Boston Apartments: How much rent can you afford?

Most landlords in Back Bay, Midtown or the Seaport District require your gross annual income (before taxes) be 30 times your monthly rent. So, for example, if you want to rent a studio/1 bedroom for $2,000 a month, you must prove that you make at least $60,000 a year.

An easy way to determine how much rent you can afford is to divide your income by 30. Let’s say you make $60,000 dollars a year:

60,000/30 = 2,000

Using this equation, you can afford to pay $2,000 in rent every month. Most financial advisers and real estate professionals cite 30 percent of your annual income as an appropriate amount to spend on rent.

But! Do you really want to spend 30 percent of your income on rent? Before you commit to a lease, consider a few things:

As mentioned above, landlords generally will want to see that you make 30 times the monthly rent – before taxes.

That’s right. When taxes are deducted, you’re actually less than sixty-thousand dollars a year. (Can’t wait for that rebate right about now, huh?) It’s important to be aware of exactly how much money you’re going to have in your pocket every month so you can budget accordingly.

Consider all the other expenses that come with life: perhaps you want to put aside money every month for retirement, or you have a health insurance plan that requires monthly payments. Factor those in. There are also other apartment costs that come into play, besides rent: utilities and cable bills are usually not included in standard leases. Then there are miscellaneous costs that come from living in a big city: laundry, 

If you choose to look for an apartment using a Boston downtown broker, remember that will come at a price; brokers generally charge one month’s rent. Landlords often ask that renters pay first and last month’s rent up front, and they may ask for a security deposit on top of that – which is generally the equivalent of one month’s rent. You’ll get the security deposit back in the end, and it’ll be a relief not to have to pay your last month’s rent when you do indeed decide to move out, but renters must be prepared to fork over a lot of money up front when they first sign a lease.

OK, enough with the scare tactics. If you have found your dream apartment and cannot prove that you make 30x the monthly rent, but know that you are good with money and can hold yourself to a strict budget, there are a few options to consider:

• Guarantor – Guarantors are legally and financially obligated to pay your rent if you, for some reason, cannot. Guarantors need to have an annual income of 80-100x the monthly rent. Guarantors can be useful for renters with bad credit or no rental history.

• Roommates — Sharing your apartment with others will allow you to afford a much bigger place on your budget, or perhaps a more desirable neighborhood. They help cut the cost of rent, not to mention other monthly expenses, like utilities and cable. If you decide to sublet, you may even avoid having to buy furniture!

Finally, just remember: the Boston real estate market can be intimidating, and most first-time renters will experience “sticker shock.”

It can be hard to come to terms with the fact that you may not be able to afford the dream apartment. Make sure to get the best bang for your buck, with enough disposable income to enjoy everything this crazy city has to offer.