patrick.net

You should rent where it makes you happy and where you find a balance of income vs living quality(if you can afford it).

I pay 20% of my gross, 33% of my net and live in a trendy upscale area.

I could afford more, but then I'm very happy where I am, and I'd have to save and spend less on other stuff.

i pay about 11% gross salary in a nice area (low crime, 900+ api schools, walking distance to downtown and a couple of parks, we feel safe going for a walk late at night of, also lots of parking).

if you include cap gains, interest and dividends, the percentage is less.

Nice. Dinks ? What city ?

Our mortgage(PITI) is 8.9% of gross, 13% of after taxes. 2800 sq ft home. 940 API K-8 school 1 block away. Asian makeup is 17% which is higher than the California average but lower than your bay area/irvine schools that get that API. >70% whites for you asian phobes who are scared to compete. 1/4 mile away from YMCA and restaurants. 1/2 mile from 2 parks. Another 3 softball field park planned for this year 1 block away. 1 mile from a state/national park which abuts the pacific ocean.

As little as possible.

I pay about 11% of gross, depends on the year because income has gone up and down. I think it has been as low as 7.5-8% in the past. Even when we had what we considered the "super-expensive" place, it was 11% of gross income or less.

If you compare to home purchases, the traditional 30-year fixed loan with 20% down required 28% of gross as a maximum PITI.

Very funny reading this thread.

One of the arguments bulls seem to pound out so loudly is that by renting, one is making a landlord rich. Aside of that being entirely irrelevant, the implication is that by "enriching" a landlord, a renter is somehow becoming poor.

And yet here you have a thread full of renters who are paying a minimal portion of their income as rent.

Hillarious.

no more than 10%. Around there is considered safe. And again that really depends on your income.

If you are making millions you probably aren't going to spend 100k renting.

zzyzzx says

As little as possible.

bingo. thats what you should aim for in all expenses related to housing.

burritos says

Our mortgage(PITI) is 8.9% of gross, 13% of after taxes. 2800 sq ft home. 940 API K-8 school 1 block away. Asian makeup is 17% which is higher than the California average but lower than your bay area/irvine schools that get that API. >70% whites for you asian phobes who are scared to compete. 1/4 mile away from YMCA and restaurants. 1/2 mile from 2 parks. Another 3 softball field park planned for this year 1 block away. 1 mile from a state/national park which abuts the pacific ocean.

Also Newbury Park is miles away from civilization.

Meaningless question. You should ask, "what percentage of the median income should be the median rent." Otherwise, you're grouping people with high incomes and simple 1 bedroom apartments with low-income families renting 4 bedroom houses to support their six kids. Obviously, the later will have to spend a far greater percentage of their income on rent.

Even then, why is it fair to determine rents based on income? Perhaps based on the cost-of-living adjustments for a city, which may relate to income, but not directly on income. After all, a young person may choose to live in NYC and rent for a few years to build up wealth and then move someplace cheaper and slower for the rest of his career.

In South Florida, I'd say the fair market prices for rents in absolute dollars, rather than by percentage of income, are about the following:

1 bedroom apt: $700
2 bedroom apt: $800
3 bedroom apt: $900
2 bedroom house: $1200
3 bedroom house: $1500
4 bedroom house: $1700

10% for housing (does not matter rent or ownership) is normal.
15% is bearable.

20% is a severe drag on your recreation, self development, education , health, etc.

Anything above 20% destroys society and economy.

Indeed, there is absolutely no reason why we should spend on housing more than what we spend on food in America.

2005: 16% (rent)
2006: 15.7% (mortgage)
2009: 15% (rent)

I must say I am surprised at how small the percentage is for others on this thread. I have always felt like I was being somewhat conservative -- guess not. Also I think it is totally right that you have to consider income level, because as income rises, I think people tend to spend a smaller portion of their money on housing.

