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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: wealthviahealth on June 25, 2019, 04:53:38 PM

Title: % of Salary on Rent in Big Cities
Post by: wealthviahealth on June 25, 2019, 04:53:38 PM
For those who live in bigger cities, I am curious to hear what percentage of your pre-tax salary you spend on rent.
I think a part of me is looking for validation ( currently overspending on rent) and the other part is looking for inspiration to do better.
Title: Re: % of Salary on Rent in Big Cities
Post by: BicycleB on June 25, 2019, 05:18:10 PM
Popular MCOL (medium cost of living) city, metro population 2 million heading towards 2.5 million. FIREd here, roughly 22k income. Net housing cost long term about 6600/year, so 30%. But if I were earning 44k take home pay and therefore had a 50% savings rate, % of take home salary on housing would be about 15%.

That's roughly the pay rate I had before FIREing. If I were a solid entry level techie taking home 66k, housing cost the way I live would be about 10%.

Details are tricky...I spend more than that because I own a home, but rent out 3 of 4 bedrooms most of the time, ending up with net cost summarized above. That's rent plus utilities, in other words. I do count capital expenses; not cheating by buying a house and failing to count appreciation, in other words. I break even compared to renting a room in similar house @$550/mo all bills paid. For my city that's a low end price but single people who search hard can find it. Usually at that price you're accepting some flaw in exchange for slightly below market rent. 

For comparison, one bedroom apartments in my city average about $1300/mo. Two bedrooms maybe $1700, so a one-roomie split would be $850 plus utilities. Getting down to the $550-700/mo range requires negotiating some type of 3 or 4 roomie deal or some other sort of housing hack. One roomie in a low end apartment would get you there, instead of an "average" dwelling split 3 ways; with smart shopping and a bit of luck, could be pleasant and safe.

https://www.rentjungle.com/average-rent-in-austin-rent-trends/
Title: Re: % of Salary on Rent in Big Cities
Post by: MonkeyJenga on June 25, 2019, 05:23:56 PM
I spent 5-65%. 5% was my last year in a VHCOLA, 65% was my second year.
Title: Re: % of Salary on Rent in Big Cities
Post by: bacchi on June 25, 2019, 05:51:17 PM
I've got a housing hack going but if I was paying full freight and working:

MCOL, 13% for 2 people in a 2 bedroom in a first-ring suburb (i.e., not downtown but considered central)
Title: Re: % of Salary on Rent in Big Cities
Post by: Freedomin5 on June 25, 2019, 06:10:10 PM
Last year we spent approximately 6% of our pre-tax salary on rent in a VHCOL city. Itís a city with a population of 25 million.
Title: Re: % of Salary on Rent in Big Cities
Post by: ElleFiji on June 25, 2019, 06:42:34 PM
I won't go past 50. But I also prefer to not have roomies. So big sacrifices in other areas. And hanging on to somewhere with good rent while increasing income.

I think that I'm at 30ish pre tax now, and 44% post tax.

I'm also a mmm drop out so YMMV
Title: Re: % of Salary on Rent in Big Cities
Post by: Joeko on June 25, 2019, 06:43:49 PM
14%.  Free cable, WiFi, Coffee and Gym
Title: Re: % of Salary on Rent in Big Cities
Post by: Ynari on June 25, 2019, 11:12:45 PM
14%, not in city center but along a subway route, near its own hub. 2b2br for 2 people in "luxury" building - doorman, gym, train access, great soundproofing, community wine nights. Granted, my "half" is 28% of my pre-tax salary, SO makes more than double what I do. And when we had a roommate, it was 9% (or 18% of my salary).

I have to admit, I feel like we're paying a LOT for housing right now, and we have seriously looked into moving since the roommate left, but it turned out to be costly for our time window (moving cross country in less than a year). It's 38% of our actual expenses, and I think my comfort level is crossed at that good ol' rule of 1/3 of expenses.
Title: Re: % of Salary on Rent in Big Cities
Post by: MrThatsDifferent on June 25, 2019, 11:15:19 PM
I pay a lot for rent :-(
Title: Re: % of Salary on Rent in Big Cities
Post by: Zikoris on June 25, 2019, 11:49:25 PM
10-15% depending on our income that year (it fluctuates). But you definitely need to figure out a good housing solution if you want to retire young.
Title: Re: % of Salary on Rent in Big Cities
Post by: mspym on June 26, 2019, 12:42:54 AM
15% in one of the most expensive cities in the world and it is only so low because we are a dual high-income household.
Title: Re: % of Salary on Rent in Big Cities
Post by: reeshau on June 26, 2019, 02:51:32 AM
renting at 19%.  You can see where I live right now.  It's a global coastal city.  Housing prices are within 10% of 2008, which was catastrophic here, and rent is 20-30% above.  Google engineers quadruple up in a 2BR, because they demand 10-minute walking commutes to their city-center offices but even they can't afford rents.

