Tips to calculate your rental affordability
August 31, 2022|Posted in: real estate
Renting a house without burning a hole in your pocket needs a lot of thought & planning! It’s good to know how much rent you can pay each month and the other costs involved before you even start perusing the rental listings. You should calculate the amount of rent you can afford, keeping your current income in mind so that you don’t end up overshooting the limit. Prime real estate portal to rent flats in Kerala shares some tips to calculate your rental affordability.
Evaluate your circumstances
To begin with, you should study your current living situation and future requirements. If you plan to live alone, a 1 BHK/RK residential unit would be enough; however, if you plan to stay with your family, a bigger apartment would be needed leading to a higher rent.
Determine your financial limits
Take a rough estimate of your annual income, including gross salary, bonus, dividends & other types of income. Most landlords prefer tenants with a monthly take-home income at least three times the monthly rent. As a thumb rule experts suggest spending not more than 30 percent of your income on rent.
Apart from paying the rent, you will also need to pay for utilities of your flat in Kerala which may go up for luxury flats in Kochi. Prospective tenants should estimate their expenses for utilities like:
- Water bills (monthly)
- Gas and electricity bills (monthly)
- Apartment maintenance charges
Your other overheads:
- Cell phone bill
- Car loan repayment
- Auto insurance premiums
- Clothing, groceries, and toiletries
- TV cable bill
- Landline phone bill
- Broadband bill
- Gym membership
Monthly rent calculation
Write down a detailed breakdown of these expenses against your income. Experts suggest using a 50/20/30 method to calculate your rental affordability like:
- 50 percent on fixed costs (rent, utilities, and transportation)
- 30 percent on day-to-day expenses (entertainment, dining out, shopping, etc)
- 20 percent on financial goals (loan-repayment, emergency saving, and insurance premium)
Subtract proportionate utilities, transportation, day-to-day expenses, and financial liabilities from the proportionate fixed cost, the rest left can be spent on rent.
The real estate agent’s charges, a one-time expenditure, must usually be paid at the time of signing the lease agreement for a flat in Kerala. Typically a fixed percent of the entire year’s lease is charged. Apart from that, you will need to have a security deposit equivalent to one – three month’s rent. This amount will be refunded to you at the time of termination of your tenancy agreement.
You will still need to ensure that you can afford to pay the moving costs and if you are moving into an unfurnished place, the cost of furniture and soft furnishings like curtains may come in your first month’s budget. You must be prepared to adjust your finances accordingly.
Due diligence on your part will save you from many financial challenges in the future. Contact us at luxurykeralaflats.com for buying, selling or renting flats in Kerala.
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