ChrisLA says

burritos says

Our mortgage(PITI) is 8.9% of gross, 13% of after taxes. 2800 sq ft home. 940 API K-8 school 1 block away. Asian makeup is 17% which is higher than the California average but lower than your bay area/irvine schools that get that API. >70% whites for you asian phobes who are scared to compete. 1/4 mile away from YMCA and restaurants. 1/2 mile from 2 parks. Another 3 softball field park planned for this year 1 block away. 1 mile from a state/national park which abuts the pacific ocean.

Also Newbury Park is miles away from civilization.

Well compared to Encino, you're probably right.

Yeah, thinking more about it, it definitely has to be based on NET, gross is meaningless..

But as some have said, with the rental prices in Miami it would be hard for some people to be at that 30% range.. Any decent 2/2 in the S.FL area you are looking at minimum $1.3K -$1.5K to start and the $1.3K is stretchingggggggggggggg it I think..

"reasonable" 2/2's I am seeing in the $1.5K - $1.7K range..

I live in Chicago and I can't, for the life of me, understand the luxury condo market. Places like this:
http://www.redfin.com/IL/Chicago/800-N-Michigan-Ave-60611/unit-4402/home/12739679

$3.25mm asking
$34k taxes
$1,694 assessment

This sort of place costs ~16k/mo. Even an all cash buyer will have about 10k/mo in opportunity costs and another ~6k/mo in taxes/hoa/insurance.

You're looking at close to 200k/yr in housing expenses. So this owner should take home ~600k/yr after taxes, or ~900k/yr before taxes.

I get it, those earners exist. But there are TONS of these sort of places (2mm - 5mm with 1k+ HOA and high taxes) in high rises. Who's going to buy them.

I have an income in this context. I'm not tied up in another property. I have capital to make a downpayment on this kind of place. Guess what? I pay $2,525/mo in rent.

The luxury high-rise condo market makes no sense. I think developers overestimated the population with the resources and inclination to make this sort of purchase. I could understand if downtown Chicago had 20-30 of these kind of properties on the market, but I think there are hundreds.

Reasons it makes no sense:
1) Taxes and HOA (variable/rising costs) represent too much of the monthly expense, eroding the attraction of buying vs rent.
2) Most earners with resources to make a downpayment (>30%) on this sort of place already own a place and have lost so much equity they're very hesitant to move and lock in the loss.
3) Many earners with income to support this sort of place have more variable income. The luck of investors, small business owners and entrepreneurs can change dramatically and quickly. If you're a high earner or executive for a bigger organization, and you lose your job, very difficult to switch firms and keep a >500k salary.

Dan8267 says

In South Florida, I’d say the fair market prices for rents in absolute dollars, rather than by percentage of income, are about the following:
1 bedroom apt: $700
2 bedroom apt: $800
3 bedroom apt: $900
2 bedroom house: $1200
3 bedroom house: $1500
4 bedroom house: $1700

Sorry, but not in any decent part of Dade County or south west Broward county..

wuaname says

Yeah, thinking more about it, it definitely has to be based on NET, gross is meaningless..

To the contrary, gross is not meaningless because traditional mortgage lending is based on 28% and 36% of gross income, not net income. Net income is far harder to predict because different factors affect the effective tax rate.

If you read the government's reports on the failed HAMP program, the debt-to-income ratios are based on gross income, not net income -- HAMP goes for 31% of gross:

http://www.treasury.gov/initiatives/financial-stability/results/MHA-Reports/Documents/April%202011%20MHA%20Report%20FINAL.PDF

Incidentally, it is simply staggering how much debt some people were carrying. Before modification, 78.9% of gross income was the monthly payment required for all of their debt, of which 45.3% was for housing. After modification, it has gone to 62.1% and 31.0% respectively. With that much debt still on the table, it's no surprise that a lot of people potentially eligible HAMP either flunk out of HAMP or re-default after HAMP modifies their mortgages.

We pay about 6% of our gross. Our rent is $1750 a month.

It also depends on what phase of your life you are in.