We live further out, in a terraced home (townhouse) on the train line.  4BR, one for a home office and one for frequent family / friend guests.  We are single earner, but I am in my "peak earning years."  If I was renting fresh this year, I couldn't (would choose not to) afford our neighborhood, and would be further out; rental prices are about 15-20% higher.  There are rent controls for renewals.

I could afford to buy, and would save myself $5k per year. (net of US home equity, sitting in CD's)  But I plan on being here for less than 5 years, so I am paying to opt out of the real estate bubble.  I have kept myself in the "easy out parking."
Title: Re: % of Salary on Rent in Big Cities
Post by: brunetteUK on June 26, 2019, 04:25:30 AM
24% before tax (but this includes employers pensions contributions which in the UK can be quite significant).
32% of my take home pay

I live in London, UK, zone 2 so pretty HCOL.
Title: Re: % of Salary on Rent in Big Cities
Post by: zygote on June 26, 2019, 08:29:10 AM
When I was in grad school I was paying about 33% of my gross stipend on rent. Not sure about the percent of take home pay; it was long enough ago I don't have the numbers on hand. Now that I have a real salary, it's 19% of my gross pay and 24% of take home. But I split the rent with my wife. If I lived alone, it would be higher.
Title: Re: % of Salary on Rent in Big Cities
Post by: renata ricotta on June 26, 2019, 09:22:57 AM
It depends enormously on your job and your apartment.

First year in LA I made about $90k at a government job and paid $1850 for rent, so that worked out to about 24% (of my gross, I'm too lazy to go back and look at my taxes).

Second year in LA I made $230k* at a private law firm and paid a face-punching $3900 for rent at a beautiful 2 bed/2bath apartment with tons of outdoor space that I never enjoyed because I worked too much.  That was about 20%.

Third year in LA I made $285k at the private law firm and paid $2695 for rent at a less fancy 2 bed/2 bath.  A little over 11%.

First half of this year I was making $305k and still paying $2695 for rent.  10.6%.  As of this coming Friday, I'm taking a sabbatical for the second half of 2019 so I'm making $0, but I got a roommate to split the rent so I'll be paying $1350 which is obviously not a percentage of my income at all, as I will have no income.  :)  If I look at 2019 annually, I'll pay a total of about $24k in rent and will have made about $150k in salary, coming out to about 16%.

*All law firm amounts are skewed to a high rent percentage because I'm not counting bonuses, which are substantial -- mostly because it's hard to remember since a bonuses are paid in a different year than their earned with a different base salary. 

The point is to illustrate that one shouldn't try to pick a rent based on a percentage of your salary, once you've determined that the rent is affordable in that you can comfortably pay for all of your other necessary expenses (i.e., it's unsafe to have your rent be 50% percent of your salary because then emergency expenses hit you really hard as you have little flexibility).  Once you can afford it, keep it low even if you make more and don't let it creep up like I did in year 2!
Title: Re: % of Salary on Rent in Big Cities
Post by: Bracken_Joy on June 26, 2019, 09:26:57 AM
We're awful, but we know we're awful. We're at 42% of take home pay I believe? But, we're definitely not hard gunning for FIRE, and it was a deliberately made choice. It's the area we choose to be spending idiots =) It would be less if I was working right now, but currently I'm not.
Title: Re: % of Salary on Rent in Big Cities
Post by: Fish Sweet on June 26, 2019, 10:51:17 AM
SoCal, in one of the most expensive areas due to proximity to freeways, the ocean, and Beverly Hills.  My rent is 20% of my after tax pay, and I don't make very much (~50k).  That said, I also live with 3 roommates and share a room so there are certainly trade offs.  I consider it well worth the price, though-- I have saved an absolutely ludicrous amount of money over the years.
Title: Re: % of Salary on Rent in Big Cities
Post by: Laserjet3051 on June 26, 2019, 11:06:10 AM
Live in a VHCOL metro area comprised of ~20 million people. Our rent is a hair below 30% of our gross income. Wife and myself are self-employed so gross income for this calculation does not include a lot of business expenses, with the exception of our $24,000 health care premium.

