Rental Guide: Making a budget that works for you

In the last installment of this Rental Guide series, we talked about making the list of what you must have (vs. what you'd merely like to have- or can't live with) as the beginning of your rental home search. Once you have a list of the location and features you need, you're ready to find a rental home based on your budget. A good rule for this is that your total monthly income (before taxes, etc) should be about 3 times your monthly rent. Or, looking at the another way, your rent should be no more than about one third of your monthly income. Banks and property managers use this as a qualification formula for mortgages and rentals, so you'll be a step ahead to plan based on this.

The Rental Guide (www.seattlehouserentals.net) has some basic budget tips and a budget worksheet to guide you in putting this together.

It's important to make sure your monthly rent fits comfortably within your income, since housing expenses such as rent are usually your highest monthly expenditure. But also consider things like utilities, furnishings, and other costs which may be higher or lower based on the location and features you identified. It's no use having a large view condo if you can't buy groceries and have no furniture from which to enjoy that view.

Start by making a list of your monthly income and expenses. It doesn't have to be complicated, you can make a list with two columns, money coming in and money going out.

Monthly Income
Income sources may include:
• After tax salary, wages and tips from your job
• Interest from savings or other accounts.
• Alimony
Be sure to account for taxes, retirement savings and other withheld amounts. Include expendable income only.

Monthly Expenses
Organize your monthly expenses by dividing them into the following categories:

Tip: Rent will usually be the highest expense, usually around 30% of income. Other targets for estimating your expenses are food, (8-15%), clothing (5%) and entertainment and recreation (5-10%).

Fixed Expenses
These are regular payments that you pay every month. These include things such as:

• Rent
• Utilities, telephone, cell phone, internet and cable
• Car Payments, including insurance and maintenance
• Debt payments (loans, credit cards)
• Medical and Dental insurance and all regular medical costs such as medication or physical therapy
• Savings (how much you put aside for the long term or rainy day fund)
• Renters Insurance, which covers your personal belongings in the event of fire or theft
• Transportation (gas, bus and train fares, etc)
• Food
• School and child care
• Gym or exercise costs

Optional or variable expenses
These items are things you pay for on a non-regular basis, but can still be tracked and should be included in your budget. Look through your checking transactions, ATM withdrawals and credit card statements to identify when and where you tend to spend money on these types of things, which include:
• Entertainment (movies, concerts, nights out)
• Restaurants
• Recreation (weekend activities)
• Vacations
• Furniture
• Clothing

The balancing act
Once you have your list completed with fixed and optional expenses, compare your expenses with your income. A good rule is to have your expenses be at least 10% less than your income so you can have
some wiggle room.

If your budget does not come out balanced, you'll have to reexamine your expenses and figure out where you can make cuts. Take a look at your optional items, (most likely your entertainment and recreation expenses) and stick to your new budget!

Rental Budget Constrained?
When examining your largest expense, rent, you may find that your rental budget is constrained. It is better to find this out before you start looking at apartments than on the first of the month. Go back and re-examine your "must-have" features, and see which of these you can actually move to "nice to have's", I'll bet you find some additional savings to be had.

Also, be sure to check to see how much you are going to be expected to pay up front. Some apartments require first and last month's rent and a security deposit. Make sure that this up front expense won't leave you in the hole.

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About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.

If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.
RD House Real Estate and Property Management
Leaders in Property Management
159 Denny Way #110
Seattle, WA 98109
(206) 728-6063
www.rd-house.com