Hunting for first apartment; how much can I afford?

I’m looking for my first apartment (w00t!), and being new to this, I’m not sure how much I can afford to spend on rent. I make $48K a year, and looking to spend $1000 a month on a studio in San Francisco. Reasonable? It’ll be about 40% of my take-home, which is higher than the recommended one-third of income rule I heard somewhere.

Any tips on apartment-living and -hunting gladly accepted too!

Those numbers are very close to what I started out with when I first graduated and moved to Seattle in 1999. I lived very comfortably. I didn’t have a car (I bought one when I got my first raise and bonus) and didn’t have any debt except student loans with relatively low payments. Taxes are a bit lower in Seattle (there’s no state income tax), but I think otherwise expenses would be fairly comparable. I guess things have gotten a bit more expensive since 1999, but I don’t think dramatically so. Unless you have other major expenses, I think you’d be ok. Just be careful with your spending, especially as you start out. It’s easy to get carried away buying furniture and stuff for a new place. It’s also easy to go overboard with eating out, drinking, etc., especially in a city like SF. All of those things add up quickly, and when you’re just starting out you won’t have a good feel for how much you can actually afford. Err on the side of spending less than you think you can rather than more. Get just the furniture you need, and don’t buy the fanciest stuff – you have years to get more and better furniture. Also, don’t fall into the trap of thinking things like “I can’t really afford this now, but it’s ok because I’ll be getting a raise in 6 months.” Wait until you get the raise. Nothing is for sure until the money is in the bank.

The “X% of income” guidelines are ok as a starting point, but I haven’t personally found them very useful beyond that. When I have wanted to figure out how much house or apartment I can afford, I’ve taken the route of building a detailed budget of all of my expenses (important: including savings for retirement and emergencies) and income, and from that deriving the appropriate housing cost. I always estimate these very, very conservatively. E.g. if I figure I usually spend $80 on the cell phone bill (made up number), I might just round it to $100 to be safe. And I always include big buffers for unexpected expenses (my “car maintenance” item is usually 2-3X what I normally end up spending). Being conservative means I end up having a somewhat smaller place than I could technically afford, but it also means I’m not in a bind when emergencies happen. Thankfully, my wife feels the same way, so our household finances run smoothly :slight_smile:

Of course, budgeting like that going to be tough if you’ve never lived on your own and don’t know what the real expenses are, so it’s not necessarily something I’d recommend right now. But I think it’s a good lifetime habit to be in. The longer you’ve been doing it, the more accurate your budgets will be. It might be worthwhile to just do one now to get a feel for it, and then compare it to the reality six months in – just don’t trust the number you come up with, until you know the real expenses. I don’t really live my day to day life on a detailed budget, but I keep track of my finances well enough (in Quicken) that I can whip one up if I want to consider upgrading houses or something.

The rule is 30% of gross income. So $1200/mo is your limit, and whenever you can go below that is better. Especially if at least some utilities are included.

Save, save, save the rest!

That’s about what I make, and I’m not comfortable spending more than $750 or so. Preferably less. However, I live in San Antonio, not San Fran; $750 can get you a very nice one bedroom/one bath here in a safe, attractive and urban area.

If I lived somewhere like San Francisco I would probably have to adjust my budget in other areas to accomodate the obviously higher rent. As it is, I like new clothes, happy hour, and takeout way too much to spend a grand a month. :smiley:

(I should add that Mr. Levins and I share the rent so our actual budget is around a grand. Meaning my portion is only $500. But when I was single, I never spent more than $650 a month on rent.)

I would guess that you could keep all that, because you could get rid of your car (which I imagine you have to have in San Antonio, but which is not at all needed in SF). Even a paid-off car costs a couple hundred a month in gas, insurance, and maintenance, so there’s the difference right there.

As far as the OP goes, what really matters is your other fixed costs–do you have a car? A debt load? An elderly mother you have to send $500 a month to support?

I looked on craigslist and wow - those prices are expensive for apartments in SF. I personally think that is a lot for an apartment. I make more than 2x that and only pay 800 month for mine. I was looking at moving and was balking at any price over $1000.

If you make 48K a year, then that’s 31,000 after taxes, $2600 a month. If you get paid 2x a month, then 1 paycheck goes to living expenses, and you have now $1300 for car, rent, food, savings, etc. If it’s short term then no big deal. for me, my priority is having an apartment that will still allow me to save up to buy a house. Otherwise you are stuck in an apartment forever.