As a % of AGI, our rental costs are 37% (of AGI). Not very sustainable, and planning an exit from this situation.
Title: Re: % of Salary on Rent in Big Cities
Post by: Malcat on June 26, 2019, 01:17:49 PM
~5% for our mortgage+condo fees, which is only slightly more than rent for an identical unit in the same building. We just closed last week, so it's representative of very current property values.

That's with very high incomes for our area, and living in an abnormally inexpensive neighbourhood in a city where nearby, very small condos often go for over a half million. We have to live extremely differently from our peers in order to achieve that percentage.
Title: Re: % of Salary on Rent in Big Cities
Post by: desert_phoenix on June 27, 2019, 02:14:46 AM
~5% for our mortgage+condo fees, which is only slightly more than rent for an identical unit in the same building. We just closed last week, so it's representative of very current property values.

That's with very high incomes for our area, and living in an abnormally inexpensive neighbourhood in a city where nearby, very small condos often go for over a half million. We have to live extremely differently from our peers in order to achieve that percentage.

Congratulations.  I recently closed as well.  It is quite a process to get through!
Title: Re: % of Salary on Rent in Big Cities
Post by: Malcat on June 27, 2019, 04:06:45 AM
~5% for our mortgage+condo fees, which is only slightly more than rent for an identical unit in the same building. We just closed last week, so it's representative of very current property values.

That's with very high incomes for our area, and living in an abnormally inexpensive neighbourhood in a city where nearby, very small condos often go for over a half million. We have to live extremely differently from our peers in order to achieve that percentage.

Congratulations.  I recently closed as well.  It is quite a process to get through!

Thanks and congrats to you.
Yeah...I can't say I have enjoyed the buying process, at all.
Title: Re: % of Salary on Rent in Big Cities
Post by: Steeze on June 27, 2019, 08:29:31 AM
Rent was 10% of gross, 20% after tax and deductions. That was in Brooklyn with a 45 min commute. Thanks to an inheritance the new place in Queens is 3% gross for taxes, insurance, hoa and a 30min commute.

Most of my coworkers pay 33-50% of take home pay. The upper limit of that are those living in new luxury buildings close to work, usually a 1br with a partner. Lower limit are those that commute and have roommates.
Title: Re: % of Salary on Rent in Big Cities
Post by: mlipps on June 27, 2019, 08:41:40 AM
In Chicago, I'm spending $1400 with a salary of $100k. That gets me a really nice studio with central air, free laundry (in the basement, not in unit) and a beautiful kitchen 5 min from the El & 20 minutes by train or bike to downtown. It's 16.4% of my gross income & I feel like it's a great deal.
Title: Re: % of Salary on Rent in Big Cities
Post by: ctuser1 on June 28, 2019, 12:37:31 PM
I have mostly worked at NYC and vicinity, with two road-warrior stints so far - first one 3 years and second one 2 years.

Starting out, back in 2003 timeframe, I paid little in rent. Usually it was roommate situations based on craigslist ads - all over Queens/JerseyCity/Hoboken and vicinity. Brooklyn and Manhattan was too pricey for me, and I used to think Bronx is too shady (I was mistaken - there are good parts) and hence avoided it.
My rent was around 5-7% at this time despite not making much money (~70k/yr).

Then, I took the first of my two consulting stints. This one was with one of the bigger name brand management consulting firms. It involved 100% travel. Well, I was lucky to land in two separate long term stints where I would go to the same client site for 1year+ (highly unusual, our projects were usually 6-8 weeks). Guess what!! I ditched a permanent address and paid almost zero rent for almost 3 years!! Yay, three cheers for my 0% rent for these three years!!

I saved such a sh**ton of money at this time that I cash purchased a super-cheap condo for my parents in a backwater town that I am never going to move to. No jobs + I don't like it there!!

