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Generally speaking, housing costs should not exceed 25% of the household's income, maybe 33%.
The basic rule of thumb is that the purchase price of the house should not exceed 3x one's annual income.
Generally speaking, rental rates and housing prices are in equilbrium when, putting 20% down on a house, mortgage, taxes, insurance and basic maintenance on a monthly basis come to about the same as the monthly rental rate.
Hope this answers your question(s).
Hey bale, thanks for trying . . .
What I was actually wondering is if say a house is valued at say $500,000 it should rent for $XXXX per month. Or if it is valued at $100,000 it should rent for $YYYY per month.
Or vice versa if the equation exists -- a typical house that rents for say $2000 a month should be valued at $ZZZ,ZZZ.
Does that make sense? I see prices and supposed comps all over the place and the same with rents without a clear relationship -- and maybe one does not exist, but I was wondering if anyone knew any rules of thumb.
If I wasn't living with my parents then it would be 65%+
Just think 9.05 per hour and then have to pay 800 for rent.
At $9/hr, $800 rent is 55.56% ... tack on all the other stuff, home expenses would be waaaaay more than 65%. I stayed home, too, when I was in a similar position. Sometimes, I wish it were still the case. Paying bills suck!
What I was actually wondering is if say a house is valued at say $500,000 it should rent for $XXXX per month. Or if it is valued at $100,000 it should rent for $YYYY per month.
Or vice versa if the equation exists -- a typical house that rents for say $2000 a month should be valued at $ZZZ,ZZZ.
Does that make sense? I see prices and supposed comps all over the place and the same with rents without a clear relationship -- and maybe one does not exist, but I was wondering if anyone knew any rules of thumb.
I haven't kept up with this conversation but just based on the above post, what I can add is, value of home and rental price are not directly related.
It all boils down to one simple equation:
Revenue - Expenses = Gross Profit
Revenue in this case would be rent and expenses are directly related to the operation of your business (ie renting out the house). Of course, there's also depreciation but I won't get into that.
Don't value the rent based on the value of the home. Base it on what your expenses are every month and how much of a return you want to make on your investment. For example, it costs me $500 every month to maintain the house - normal upkeep, repairs, monthly HOA dues, etc. If I set the rent to $600, I'd make $100 profit; if I set the rent to $1,000, I'd make $500 profit.
What does matter, however, is the location of your rental property. Are you in a highly desirable area or somewhere in the hood? I rent a house out in the country for about $900/mo. If it were closer to town, they could probably charge me around $1200/mo but since nobody wants to live way out here and there are a LOT of rental homes, my landlord really can't go much higher than $900.
5% only utilities,taxes, insurance, repair. We paid off our house over 20 years ago and when we had a corporate move, only bought what we could afford with those funds. We resisted getting a bigger and "better" house.
Now dont have the best house currently but its location gave me the ability to go back to work easily and I am ready to retire with Federal Health insurance = Priceless. Plus we can live here for the next 10-15 years.
rent+gas+water/trash+electricty = 21.7% of my take home pay
I rent a 650sqft 1 bedroom though, this is South Orange County which is very expensive, most people cannot afford to rent out an entire apt. by themselves and usually split a 2bd with another or they are couples.
Was reading in the news that more people are spending at least half of what they make on housing. In this thread, I do not want to know what your rent or house payment is. I want to know, what percentage of your income it consumes.
Housing costs should include:
mortgage payment or rent
Utilities (gas, oil, and electric)
taxes, PMI, insurance
water
trash pickup
If you are married, then your income should include that of your spouse.
P.S. Let's consider income as after-taxes "take home" pay.
mortgage payment- 21%
Utilities (gas, oil, and electric) -9%
taxes, PMI, insurance-11%
water 0%
trash pickup-.003%
About 8%. House is paid off, so we have taxes, insurance, electric, gas, water, cable, internet, land line.
What about maintaining the house?
I should have included that as well. Most people probably spend several hundred a month in maintenance alone -- and that includes things like replacing the roof or septic or buying a new stove or fixing the furnace, and so on. Repair bills can really add up.
Yikes, SEVERAL hunderad a month?! Woof, you're not making a good argument that I should be a homeowner!
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I stayed home, too, when I was in a similar position. Sometimes, I wish it were still the case. Paying bills suck!
