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Housing costs are probably your biggest expense, especially when you live in a big city. Most financial advisors suggest you only spend 30% of your net income (that’s the money you bring home AFTER taxes) on rent, but that’s tough. Say you’re making $50,000 a year, which puts you in the 20% tax bracket (Priya’s being conservative here to make sure you don’t overspend). If you spend just 30% of your income on rent, you’ve got a monthly budget of $1,000. That can be really tight in NYC (or downright impossible, especially if you’re trying to live alone).
Priya suggests the 80/20 rule: Live off of 80% of your income (this includes rent, any loan repayment, bills, as well as expenses like your gym membership and Netflix) and save 20%. That gives you more wiggle room for rent, but it also means less money for other things. It’s up to you to decide how you spend your money. For some, paying higher rent to live in a certain neighborhood, or in a building with special amenities (door-person, washer/dryer, roof deck), or simply to live alone, is worth it. Other people might prefer a bare-bones living space and spend extra cash on something else. You’ll want to consider all of these things when deciding how much you can afford to spend on rent.
Many landlords also require your annual salary to be 40 to 50 times the monthly rent. So if you’re making $50,000, they’d be willing to rent you an apartment for $1,250. If you’ve got roommates, you can obviously go higher — if the two of you make $100,000 a year combined, you can rent a place for $2,500.
If you bring in a guarantor (more on that below), landlords require this person to have an annual salary of 80 to 90 times the monthly rent. All important factors to consider when you begin the apartment-hunting process.
You should also consider how much you’ll spend on a broker’s fee (in NYC, it’s as much as 15% your first year’s rent; when I was living in Boston, it was the equivalent of one month’s rent), as well as all the money you’ll need to put down before you move (first and last month’s rent, security deposit, move-in and application fees). These numbers can add up fast. If you and a friend are renting a $3,000 apartment in Brooklyn, your move-in expenses can be as much as $15,000 if you’ve have to pay a broker’s fee and all the move-in expenses. That’s an additional $1,250 a month you’re paying for the apartment over the next year.
Another way to make sure you can actually afford a higher rent is to try saving it each month. Say you’re paying $1,000 a month for rent right now, but for $1,500 you could get your own place. Spend a few months setting aside that extra $500 in savings, so you can see what it’s like to live without that extra cash. (Bonus points because you’re saving extra money, too.)
Obviously, it can be more expensive to live in certain neighborhoods. But sometimes, that extra expense might be worthwhile. It can be tough to know where you want to live if you’re new to a city, but your neighborhood can have a big influence on your life. There are lots of personal preferences to consider, but everyone should think about the following:
- If you drive, is there adequate parking?
- If you rely on public transportation, is there a convenient train station?
- Do you feel safe in the neighborhood?
- Are you close to a grocery store? Drug store? Gym? Other amenities you can’t live without?
Priya also points out that it’s good to think about transportation costs. If you live close to work, you might be able to spend more on rent because you’re saving on transportation. If you don’t mind a long commute (you use the time to read or listen to podcasts), you might be willing to move further away from the city and save some money on rent.
Then there are all the personal preferences that everyone has to consider on an individual basis. Maybe you love living somewhere up-and-coming, or you want a neighborhood that’s established and known for its safety. Perhaps you want to be close to friends or family or someone you're dating. Maybe you hate city living and you’re drawn to an area with parks. You know what you like; just make sure to keep it in mind when you’re apartment-hunting. And whatever you want, it’s important to explore the areas where you’re looking to make sure they have everything on your must-have list.
I’m not sure I could live without a dishwasher, but Priya has a good friend who spent six months on a work-study program without one, got used to washing dishes by hand, and ended up moving into a dishwasher-free apartment back in Brooklyn — and saving a lot in rent.
I also couldn’t live without laundry in my building, but if you hate doing laundry and like to drop your clothes off weekly at the local laundromat, then maybe that’s an amenity you can live without.
On the other hand, I don’t have a car, so I could care less about parking. Amenities (like budgets and neighborhoods) are personal, so you have to make these decisions on your own. Just remember: After you have that wish list, make sure there are a few things you’d be willing to compromise on. I hate electric stoves, but I put up with one for seven years because I loved the apartment so much. No home is perfect (as anyone who watches House Hunters knows); it just needs to be practically perfect for you.
Applying for an apartment in NYC is insane. In my early 20s, I tagged along with my then-roommate Katy as she looked for her own place. She found a one-bedroom (what my mom would call a "total dump") in Brooklyn that she liked. The real estate agent told us someone else was interested in it, and we needed to race back to the agent’s office in order to get Katy’s paperwork and deposit it first. We ran from Brooklyn to midtown, beating the other woman by mere seconds. Thankfully, Katy had all her paperwork in order, and she got the apartment. But, had she not been prepared, someone else would have grabbed that place quick.
It’s not always that nuts in NYC, but you should have all your paperwork ready to go before you start seriously looking. According to Compass, an NYC-based real estate company, you’ll need the following:
- Proof of employment letter, on company letterhead and signed by a company representative, stating your position, start date, length of employment, salary, and opportunities for bonuses
- If self-employed, a CPA letter stating annual income and source of income
- Last two pay stubs
- Last two years' tax returns: first two pages, including signature page
- Last two years' W-2s
- Two most recent bank statements (including checking and savings)
- Reference letters from or contact information for previous landlords
- Photo ID (driver's license, passport, etc.)
I think you can probably skip the reference letter from a landlord, but better safe than sorry. You’ll also want to check your credit history, to make sure you’ve got a good credit score. There’s a good chance your new landlord/the building management will run a credit check on you before they agree to rent you the apartment, and it’s likely they’ll charge you anywhere from $100 to $150 for the favor.
It takes a while to pull this all together, so take the time before you start your hunt, so you don’t get your heart broken by missing out on your dream apartment.
I’m the worst about asking questions. I get really shy about it, for some reason, or I forget altogether. But there’s no shame in asking questions — it’s better than not knowing the answers! This is where you’re going to be living; it’s important to know as much as you can about the apartment.
Some examples you’ll want to ask:
- What utilities are covered in the rent?
- Do I have to pay for my own heat and hot water? (If yes, that might change your budget.)
- Can I have a pet? Does it require an extra deposit?
- Is there a limit to the number of people who can live in the apartment?
- What community rules should I be aware of?
- Can I paint? Put nails in the walls?
- Who handles maintenance problems?
- Whom do I call in an emergency?
- How much money is required to move in? (First, last, security deposit?)
- What’s the penalty if I break my lease?
- Are there certain days of the week when I can’t move in?
- Do you require a certificate of insurance from my moving company?