I got married around this time, and took a more traditional job close to NYC. That is when the traditional NYC rents really hit me. :-(.. I was paying 19%+ of my income in rent!! I found that to be un-affordable and made a series of trade-offs to land us closer to 10% in rent over the next year or so - including 3 interstate moves and job-hops over a 14 month period (NJ->CT->PA->CT). We finally landed in a shitty apartment in a safe locality close to the industrial parts of an NYC-exurb town in CT. We stayed here for 10 years.

These 10 years included the 2008 recession. The rent increase over these 10 years was very little (<20% over 10 years). During this period, my income increased a lot and DW started working. So our housing cost percentage went down a lot. For the last 5 years, we paid < 5% in rent.

Now we own a home (well - we have a mortgage - so really the bank owns it)!! As per my calculations, the monthly carrying cost for this house is again back to 10% of income range.

I found 19% to be on the edge of not being affordable! I like 5%. I can do 10% - but don't particularly like it.
Title: Re: % of Salary on Rent in Big Cities
Post by: tygertygertyger on June 28, 2019, 01:15:59 PM
About 13% of my pretax income... but that covers my half of the apartment we rent. And that's a pretty good deal, as we live in a more driveable and less subway-friendly part of town. Good bus service still, which I use to commute. If we moved even half a mile, our rent would be $400-$700 more per month.
Title: Re: % of Salary on Rent in Big Cities
Post by: FatFI2025 on June 29, 2019, 06:17:21 PM
HCOL city 6% pretax / 8% post-tax. Two people in a 1BR, prime location, CAC, in unit W/D, reserved garage parking. It's considered a good deal, probably because our windows and balcony are about 10 ft. from our neighbors.

I would go up to 40% of pretax income for a mortgage.
Title: Re: % of Salary on Rent in Big Cities
Post by: damyst on June 30, 2019, 01:16:45 AM
The metric isn't very interesting when considered in isolation.
Obviously, the ratio depends on your housing spend, and on your household income. Both of these are important targets for optimization, regardless of the ratio.

Housing spend:
Asking "can I afford to spend this much on housing" is not the Mustachian way. The right question is "am I spending my money on the things that are important to me".

In our case, when looking for a rental we chose to spend money on: short, car-free commutes; a second bathroom; a dishwasher; and decent insulation. We don't regret a single dollar.
The commute issue is the big one. Like MMM, we consider the long commute a red line. We didn't just make sure to live close to work when we first rented our place - we also rejected career opportunities that weren't close to home when switching jobs.

Household income:
Those cities and regions that this forum calls "high cost of living" can equivalently be thought of as "high income potential".
If you're planning to live in a HCOL area long-term, you should have a plausible plan for reaching income levels that will let you get ahead financially. It's totally okay to start at the bottom and spend too much money on sub-par housing. It's not okay to then spend your energy complaining to online forums about how expensive everything is, while your colleagues are out there furthering their careers or creating new income streams.

If we were making the median household income for our area, we'd be spending 34% of pre-tax income on housing. But we're not - we're exceeding the median income by a substantial factor. That's not just a happy accident. We've taken steps to ensure that our incomes keep up with the market value of our skills. We continue to hone those skills. We made sure not to derail either career after our child was born.

TL;DR:
You need to be intentional and strategic about your spending, and you need to be intentional and strategic about your income.
Title: Re: % of Salary on Rent in Big Cities
Post by: use2betrix on June 30, 2019, 04:37:00 PM
We moved out of a major city to a smaller one about an hour away this past spring. Our rent there was about 5%.

Highest percentage Iíve ever had was 25% for about 1-2 years immediately after starting my career.
Title: Re: % of Salary on Rent in Big Cities
Post by: thesis on June 30, 2019, 09:58:31 PM
I don't know that Denver is necessarily a big city, but rent is hella expensive here right now. But post-tax, I'm paying about 12% or so in rent, but I'm also getting a very rare deal. SINK working in software. (and technically I'm in a suburb of the city, but downtown is like a 30 minute drive from here)

When I was living alone, the most I ever paid was around 30-35% at one point, before switching jobs and earning a lot more :o . Actually, discovering MMM and Jacob Fisker is what convinced me that this was a huge luxury that was costing me something like an extra $600/month that can could have been growing for me instead. Some days I miss that little apartment, but my roommate situation and cost of rent is just about the best you could hope for in this city.