I rented for 2 years after college when I was making about the same as you. I’d try to do the same. $1300 a month sounds like a lot, but it’s really not.

$48,000 is not a terribly high salary for an expensive city like San Francisco. I recommend that you try to find a roommate situation and get the housing cost lower than $1,000 per month. (I’d also recommend trying to get started with contributing to the 401(k) plan. It may seem early if you’re just out of school, but the time value of money will help in the long run.)

I love San Fran, wait till you come across the “key deposit.” I loved that, when I was looking. You find a nice cheap flat and it comes with a $5,000 annual key deposit, payable in CASH only and there are no written records or anything as it’s not supposed to be.

Or better yet, the roommate, when a guy with a two bedroom flat that rents for $2,200 a month wants a roommate. You get the tiny bedroom and wind up paying $1,500 a month on the flat plus half the utilities.

Nothing more eye opening than trying to get a flat in SF.

Good luck to you :slight_smile:

The “third of your income rule” is, as mentioned upthread, meant to be applied to your *gross *income. Personally, if you’re looking for a guideline based on *take-home *pay, I’d suggest no more than 50% of your net.

The other major consideration would be, how stable is your new job? Is this something you’re very sure you’ll have six months from now? A year from now? How much do you have in savings? What I’m getting at is, if you’re fired or laid off next week, how long can you afford to keep paying your rent?

Personally, my rent is about 27% of my gross income and 41% of my take-home.

It’s probably not really relevant for the OP at this point, but my personal problem with the percentage rules is that they don’t scale up well with income. At least, they haven’t for me. If my income doubles, my other expenses don’t necessarily double. My income tax will more than double, and my savings should. But my grocery bill probably won’t. My cell phone bill won’t. My health insurance premium won’t. My spending on gas and service for my car won’t. You certainly can double all of your expenses when your income doubles, but you don’t have to, and I don’t recommend it.

If you’re reasonable about your expenses overall, at a certain income spending 30% of your gross on rent will leave you with a lot left over. You can use that to save even more (great idea) or to go on more trips (your choice), but as long as you’re saving a good amount, I don’t think it’s terrible to spend some of that on a better place to live. It’s all about priorities – would you rather have a nicer apartment or a nicer car? Apartment or vacation? Apartment or more eating out?

FWIW, we’re currently living substantially UNDER the 30% level, and happy with it – it lets us save a lot, go on nice vacations, etc. But I could very easily adjust the budget to spend a lot more than 30% on mortgage/rent without hurting savings or other important things. The key thing is that you actually DO make the tradeoffs, and make decisions that keep you living within (or below) your means. It’s all too easy to tell yourself you’re going to cut back on eating out in order to afford a better apartment, and then not follow through on the cutbacks. If you don’t have the discipline to stick to the plan, a cheaper apartment is the only way to go.

Were you just living with random people/friends in houses before, or with your parents? If the latter (and probably even the former) I would definitely try and shoot low (find a roommate!) until you have a better idea of how you need to budget. IME, a lot of people moving out of their parents’ houses for the first time have absolutely no idea how much smaller their salaries seemed when rent came out of them.

That said, most people I know who move out for the first time aren’t making $48k, either.

Yeah, I found that a little odd, too. But, whatever.

As far as certain expenses not scaling with increases in income–sure, the more you make, the more of your income (as a percentage as well as a fixed amount) you can afford to spend on variable expenses like rent/mortgage and car payments. For as long as you have a salary at that level or higher. With a first serious job out of school with the current economy, where losing it for whatever reason could mean a long period of either much lower income or no income at all, I wouldn’t go too nuts.

Back in the late 1980s, my father advised keeping your rent/mortgage to 25% of your gross.

I found I was never able to do it for less than 30%. Still think that’s a good rule of thumb. 40% for San Francisco seems… reasonable. Sort of. For that location. If you can get a 2 BR for maybe $1600/month with a roommate, then your share would be like $800 a month and you could also eat real food aside from Ramen noodles. Also, ditch your car (if you have one) and rely on public transportation if you’re living in the Bay Area. There are a few cities in this country where I’d make that recommendation and San Francisco is one of them. Not having a car would represent significant savings.

The OP’s proposed rent would be *25% *of gross, not 40% ($1,000 a month times twelve months is $12,000, which is one-fourth of $48k). They misunderstood the rule and were saying it would be 40% of their take-home.