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How Much Rent Can I Afford?

By George Hadgelias

How much should I be spending on rent, and how much rent is too much?

These are questions you might be asking if you’re in one of the 2.6 million households across Australia who rent.

To help you figure out how much you can afford – and cut costs to your rental if you need to – we’ve put together this handy guide.

What percentage of my income should go to rent?

While it’s totally up to you how much you spend on rent, you may prefer to stick to a comfortable amount.

There are a few ways of working out how much you should put towards rent. All of them involve looking at your income and figuring out what you can afford.

The 30% rule

Many renters like to rely on the 30% rule, which means a maximum of 30% of your income goes to rent. An ideal amount is about 20%, but 25% is also a good target to aim for.

However, this isn’t always feasible on a low income, as average rents in your chosen area may well be above 30% of what you’re earning.

How to organise a budget the Barefoot Investor way

There are several other ways to tackle your rental budget, but a popular approach is the Barefoot Investor’s ‘bucket’ strategy. Basically, you divvy up your income into three buckets:

1. Blow bucket

A Blow Bucket is for day-to-day expenses like rent, food, bills, splurges and paying off debt or unexpected expenses.

In your Blow Bucket, you want 60% of your income going towards daily expenses, 20% towards debt or unexpected costs, plus a 10% allowance for splurges and 10% towards long-term savings for things like holidays or a new car.

Any leftover money goes into your Mojo Bucket

2. Mojo bucket

A Mojo Bucket gives you a safety net if you need it.

When you’ve got 3-6 months of living costs saved up, start transferring any excess money into your grow bucket.

3. Grow bucket

A Grow Bucket is for investments and helping you build long-term financial security.

If you’re unsure about where to start, speak to a trusted adviser or financial planner about ways to invest this money responsibly.

How to calculate how much I should be spending on rent per week

If you choose to use the 30% rule, calculating your rent is easy. First, work out your weekly income then use the following calculation:

Take home weekly pay x 0.3 = how much you can afford to spend on rent every week

For example, if you’re earning $1,200 per week, ideally you want to spend no more than $400 per week on rent.

Or, if you’re partnered up and your combined income is $2,000 per week, your weekly rent should be around $600 split between the two of you.

Depending on the rent cycle of your chosen property, you might want to note down your income as a weekly, fortnightly or monthly amount.

Remember that rental properties mostly advertise the rent as a weekly amount, which actually works out to be more per month than you first imagine because there are more than four weeks per calendar month.

This is especially important to know if you’re paid monthly, instead of weekly or fortnightly.

For example, if a property is being advertised at $500 per week you’ll need to multiply that by 52 (the number of weeks in a year).

Then divide that total by 12 (the number of months in a year) to find the rent payable per calendar year.

For example: $500 x 52 = $26,000 (the rent paid in a 12-month period).

$26,000 / 12 = $2166 (the rent payable per calendar month).

What is rental stress?

According to the Australian Bureau of Statistics (ABS), rental stress is when a household is spending more than 30% of their income on rent.

Currently, 32% of Aussies are renters and, according to the Australian Institute of Health and Welfare, around 17% of households are considered to be under rental stress.

Let’s say a couple takes home $3,000 each week and their weekly rent is $1,300. Using the 30% calculation in reverse helps us figure out what proportion of their income is going to rent. It would look like this:

$1,300 / $3,000 = 0.43

This means rent is chewing up 43% of their income, which is a hefty amount. Technically, the couple would be under rental stress.

5 ways to avoid rental stress and lower your rent

Sometimes it can be tricky avoiding high rent, especially if you need to be in a particular area for work, study or your kids’ schooling. That being said, there are a few things you can do to try and keep yourself out of a sticky financial situation.

1. Set a budget and be realistic

By setting a budget, you know exactly where your money is coming from and where it’s going.

Write down all your income sources (for example, work and investments) and figure out how much you’re bringing in each week.

Then, jot down your ongoing expenses like rent, food, bills, petrol, childcare and any other non-negotiable costs. Next, work out how much you spend on extras such as going out, clothes, coffees and so on.

By giving yourself a clear picture of your income and spending, you can work out how much of your money is going towards various expenses.

You might even be able to cut back on certain things to save a bit of money. For example, just by making coffee at home every day rather than buying one from a cafe, you could save around $20 each week.

That equates to over $1,000 every year.

2. See if you can negotiate

If you’re already renting a place, you may be able to negotiate lower rent with your real estate agent or landlord. Research rents in your area for similar homes to get an idea of what others are paying, and put it to your agent to see if the landlord is willing to budge. This can very well work if you’re a reliable, long-term tenant.

The same goes if your rent is up for review. Keep an eye on prices in your area to ensure your rent increase is justified. You always have the option to push back if you feel it’s excessive.

Alternatively, if you’re applying for a new place, you may be able to negotiate a rent reduction in exchange for a longer lease. This is a win for the landlord too, because a vacant property is a big hassle for them and it can take a while to find good tenants.

And if you find yourself in a situation where you can’t make rent that week, the first step is to speak or email your property manager or landlord to see if you can work out a plan going forward.

If you find yourself in financial hardship there are community organisations, such as the National Debt Helpline, who can help you get back on track for free.

3. Go for a more affordable option

Think about what you could possibly do without and see if you can sacrifice certain things for cheaper rent.

For example, you may be able to cut costs simply by moving one suburb over. Or, you could give up some yard space for a home with a small courtyard.

Otherwise, if your spare room hasn’t hosted a guest since 2007, consider moving to a place with one less bedroom.

4. Split the cost of rent

If you have a spare room and you’re in a situation where you can share with others, bringing in a housemate can mean a huge reduction in rent. You can also split other costs like electricity, gas, cleaning supplies and groceries, equating to even bigger savings.

If your property comes with a car spot you don’t use, you could even consider renting that out too – especially if you’re in an inner-city area close to where people work. Just check with your agent or body corporate (if you’re in an apartment) if there are any restrictions to renting out your car spot.

You can look for housemates on

5. Consider buildings with amenities

Happy to live in an apartment or housing complex? You may just find one with amenities like a gym, tennis court, pool, parking, external storage or communal areas that can be used as co-working spaces.

These inclusions can help you save if they’re things you already spend money on.

So while your weekly rent may be higher you’ll find your overall budget is in better shape by cutting back in other areas.

Average weekly rents around Australia

Wondering how much Aussies around the country are spending on rent?

Here’s a breakdown of average weekly rents by region according to the March 2022 Quarter Proptrack Rental Listings Report

CLICK HERE for more information.

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