Apartment rent in NYC salary should be 40-50 times NET or GROSS salary? (rentals)

[hannahcruz88]

I have heard that in order to get approved for an apartment in NYC that your salary has to be 40-50 times greater than the monthly rent--are they talking about your salary before or after taxes?

[bmwguydc]

It's calculated on the gross salary, to determine the maximum for which you qualify. If you want some room in your own budget, calculate on the net, and the management company will have no problem.

Using the standard rule, if you make $100k (gross), you could rent an apartment for $2,500 at 40x, and $2,000 at 50x.

[cali4ever]

It's hard to understand why there are such aberrations in apartment rentals. For example, if (taking the same salary $100k) one would like to get mortgage, his maximum would be in 3-5 times his gross salary, provided he puts 10-20% down. Let say he would buy $400k apartment. With current 30-year loan running at about 4.5% APR, his payment you be about $2000 + tax, at that less than half of his payments he will be actually paying for the interest on the loan. The same rental apartment would run more than $2k/month, and it's not tax deductible, and you don't accumulate any equity. Seems absolutely crazy to rent on long term basis.

[cleasach]

Originally Posted by cali4ever

It's hard to understand why there are such aberrations in apartment rentals. For example, if (taking the same salary $100k) one would like to get mortgage, his maximum would be in 3-5 times his gross salary, provided he puts 10-20% down. Let say he would buy $400k apartment. With current 30-year loan running at about 4.5% APR, his payment you be about $2000 + tax, at that less than half of his payments he will be actually paying for the interest on the loan. The same rental apartment would run more than $2k/month, and it's not tax deductible, and you don't accumulate any equity. Seems absolutely crazy to rent on long term basis.

Crazy maybe but it's not easy to accumulate 20 percent down even living frugally. Using a $400k apartment as an example, it's most likely a co-op which will require at the very least, 2 full years of mortgage and maintenance payments liquid after closing. So on top of the 80k you put down on the place, you will need at least another $48k in the bank. Then the co-op will have monthly maintenance which on a one bedroom can run anywhere from $500-1000 per month (probably more in Manhattan). Manhattan co-op boards are probably much more stringent in their requirements.

A lot of people here are in the same boat, i.e., the monthly payment is completely doable (they're probably paying close to a mortgage payment now in rent) but are locked out of buying because of the huge chunk you need to get in so they are forced to rent long term, save what they can and hopefully buy at some point.

As to the OP: gross income is what's used but you're better off using net. Example: If you earn 40k a year, are single with no dependents and filing single 0 in NY, you would qualify for a rental of $1k a month. Your take home every two weeks would be about 1100. if you were paid bi-weekly. That's a pretty big chunk of your take home going towards rent.