Finding an apartment or house to rent isn’t easy. There are a whole lot of things to know and a bunch of obstacles to overcome as well. You need to find a place you like, a location that works, and a price that’s right. And, just because you’ve found a place that you love doesn’t mean that the landlord is going to be ready to rent it to you. They have a lot to consider, too.
One of the most important things you should know about is the 33% rent rule. This is something that’s pretty much a standard for landlords, but it’s also important for borrowing money and even making a budget. So, if you know the 33% rule for renting, you’ll be able to better plan for your own money management.
What’s the 33 Percent Rent Rule?
Plain and simple, the rule is that you shouldn’t be spending more than 33% of your income on rent. Another way to think of this is as the “3x rent rule”.
If you find a place that costs $800/month, you should be earning 3x that to be able to rent it comfortably. That would mean that you need a gross income of $2400/month to be able to rent an $800 place. 33% is the same as 1/3, so you should only spend one-third of your income on rent.
Why is this a rule?
There’s nothing set in stone, and there are no laws about charging a person more than 33% of their salary in rent. Instead, this is just a general outline – a rule of thumb – that a majority of landlords follow. Why? While it may seem harsh or unfair to you, this rule protects both the landlord and you, the tenant.
From the landlord’s point of view, this rule shows them that you will have enough income to pay your rent on time and in full every month. Think about it. You will also have to pay taxes, utilities, groceries, transportation costs, and a host of other expenses. 33% is about what the average person can afford for rent and still be able to be comfortable and even save a little money.
From your side, this limit will keep you from scrambling to pay rent each month. It should keep you from getting into debt and falling further and further behind financially. So, it’s actually a really great rule to follow.
How to Calculate the 33% Rent Rule?
Calculating the 33% rent rule is easy. First, take the rent you have to pay and divide that by your gross (pre-tax) income. Then multiply by 100 to get the answer in %.
Here’s an example with $800/month in rent and $2400/month income: 800 / 2400 x 100 = 33.333%. This is the max you should spend on your rent.
If you want to know what you can afford on your income, work in the opposite way. Take your gross income and multiply it by 33%. 33% is 33 out of 100, and 33/100 = 0.33. For an income of $1800/month ($1800 x 0.33 = $594), you shouldn’t rent a place that costs more than about $600/month.
Exceptions to the 33 Percent Rent Rule
No matter what the rule is, there’s always an exception, or someone looking to find a way around it. Can you ignore the 33% rent rule? This is normally for the landlord to decide.
Most corporate and many private landlords ask you to provide proof of your finances before getting into a rental contract with you. Many corporate landlords have hard and fast criteria about who they rent to. This generally includes credit scores over 620 and a pre-tax income of at least 3x their asking price for rent. And they will make you prove it with pay stubs or an employment contract.
Private landlords, on the other hand, can be more flexible.
Private landlords make their own rules, and that means they set their own levels of financial risk. If you’re close to the 33% they think is reasonable, they might still rent you the property. So, if, for example, you make $2200/month and they want $800/month in rent, that’s 36% (800/2200 x 100). Not too far off, right? A landlord may allow you to rent the property, even if you’re a little bit over 33%.
However, imagine you only make $2000/month. Now that’s (800/2000 x 100) 40% of your income. The landlord might feel that’s just too much for you to handle. But can you change a landlord’s mind? There are a few ways you might be able to.
Bigger Security Deposit
The first is to pay a larger security deposit. Normally, you have to pay 3x of the rent when you move in – the first and last months’ rent plus a security deposit equal to one month’s rent. But if you offer more, this gives the landlord more financial security.
If you pay your rent late in the coming months, the landlord still has this chunk of money to fall back on. This reduces their risk, but it also means you have to have more money saved up to start with.
The other way to convince a landlord to rent to you is to prepare a budget to show your spending. Your plan can break down your income by showing all your expenses. And, if this budget shows that there’s more than enough left at the end of the month, and it’s realistic, the landlord might be swayed.
If your heart is set on a property that you can’t afford, there’s one more option. You can always find a roomie. Sure, you have to share your space, but together, your renting power might be more than enough to secure you a comfortable place.
Thinking About Relocating?
If so, check out our guides on the Cheapest Places to Live in North Carolina, the Cheapest Beach Towns in Florida, the Cheapest Places to Live in Texas, the Cheapest Places to Live in California, the 10 Cheapest Places to Live in Georgia, and the Safest States in America in 2023.
Also, have a look at our breakdowns on Rent Increase Laws in Florida, States With No Property Taxes, California Rental Laws and Loopholes, LA vs. NYC Living, and New York City vs Chicago: Which Is Better for more helpful information about rental prices and saving money.
The 33 Percent Rent Rule Summarized
A good way to find out what you can afford to rent is to take a third of your gross income. This means 33% of your pre-tax income is about all you should ever spend on rent if you want to keep your head above water. You have a lot of other living expenses, and most landlords don’t want to rent to you if the rent is going to be too high for you to pay.
All you need to do is take 33% of your salary and find out what you can afford to rent. If that number is close to the apartment you have your eye on, you might still be able to wrangle it. If not, you’d better find a roommate or find someplace more affordable. So, get out your trusty calculator and see what you can afford.
Until next time, good luck, and hopefully, you find the perfect place to live.