# Finding an Apartment

Page 2

### Knowing What You Can Spend

You should spend no more than 25 to 30 percent of your monthly gross income (your income before taxes are deducted) for rent. So if you're making \$30,000 a year (\$2,500 a month), you shouldn't be paying more than \$700 a month for your rent, using the 28 percent calculation. The following table will help you figure out approximately how much you should be spending for rent.

Amount You Would Spend for Housing (at 28% of Income)
Annual Income*Annual Housing CostMonthly Housing Cost
\$ 20,000 \$ 5,600 \$ 466.67
25,000 7,000 583.33
30,000 8,400 700.00
35,000 9,800 816.67
40,000 11,200 933.33
45,000 12,600 1,050.00
50,000 14,000 1,166.67
60,000 16,800 1,400.00
70,000 19,600 1,633.33
80,000 22,400 1,866.67
90,000 25,200 2,100.00
100,000 28,000 2,333.33

*Gross Income

Another thing to keep in mind is that you're free to negotiate with an owner concerning the rent he or she is charging. You'll probably be more successful trying this with a private rental, as opposed to an apartment complex where rents are established. If you've found a place you like that's a little out of your price range, go ahead and ask the landlord to drop the rent by \$25 or \$50 a month. Depending on the rental market in the area, you may or may not get the results you want. Saving \$50 a month in rent adds up to \$600 a year. It's worth asking about, don't you think?

### Up-Front Costs

##### Show Me the Money

A security deposit is the amount of money you pay to the landlord to protect against damages that occur to the apartment while you're renting it. He or she should give you an itemized list of deductions to your security deposit. If you fulfill the terms of your lease and leave your apartment in good repair, your money should be refunded.

##### Money Pit

If you find out your prospective roommate smokes two packs of cigarettes a day and likes to have wild parties every weekend, and you can't stand smoke and like to relax with a good book on a Saturday night, call off the deal before it's made. If you sign a lease, you're legally obligated and will be held financially responsible for your share of expenses.

When you find an apartment you can afford, it's not quite as easy as handing over your first month's rent and moving in. Your landlord also may require the following:

• An extra month's rent (usually used to cover your last month)
• A security deposit equivalent to one or two months' rent

So if you find an apartment for \$700 a month, you could end up having to pay out nearly \$3,000 before you even move in.

The extra month's rent and your security deposit should be kept in an escrow account, which is an account specified for the purpose of holding your money until it is either used or returned to you. Some states, but not all, require that security deposits be kept in interest-bearing accounts for the tenant.

All that up-front money can be pretty discouraging news, to be sure, and it is one reason Gen Xers are hanging out longer with Mom and Dad. It's also why many people choose to rent with another person or a group of people.

Next: Page 3 >>

More on: Family Finances

Excerpted from The Complete Idiot's Guide to Personal Finance in your 20s and 30s © 2005 by Susan Shelly and Sarah Young Fisher. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

To order this book visit the Idiot's Guide web site or call 1-800-253-6476.

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