How much rent can I afford?

How much rent can I afford?

Renting your first home is an exciting prospect but it’s important you do your calculations and research beforehand to understand what you can comfortably afford. Stretching yourself to cover your rent and bills could leave you without the funds to cover other important or unexpected expenses, which can really put a strain on your finances.

Here, we’ve looked into how to calculate how much rent you can afford, to ensure you move into your property worry-free and ready to make a house a home.

The salary rent calculator

Creating a salary rent calculator is as simple as making some easy calculations. It’s a little like creating a budget, but with a different goal. Here’s how to calculate how much rent you can afford, once you factor in bills and other expenses.

1. Consider what bills you’ll likely need to pay

While it’s unusual for a landlord to include the cost of utilities in your rent, if you’re moving into shared accommodation, like a flatshare or shared house, then the existing tenants will already have a good idea what the bills cost and will likely ask you for one monthly payment that covers the lot. However, if your bills aren’t included, these are the ones you’ll likely need to consider, on top of the cost of your rent:

  • Gas and electric – you can pay monthly for this bill, spreading the cost over the year and providing meter readings when requested. If you’ve never paid for this before, the average household cost for the UK, which is £65 a month, is a useful figure to start with. Alternatively, some online property listings, like Zoopla, often provide you with estimated “running costs” for a property, so you could use these to work out roughly what you’ll need to set aside.

    Everybody’s energy costs vary, though, so it’s worth remembering that as you provide more meter readings over time, your provider may increase or decrease the amount they bill you based on your usage.
  • Council tax – you can work out how much your council tax will be before you move in. for council tax bands in England and Wales, here for Scotland and finally here for Northern Ireland.
  • Water – this bill can be paid for monthly. Again, like gas and electric use the average then wait for your first bill.
  • Service charges – whether or not you have to pay these will depend on the property you’re renting. Usually, service charges cover maintenance costs for shared parts of the building, like stairwells, that you pay to your landlord.

You may also need to factor in:

  • TV licence costs – this can be paid monthly or annually.
  • Broadband and TV – these usually come as a package and are paid monthly.
  • Contents insurance – this depends on what you need to cover but can be a relatively low amount.

2. Work out how much you spend on other monthly costs

As well as your main bills, there will be other essential expenses you need to factor in on a monthly basis. These could include:

  • Food – how much you spend on groceries and lunches should be factored into this.
  • Mobile phone – many of us pay monthly for our phone contracts.
  • Childcare – whatever you pay to have your child looked after while you are at work needs to be considered
  • Clothing – work out how much you spend on clothing each month, and whether that spending is a treat or for essential items.
  • Gym and hobbies – how much is your gym membership or the cost to attend classes or other favourite activities each month?
  • Payments on loans or credit cards – make sure your budget includes your existing commitments to pay back any loans or credit cards you have.
  • Commuting costs – Car finance costs, insurance and tax all need to be factored into your monthly bills, as should petrol. If you use public transport, factor in the cost of your monthly travelcard for the train or bus, plus any extra you spend on getting around.

When working through this list, if you’re ever unsure of the exact amount it’s always a good idea to round up and overestimate. Once you have an amount next to each of the things listed, add this up to see how much your monthly expenses could cost.

Let’s use an individual earning £21,000 a year as our example:

  • Monthly take home pay after tax: £1471.74 (Income)
  • Gas and electric: £65
  • Water: £33.75
  • Council tax: £105
  • Service charges: £0
  • Contents insurance: £30
  • TV licence: £25.10
  • TV and broadband: £60
  • Food: £150
  • Mobile phone: £40
  • Childcare: £0
  • Clothing: £100
  • Gym and hobbies: £35
  • Credit card: £60
  • Car insurance and tax: £40
  • Petrol: £120
  • Total = £863.85 (Expenditure)

 

Deduct the expenditure from the income, which, in this example, leaves the individual with £607.89 disposable income per month. It’s sensible to hold back a portion of your disposable income to cover emergency costs or for savings, so in this case, a comfortable rent amount may be around £400 per month.

Do these calculations above with your own estimated costs, to discover how much your everyday essentials cost and how much you can afford to spend on rent.

If you feel the money you have left won’t leave you with enough to rent the kind of property you want, you could look into ways to cut back on your everyday costs to free up more money. Perhaps you could reduce your clothes budget, or swap your car for a bike a few days a week to save on commuting costs.

Do you have enough for the upfront costs?

When planning to rent, there are some upfront expenses that can be quite expensive so you’ll need to account for too – so it’s very important you find these before applying for any properties.

 

  • First month’s rent and deposit – When renting a property, the first month’s rent and tenancy deposit are usually required upfront. Deposits are usually the equivalent of one and a half month’s rent. So, for example, if the house you’re looking at costs £600 a month to rent, you will need to pay a £900 deposit, as well as your first month’s rent – a total of £1500 in upfront costs.
     
    When you leave the property, you will get the £900 deposit back if everything is in good order, but it can take a little while for the money to be released back to you. This is something to bear in mind if you’re looking to move from one rented property to another, as you may not be able to rely on transferring your deposit from one property to another to cover costs.
  • Letting agent fees – If your prospective landlord is renting their property through a letting agent, then you may be expected to pay a fee when you apply to rent the property. Agencies can charge anything from admin fees to reference fees while setting up your tenancy and the amounts different agencies ask for can vary a lot, so it’s a good idea to ask what these are before you go ahead and factor them into your calculations.
  • Furnishing the property – If it’s your first time moving out, you may want to look for a furnished property to keep costs down. However, if you’re going for an unfurnished property, you may need to find the money to buy furniture, such as a bed or sofa. Friends and family may be able to help with this though, and sites like Gumtree or local buying and selling groups can help you acquire good quality furniture cheaply
  • Moving fees – If you have furniture to move, you’ll likely need to hire a larger vehicle to transport it. Hiring a van or using a removals company to move your furniture is therefore a cost that you’ll need to factor in, although there are plenty of ways to do this cheaply so that your move comes in on budget.

Other things to bear in mind when renting

Read your tenancy agreement carefully

Ensure you understand all of the terms of your agreement and that there are no costs in there that you haven’t accounted. Do this before you sign anything. For example, your landlord may provide you with a television in a furnished rental property but you may still be liable for the cost of the TV licence.

 

Take pictures of the property when you arrive

Carefully examine the inventory your landlord or letting agent presents you with and check this against each room. If you notice any damage or stains that aren’t listed on there, take a picture and then notify them. This ensures you won’t be held responsible and penalised for the damage when you move out of the property.

What if I have bad credit and want to rent?

If you have bad credit, this can make it more difficult to rent a property, but it’s certainly not impossible. Take a look at our guide on renting with bad credit for more information.

More reading material

Want to know more about managing money or borrowing for certain situations? Take a look at our in-depth guides below.