When I was just out of school, I had no medical worries and few other expenses. Back then paying up to 25% seemed perfectly fine and I had plenty left over for my amusement.

These days with a kid and all I would never spend that much of my budget on rent.

About 13.6% of our gross income goes to rent. I really don't want to pay much more for housing, rent or mortgage, this amount gives us a lot of financial flexibility. We were paying even less but we moved into a bigger place when rents went down a couple years ago.

I figure around 8.3% of ours. Then again we sort of have an unusual situation as we're renting a pretty nice house for a lot less than what they go for because the landlord has not raised the rent in years. Otherwise it would be around 15%.

That is interesting, so many posted what percentage they pay but not what it should be.

It should be as close to zero as your living requirements permit. Don't pay any more than you must.

A different question might be "how much is too much"? According to mischaelsch the scale is

michaelsch says

10% for housing (does not matter rent or ownership) is normal.
15% is bearable.

20% is a severe drag on your recreation, self development, education , health, etc.

I'm constantly amazed at how rich patnet users are. If you say that $1750 per month is only 6% of your gross monthly income then you make $350,000 per year. That's among the top 1-3% for annual household income in the US.

I hesitate greatly to state my percentage and I only pay $875 per month.

Ok, so that's 22% of my gross income. I gross in the average range for household income in the US.

You have to live somewhere. My rent is below average in my area. Most households even in my area don't hit $75k per year let alone $350k per year.

It's easy for some to sit in an ivory tower and claim that no one should spend more than 10% of one's income in rent when one's income is far above average and/or you live where the cost of living is below average. Most Americans must spend a higher percentage if they want even basic housing. That's a fact and it's the way most are forced to live.

How the hell do you guys do under 10% of your gross? You must be living in a dive.

My mortgage is 10.5% of my my gross. My mortgage is roughly 18K a year. And I live in the ghetto. I mean ghetto where there are prostitutes and illegal day laborers. The cars that make up the streets are 1990 Dodge Neons and 1980 Ford Rangers.

Even with good income, 220K a year, that only allows you to live in a 1 bedroom studio in a place like Alameda or share a room in Lafayette if you want to stay around the 10% of your gross mark.

We must have very wealthy people on this site.

simchaland says

I’m constantly amazed at how rich patnet users are. If you say that $1750 per month is only 6% of your gross monthly income then you make $350,000 per year. That’s among the top 1-3% for annual household income in the US.

Actual payroll records of typical salaried employee by South Bay High Tech employers state otherwise. After 3 decades of working in SV, I dont even come close to $350K and nor do any of my long time friends/coworks.

eastbaydude says

Even with good income, 220K a year, that only allows you to live in a 1 bedroom studio in a place like Alameda

I don't know anything about the Alameda housing market, but are you sure? I found the first two things off Craigslist. Here's a 3/3 + office in Alameda for $2500/mo:
http://sfbay.craigslist.org/eby/apa/2441356175.html

Upstairs 1/1 unit in a duplex for $850/mo:
http://sfbay.craigslist.org/eby/apa/2441339304.html

You're saying a studio is $1800/mo?

corntrollio says

eastbaydude says

Even with good income, 220K a year, that only allows you to live in a 1 bedroom studio in a place like Alameda

I don’t know anything about the Alameda housing market, but are you sure? I found the first two things off Craigslist. Here’s a 3/3 + office in Alameda for $2500/mo:

http://sfbay.craigslist.org/eby/apa/2441356175.html
Upstairs 1/1 unit in a duplex for $850/mo:

http://sfbay.craigslist.org/eby/apa/2441339304.html
You’re saying a studio is $1800/mo?

your first example requires a person to make $300,000 a year gross @ the 10% debt-to-income benchmark

your second example, requires a family to make 100K a year to live in a part of town known for "un-warranted" (real estate speak) inlaw converted units. That place probably has no more than 800 sq feet of living space and no parking. How is a family of 3 or 4 who makes 100K average income live in a small 1 unit apartment. And that area has no or little street parking available.