Author Topic: How much should I spend on rent?  (Read 1813 times)

John Wick

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How much should I spend on rent?
« on: April 01, 2018, 05:57:06 PM »
Dear,

My landlord asked me to leave the apartment that I am currently living in since she is moving to town and needs a place to live. Despite the physical and mental hassle of moving, I think it is going to be a good opportunity to review my needs. My current rent is equivalent to 15% of my net income for a 3 bedroom apartment (1400 ft2).

After a intense search for the perfect apartment (there were a lot of requirements such as being on the top floor - no one dragging furniture at 3 a.m. above me) I end up with TWO contrasting options:

Option 1: One bedroom apartment (530 ft2) on the top floor which rent corresponds to 10% of my net income. It is unfurnished and I will need to spend a little on appliances (will need a stove) and minor renovations. I would end up saving ~ 65% of my net income.

Option 2: A two bedroom penthouse (1400 ft2) furnished and with top of the line finishing. The rent corresponds to 20% of my net income. I would end up saving ~ 55% of my net income. It is a really nice apartment, with a Jacuzzi on the exterior area of the second floor (it is a duplex).

About me: I live alone, 35 years old, single, no wife, no kids, and no intention to have kids or get married. During my spare time, I really enjoy staying at home watching movies, learning new things, and resting. Actually I don't like going out. Those reasons are leading me to choose Option 2.

It has being indeed a dilemma for me. I don't want to FIRE ASAP. I am enjoying my current job, duties, and boss (working on R&D, exciting project). However, there's a voice in my head saying "you can't spend that much on rent, you should be saving".

Any advice?
« Last Edit: April 01, 2018, 06:12:54 PM by John Wick »

chasesfish

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Re: How much should I spend on rent?
« Reply #1 on: April 01, 2018, 06:42:20 PM »
Would the outdoor jacuzzi be good for entertaining...as a single person?

Either way you're blazing towards FI, if you don't want the penthouse go with the cheaper option

joestash

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Re: How much should I spend on rent?
« Reply #2 on: April 01, 2018, 06:57:20 PM »
How long are the leases?  If you could try option 1 for 6 months I would do that.  I have found that living in a relatively small apartment as a single person is actually preferable to a bigger place.

Also, how long would option 2 postpone FIRE vs option 1?  Is option 2 worth it to work that much longer?

marty998

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Re: How much should I spend on rent?
« Reply #3 on: April 01, 2018, 07:20:00 PM »
I don't understand what you would be FIREing to?

If "resting" is in your top 3 lists of interests, I'd suggest you need to broaden your horizons.

John Wick

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Re: How much should I spend on rent?
« Reply #4 on: April 01, 2018, 07:22:25 PM »
Would the outdoor jacuzzi be good for entertaining...as a single person?

Either way you're blazing towards FI, if you don't want the penthouse go with the cheaper option

The Jacuzzi would be great to relax at the weekends. However, every aspect of this penthouse is better than the smaller one. Finishing, soundproof windows, furnished, kitchen appliances, space for an office...

lbmustache

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Re: How much should I spend on rent?
« Reply #5 on: April 01, 2018, 07:25:43 PM »
Would the outdoor jacuzzi be good for entertaining...as a single person?

Either way you're blazing towards FI, if you don't want the penthouse go with the cheaper option

The Jacuzzi would be great to relax at the weekends. However, every aspect of this penthouse is better than the smaller one. Finishing, soundproof windows, furnished, kitchen appliances, space for an office...

If you spend a lot of time at home/don't go out much, it makes sense (to me) to go for the nicer option. You are still saving at a good rate, and as you mentioned, don't want to FIRE asap.

John Wick

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Re: How much should I spend on rent?
« Reply #6 on: April 01, 2018, 07:29:18 PM »
How long are the leases?  If you could try option 1 for 6 months I would do that.  I have found that living in a relatively small apartment as a single person is actually preferable to a bigger place.

Also, how long would option 2 postpone FIRE vs option 1?  Is option 2 worth it to work that much longer?

Leases usually extend for 30 months with no penalties after 12 months. However, in order to leave the apartment I would need to paint the interior.

Option 2 would postpone FIRE in 3 years, I think. If my job keeps as it is, I am completely ok.

John Wick

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Re: How much should I spend on rent?
« Reply #7 on: April 01, 2018, 07:35:21 PM »
I don't understand what you would be FIREing to?

If "resting" is in your top 3 lists of interests, I'd suggest you need to broaden your horizons.

My previous role/boss were extremely demotivating, which leads me to FIRE ASAP. Now I am enjoying my job, but there is no guarantee that it will keeps the same.

