Use this calculator to easily calculate the rent you can afford given your current income and expenses. Lease affordability calculator for property rentals.
Rent affordability is the monthly sum you can dedicate to rent payments and still be financially in the positive at the end of the year, if not at the end of each month. For example, if your monthly income is $5,000 and you are paying a student loan of $1,000 per month, and have expenses for utilities, food, transportation, and leisure of about $2,500, then the remaining sum $1,500, which is what you would be able to pay for rent, if all other factors remain constant.
However, life is naturally uncertain: your income might change in a negative fashion, you might incur larger expenses in some months, due to unexpected medical bills, fines, unplanned vacation that you really, really want to go on, and so on. Therefore, it is always wise to have spare money at the end of the month which you will put aside in good months, and in months with extra expenses you can use this "cushion" to remain cash-positive. Estimating the rent you can afford requires that you engage in cash flow management. This rent affordability calculator can be a useful assistant in this task of financial risk management.
Rent risk levels defined
The risk levels used in this rent calculator are defined as follows. If regular expenses are not specified, we define low risk lease amounts as 15%, medium risk as 25% and high risk as 35% of the remaining income which consists of net income minus recurring debt. This classification is based on assumptions about your monthly expenses that might or might not be close to your particular situation. If regular expenses are specified, we define low risk as 70%, medium risk as 80% and high risk as 90% of the remaining income - net income minus recurring debt minus regular expenses. The risk rises as the income left to cover unexpected and irregular expenses decreases.
How to calculate rent affordability?
To calculate rent affordability using our rent calculator, simply enter your net income after taxes (yearly or monthly salary, or salary equivalent to an hourly rate), your recurring debt (e.g. car loan, student loan) and, optionally, your regular expenses for food, transportation, utilities, and luxuries. The calculator will convert everything to monthly figures and then determine the lease payments you can afford depending on the amount of risk you are willing to incur.
The mathematics are those of simple percentage multiplication, as specified in the risk levels section above. So, a low risk rent is calculated as 70% x Disposable Income if monthly expenses are accounted for, and 15% x Disposable Income if monthly expenses were not specified. For a more accurate rent affordability estimate we recommend that you enter your average monthly expenses.
The table below presents estimated low risk monthly rent affordability for several different scenarios with the main variables being net income, recurring debt (e.g. credit card debt, loans, etc.), and regular expenses (food, utilities, insurance, fuel, etc.).
|Variables||Scenario 1||Scenario 2||Scenario 3|
|Net Monthly Income||$3,000||$6,000||$9,000|
|Recurring Monthly Debt||$800||$1,200||$2,000|
|Regular Monthly Expenses||$1,000||$2,200||$3,000|
|Affordable Monthly Rent||$840||$1,820||$2,800|
All numbers were calculated using our tool.
Costs other than rent payment
While the price on a property lease contract is very important and it is key that one can afford to make regular payments on it, it is not everything when it comes to meeting lease payments each month. There is so much more to a home even from a purely financial standpoint. Consider the following additional expenses when choosing a rental property.
Costs related to travelling need to be taken into account as the price of gas or public transportation needed for a daily commute can add up to a substantial amount over a typical month. Sports and recreational activities may also require more travel from certain locations and the associated cost and inconvenience would need to be considered. The choice of schools, shopping areas, and activities also depends on the location. Make sure to include these in the "Regular expenses" field of our tool to get a more accurate result.
Costs due to the size of the rental
While a smaller property may cost less to rent, it may also come with non-material costs such as the lack of space for a proper home office or place to do work at home which might result in reduced income opportunities. Insufficient space to do homework and to study may impact kids' long-term earning prospects. On the other hand a larger rental would require more expenses in terms of heating and cooling and those bills can be substantial.
Other related expenses
Rent payments aside, a rent affordability calculation should also include the security deposit, insurance, and a pet deposit or application fee if applicable. Recurring bills such as the cost of water, gas, electricity, internet, and TV need to be added to the expenses if not already included. Make sure to include these in the "Regular expenses" field of our calculator for a more accurate assessment.
Some rentals come unfurnished so the cost of furnishing has to be included in the math, possibly tipping the scales towards a different option.
This is a simple online tool which is a good starting point in estimating the rent you can afford but is by no means the end of such a process. You should always consult a qualified professional when making important financial decisions and long-term agreements, such as rental agreements. Use the information provided by the calculator critically and at your own risk.
Cite this calculator & page
If you'd like to cite this online calculator resource and information as provided on the page, you can use the following citation:
Georgiev G.Z., "Rent Calculator", [online] Available at: https://www.gigacalculator.com/calculators/rent-affordability-calculator.php URL [Accessed Date: 31 Jul, 2021].