(edit for comparison: bottom of the barrel single bed apartments are $800-900 no washer/dryer. Sometimes this is the price of studios. It's more like $1100-1800 if you want "decent" locations and amenities. Two bedroom apartments are like $1400-2200 in suburban locations, and this is probably skewed toward the cheap because I'm cheap and my research is cheap ;). I've not seen a single bedroom apartment for less than $800 in the past few years, even in the worst parts of town )
Title: Re: % of Salary on Rent in Big Cities
Post by: BicycleB on June 30, 2019, 10:10:19 PM
I don't know that Denver is necessarily a big city, but rent is hella expensive here right now. But post-tax, I'm paying about 12% or so in rent, but I'm also getting a very rare deal. SINK working in software. (and technically I'm in a suburb of the city, but downtown is like a 30 minute drive from here)

When I was living alone, the most I ever paid was around 30-35% at one point, before switching jobs and earning a lot more :o . Actually, discovering MMM and Jacob Fisker is what convinced me that this was a huge luxury that was costing me something like an extra $600/month that can could have been growing for me instead. Some days I miss that little apartment, but my roommate situation and cost of rent is just about the best you could hope for in this city.

(edit for comparison: bottom of the barrel single bed apartments are $800-900 no washer/dryer. Sometimes this is the price of studios. It's more like $1100-1800 if you want "decent" locations and amenities. Two bedroom apartments are like $1400-2200 in suburban locations, and this is probably skewed toward the cheap because I'm cheap and my research is cheap ;). I've not seen a single bedroom apartment for less than $800 in the past few years, even in the worst parts of town )

And? What special deal did you find now??

:)
Title: Re: % of Salary on Rent in Big Cities
Post by: caleb on July 01, 2019, 08:45:01 AM
MCOL metro, two miles from downtown.  Mortgage, taxes, and insurance on a SFH are 13.8% of our gross.  Unless we were trying to aggressively pay our mortgage just to be rid of it, I wouldn't want to have higher fixed housing costs.
Title: Re: % of Salary on Rent in Big Cities
Post by: remizidae on July 01, 2019, 11:52:29 AM
Renting in HCOL, we pay 14%. That includes utilities and I walk to work. Have considered buying, but it would increase our housing cost even if we bought at the very bottom of the market with 20% down.
Title: Re: % of Salary on Rent in Big Cities
Post by: okcisok on July 02, 2019, 10:43:05 PM
LCOL city, 19% of my take-home pay. Share a 2 BD/2Bath apartment in a "nice" building. (As in w/d in the apartment, two pools, gated, parking garage in the building, dry cleaning drop off & pick up service, outdoor kitchen with grill and stocked beer fridge, gym, you name it.)
We're downtown, near streetcar stops and the interstate.  I can walk to work, cheap entertainment, shopping, and the public library. I couldn't find a cheaper apartment anywhere in town that's as safe and walkable. The rent goes up about 1.5% a year.
Title: Re: % of Salary on Rent in Big Cities
Post by: thesis on July 03, 2019, 11:37:56 AM
I don't know that Denver is necessarily a big city, but rent is hella expensive here right now. But post-tax, I'm paying about 12% or so in rent, but I'm also getting a very rare deal. SINK working in software. (and technically I'm in a suburb of the city, but downtown is like a 30 minute drive from here)

When I was living alone, the most I ever paid was around 30-35% at one point, before switching jobs and earning a lot more :o . Actually, discovering MMM and Jacob Fisker is what convinced me that this was a huge luxury that was costing me something like an extra $600/month that can could have been growing for me instead. Some days I miss that little apartment, but my roommate situation and cost of rent is just about the best you could hope for in this city.

(edit for comparison: bottom of the barrel single bed apartments are $800-900 no washer/dryer. Sometimes this is the price of studios. It's more like $1100-1800 if you want "decent" locations and amenities. Two bedroom apartments are like $1400-2200 in suburban locations, and this is probably skewed toward the cheap because I'm cheap and my research is cheap ;). I've not seen a single bedroom apartment for less than $800 in the past few years, even in the worst parts of town )

And? What special deal did you find now??

:)

<$600/month. We'll just leave it at that ;). Most friends who are renting rooms are paying around $700/month or more.
Title: Re: % of Salary on Rent in Big Cities
Post by: JLee on July 03, 2019, 12:25:32 PM
8.6% in my apartment (16.3% before roommate).

I bought a house at about 27%, but if I knock the roommate income directly off the payment (instead of counting it towards overall gross income) I am down to 4.2%.