I really enjoy spending time alone. I don't like social interactions and I don't want to change that.

joestash

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Re: How much should I spend on rent?
« Reply #8 on: April 01, 2018, 08:16:31 PM »
Some clarifying questions...  When would you FIRE with option 1?  When would you FIRE with option 2?  How long have you been in the job situation that you enjoy?  Is it realistic to think this will last until FIRE or that you could find something similar?

John Wick

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Re: How much should I spend on rent?
« Reply #9 on: April 02, 2018, 02:29:39 AM »
Some clarifying questions...  When would you FIRE with option 1?  When would you FIRE with option 2?  How long have you been in the job situation that you enjoy?  Is it realistic to think this will last until FIRE or that you could find something similar?
Option 1: fire in 6 years.
Option 2: fire in 9 years.

I have been in this job for 6 months. Have no idea about the answer for the last question.

jeroly

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Re: How much should I spend on rent?
« Reply #10 on: April 02, 2018, 11:44:09 AM »
The standard recommendation for non-Mustachians is to spend no more than 25% of income on rent, so both options you list fit that bill. Landlords tend to want 40x monthly rent as income.  There are places (many / most HCOL areas these days) where spending only 25% to get an apartment can be tough.

I am interested you might be where there are only two rental options, period.  Are there no unfurnished deluxe rentals in the vicinity?  Are there no smaller places that come with applicances or where you can also rent the appliances?

Sometimes when I've looked for real estate I've defined in rather constrained terms what I'm looking for (e.g. houses between $180k and $230K, with finished basement and a fireplace) and then search within it.
Then again, sometimes I've run into things that didn't fit the categories (the house we picked had no finished basement nor a fireplace) and been crazy about...

If you're looking for anectdotal evidence, I chose something like option B when I moved to my current city five years ago, and have been glad that I did, but I didn't have to choose a later retirement date (already FIREd).

joestash

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Re: How much should I spend on rent?
« Reply #11 on: April 02, 2018, 11:55:06 AM »
Some clarifying questions...  When would you FIRE with option 1?  When would you FIRE with option 2?  How long have you been in the job situation that you enjoy?  Is it realistic to think this will last until FIRE or that you could find something similar?
Option 1: fire in 6 years.
Option 2: fire in 9 years.

I have been in this job for 6 months. Have no idea about the answer for the last question.

So 6 months ago you hated your job and now you have a new one but have no idea how long it will last and you're willing to work 3 more years while potentially hating your job again?  Personally, I would be more focused on getting control of my work than a bigger apartment.

John Wick

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Re: How much should I spend on rent?
« Reply #12 on: April 02, 2018, 12:15:12 PM »
The standard recommendation for non-Mustachians is to spend no more than 25% of income on rent, so both options you list fit that bill. Landlords tend to want 40x monthly rent as income.  There are places (many / most HCOL areas these days) where spending only 25% to get an apartment can be tough.

I am interested you might be where there are only two rental options, period.  Are there no unfurnished deluxe rentals in the vicinity?  Are there no smaller places that come with applicances or where you can also rent the appliances?

Sometimes when I've looked for real estate I've defined in rather constrained terms what I'm looking for (e.g. houses between $180k and $230K, with finished basement and a fireplace) and then search within it.
Then again, sometimes I've run into things that didn't fit the categories (the house we picked had no finished basement nor a fireplace) and been crazy about...

If you're looking for anectdotal evidence, I chose something like option B when I moved to my current city five years ago, and have been glad that I did, but I didn't have to choose a later retirement date (already FIREd).

My search for an apartment is strictly narrow since it MUST be on the top floor. You have no idea how hard is to find an unit on the top floor, on the desired neighborhood, and is on my price range.

I lived once in a one bedroom apartment where the upstairs neighbor used to drag furniture at 2 a.m. The noises always waked me up. I swear to never again live in an apartment with another human being living upstairs. During that time, I lost precious hours of sleep and got extremely nervous. That is something that I am not giving up, even if that means spending 30% extra on the rent.

An unfurnished two bedroom (800 ft2) would be very similar to the penthouse price (16-18% of my net income). For this reason, I am not considering an intermediate option.

I live in Brazil. Most real estate for rent here is pretty much crappy. The renovated ones are very expensive.


405programmer

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Re: How much should I spend on rent?
« Reply #13 on: April 02, 2018, 02:46:18 PM »
Jacuzzi. Hands down.

I was recently given one by my family and it has drastically improved my standard of relaxation on any given night. It did cause a somewhat hefty increase to my electric bill (~50 in winter and ~15 in summer) but the ability to walk out my back door and sit in a hot spa is pretty kickass. The impact to your electric bill will be based on your use. For instance, I use it about 3 days a week. Also the efficiency of newer models might be way better. Mine is a 1998 model.