Renter's Guide - What Can I Afford?

Renting an apartment begins with delving into one’s own finances, so a prospective renter knows exactly how much rent they can afford. 


Renting an Apartment in NYC: What Can I Afford?

Renting an apartment begins with delving into one’s own finances, so a prospective renter knows exactly how much rent they can afford. Keep reading to see several rules of thumb that can make the calculations easier.



The experts at Investopedia provide one of the most basic rules when getting started. Begin with your gross annual income (GAI). If self-employed, working multiple part-time jobs, or in school, you will have to estimate your gross annual income (generally by taking an average of the past three years’ GAI as reported on federal income taxes).

If you know a better-paying position is part of the reason for seeking a new apartment, the calculation should be made with the new job’s GAI.

You can then calculate 30 percent of this GAI as an initial high-rent threshold, but more work remains. For example, if an accountant is anticipating a GAI of $75,000, they can take 30 percent of $75,000 ($22,500) and divide that by 12 to get a monthly payment of $1,875.

The GAI is not a trivial number. Landlords expect potential renters to show proof of income and will apply the “40x rule”: Whatever the rent is, GAI should be approximately 40 times greater. For the accountant, a landlord looks at a GAI of $75,000 and divides by 40, which calculates to $1,875.


Monthly Expenses

The remaining 70 percent of GAI is allocated by the prospective renter, based on estimates and experience. Categories that should be considered include:

  • Transportation—Public transportation, taxis, garages, car insurance, fuel, and (realistically) the occasional parking ticket should all be considered
  • Food, Beverages and Supplies—Include all of the things consumed at home (groceries, snacks) and routine household supplies (cleaning products, personal hygiene items)
  • Debt—Student loans, car payments, and unsecured debt (credit cards) must be accounted for, with more-than-minimum payments factored in to save on interest charges
  • Utilities—This only applies if a rental payment will not include electricity, water, and heat
  • Retirement—A wise renter plans for a wealthy, healthy retirement by contributing to a 401(k) or 403(b)
  • Insurance—The renter includes healthcare and renter’s insurance costs
  • Savings—The smart renter knows to tuck a little money away each month for upcoming vacations and an emergency fund
  • Communication—Cell phone, landline, internet access, and postage stamps
  • Clothing and grooming—Calculate an allowance that includes hair styling, appropriate business attire, and grooming necessary for one’s job
  • Entertainment and Luxuries—This category will include all of the extras not accounted for elsewhere, so when budget cuts are needed, they are found here: boutique coffee or tea, pet food and veterinary care, meals out, gifts, cable television, movies, live shows, concerts, books, media, bar bills, gym membership, sports equipment, clothing, and more.


Don’t Fudge The Numbers

Adding up all monthly expenses, subtract this total from take-home pay (actual or expected). The difference represents money available for rent.

You may struggle at this point to squeeze all of the categorical expenses out of the available 70 percent of GAI. A temptation exists to revise estimates downward, giving an unrealistically low total that now fits into the available funds.

A wiser strategy is to face the reality that many expenses a renter views as necessities are, in fact, luxuries that can be cut to afford your ideal home.


Rent at StuyTown-Peter Cooper Village

StuyTown offers great apartments that are much larger and more affordable than comparable units in Manhattan. To check out our no fee rentals, contact the leasing office at 877.774.1849.