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Old 12-30-2005, 07:42 AM
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Default How much can I afford to pay in rent?

I just got my first job after graduating university, and I want to know what people with some experience think is a reasonable proportion of your income to spend on accomodations.

I make money playing *****, but am not counting on it in my budget. As such, I figure I have an after tax income of $2500/month. I want to invest about 1k of it, and spend the rest living the jetset lifestyle I so richly deserve.

My current plan is to rent for six months to a year, and then re-evaluate. I might be able to buy right away, but I only have a small potential downpayment. I also am uncertain about liking this job and wanting to own property in my city. Still, I would listen to a compelling argument for entering into indentured servitude.

I've looked at a few apartments, and they seem to be in the range of $700-$900. I know mathematically how to think about the time value of money, but in a practical sense how much of a difference does this variation in rent make? Will extra savings towards a downpayment make a significant difference in the sort of property I'd be able to buy? Will having insuite washer/dryer and a nicer kitchen really make me $100 happier/month? Any other advice?
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Old 12-30-2005, 07:51 AM
Blarg Blarg is offline
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Default Re: How much can I afford to pay in rent?

I'm tired and lazy so won't say much besides YES having laundry inside will make you very much happier. It's a lifestyle thing you will easily notice and be grateful for. Seriously. Whether it's worth $100 a month is up to you. But in my opinion, it makes a real difference in how you perceive your life and your circumstances. Having to go outside in the cold and fight for washers and pull the occasionally urine stinking diaper from your ruined urine stinking wash will really make you feel like you've failed in life.
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Old 12-30-2005, 08:56 AM
nigelloring nigelloring is offline
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Default Re: How much can I afford to pay in rent?

[ QUOTE ]
I'm tired and lazy so won't say much besides YES having laundry inside will make you very much happier.

[/ QUOTE ]

I use the "wash and fold" service at the cleaners next door. Once a week I bring them all my dirty clothes, and for $1 / pound they wash, fold, and even pair up all my socks. Amazing.
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Old 12-30-2005, 08:57 AM
Schwartzy61 Schwartzy61 is offline
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Default Re: How much can I afford to pay in rent?

Well it all depends on how much you spend on everything else.

You need to sit down and figure an honest budget. You need to figure out everything you will spend money on and just total it up.

I do think trying to save/invest 40% of your after tax income is a bit grandiose unless you plan on living like a bum for the most part.

Don't know about the nicer kitchen, but having washer/dryer in house has got to be a necessity...

Check out this link...

How to Determine How Much You Can Pay in Rent

Should help a little...
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Old 12-30-2005, 08:58 AM
istewart istewart is offline
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Default Re: How much can I afford to pay in rent?

[ QUOTE ]
[ QUOTE ]
I'm tired and lazy so won't say much besides YES having laundry inside will make you very much happier.

[/ QUOTE ]

I use the "wash and fold" service at the cleaners next door. Once a week I bring them all my dirty clothes, and for $1 / pound they wash, fold, and even pair up all my socks. Amazing.

[/ QUOTE ]

It will be even more amazing when you make a gimmick account in three months to whine about the three local Mexicans who robbed your house.
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Old 12-30-2005, 09:10 AM
dcasper70 dcasper70 is offline
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Default Re: How much can I afford to pay in rent?

IMO, if you have the means to own, lean that way first. If you can get a halfway decent condo in your price range, it certainly beats renting. Get into the market and maybe build some equity. With the right place, you stand a decent chance of making money in the long term.

If you're worried about being tied down, don't.
Get an adjustable rate mortgage for a lower rate/payments and sell in 2 years if you want to move.

You're young, you can do this. Hell, even 5 years is nothing. When you're in your mid 30's you'll realize that the time really didn't matter...it just goes on by [img]/images/graemlins/frown.gif[/img]
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Old 12-30-2005, 09:15 AM
Blarg Blarg is offline
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Default Re: How much can I afford to pay in rent?

Agreed on the time not mattering.

I've found it consistently hilarious when people who own properties whine about not making enough money, forgetting about the catastrophe of lost rent they have avoided by owning instead of renting. Even if you break even after many years of home ownership, it's nothing compared to the complete butt-f*cking you would have gotten paying rent. Unbelievably serious money differential there.

You have to lose very big to not come out ahead owning compared to renting.
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Old 12-30-2005, 09:42 AM
Sooga Sooga is offline
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Default Re: How much can I afford to pay in rent?

The thing is, in certain places, renting is the only option for some people. For instance, in the L.A. area (where I live), if you want to buy a condo, you won't find a decent one in a decent neighborhood for less than $350k, which, unless you can put at least 20% down, will run you about $2k/mo or so (I asked around and did some research on that this summer). Contrast that with paying about $900/mo on rent, and it's not really much of a 'choice'. My plan right now is to keep renting apartments for a few more years until I have a good chunk of money saved up, and then move to somewhere a lot more affordable (i.e. probably out of california).
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  #9  
Old 12-30-2005, 09:54 AM
Blarg Blarg is offline
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Default Re: How much can I afford to pay in rent?

California prices really are insane.

You can get by on spending a hell of a lot less than $2k a month, but you have to accept living in neighborhoods you don't want anything to do with, and maybe where the people don't want anything to do with you either.

There are actually a lot of city programs enabling very low cost mortgages, and community colleges offering courses on how to get those low mortgages. Friend of mine did that; smart girl.

But nobody without money is moving into nice neighborhoods anytime soon. It's a long process. Still, compared to paing rent, it rarely loses money. The nightmare stories I've heard my friends tell me usually count as nothing compare dto what they would have spent paying rent.
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Old 12-30-2005, 10:56 AM
Cubswin Cubswin is offline
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Default Re: How much can I afford to pay in rent?

[ QUOTE ]
it's nothing compared to the complete butt-f*cking you would have gotten paying rent.

[/ QUOTE ]

This logic is no longer true in a good number of markets at this moment. Renting actually makes better sense given the all time high housing cost to rent ratios. Historically, this ratio has tended to be in the neighbourhood of 100/1 but in many markets it is now over 300/1.

The building I live in (Northern VA) is going from apartments to condos. Monthy rent is $1425 while we have first right to buy the new condo at $495000. The cost to rent ratio on my unit is a 347/1!!! On top of that, there would be a $500 a month association fee. Ok, lets do some math.

Assuming I wanted to buy my condo, and i had $50k to plunk down, lets just say i borrowed $450k at 5.5 for 30 years. My monthly mortgage + HOA fees would be $3055. Of course, this does not take into account property taxes, income tax breaks and insurnace costs that come with home ownership. $1805 of my monthy payments would be thrown out the window, lost to HOA fees and interest payments. $1250 of my monthly payments actually goes toward equity in my house.

Now, if i continue to rent at $1425 but save and invest the difference of my would-be mortgage if i bought, I would be in a better situation ($3055-1425= $1625 invested as opposed to $1250).

To make a long story short, the old adage that renting is throwing money away no longer holds true in many markets. In many cases, renting is actually a sounder financial option. To the OP... the housing market is cooling off quickly at the moment. Save some money while renting and try to shoot toward saving 20% toward a down payment and avoid mortgage insurance. When things finally cool down, and the real estate flippers see their profits margins shrink, then get ready to pull the trigger.

cubs
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