location. “There are some landlords who only take sad guarantors or third-party guarantors,” she said. Guarantors can be a friend, family member or a guarantee company.
How to Find a Guarantor
For some, parenting is a good option. For others, a friend who accepts the worst-case scenario to pay your rent when it comes to it may work.
Probably the best scenario that will keep your relationships intact goes with a rental guarantee service. They are similar to insurance companies where you pay a fee for emergency coverage. Firm companies pay about 80% of monthly rent per year. Most will require you to earn 28 times the rent and have a good credit history. And here’s a professional tip: If you’re looking at apartments that don’t meet your rent-to-earnings ratio, it’s best to secure a guarantor before filling out apartment applications.
What About Broker Fees?
Monthly rent is not the only fee you need to consider when finding your new home. You may have to pay broker’s fee, which can run about 15% of the annual rent.
You can find apartments without brokerage fees. Try it looking for free housing at StreetEasy.
More Considerable Costs
Many landlords require tenants to pay the first and last monthly rent in advance, in addition to a security deposit.
“I would also consider transportation costs, especially if you found a great apartment far from the subway. A cheap studio may not actually be affordable if you spend a fortune on Ubers, ”Tagliamonte said.
Something else to watch out for is rentals that have discounts on the first year. Think rent concessions or a net effective rent. Although these apartments may look like on your budget, the second year will give you an unfortunate change.
“With a lot of incentives out there, people can step aside a little bit,” Feldesman said. “But when those incentives are no longer valid for the second year’s rent, you may find that you can’t pay for your housing.”
Considering all of these factors should help you figure out the right amount of rent for your budget this year and beyond.