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Budgeting for your next rental.
Understanding how much you need to earn to comfortably afford rent is a key part of securing a property. Most landlords expect your monthly income to be about 3 times the rent, ensuring you can handle rent and other living expenses.
1. Finding Your Monthly Income
Calculate how much reliable income you receive in a year.
This can include salary, bonuses, tips, secondary jobs, child support, government grants, etc.
Remember, you'll need documentation to support this (e.g., Letters of Employment and recent pay stubs).
Example:
Primary Salary = $60,000 = $5,000 monthly
Bonuses = $15,000/year = $1,250 monthly
Secondary Job = $16.55/hr @ 12 hours/week ≈ $200 monthly
Tips = $150 per shift @ 2 shifts/week ≈ $1,200 monthly
Therefore, your monthly income is approximately $7,650.
2. Base Rent Calculation
Living within your means is important. This is why it is important not to exaggerate your calculations. Landlords will be checking that your rent is no more than ⅓ of your monthly income.
Example Continued:
Monthly Income ≈ $7,650 monthly
Rent = ⅓ of $7,650
= 0.33 * 7,650
= $2,550
Therefore, your base rent, or starting point, is $2,550/month/
3. Utilities and Hydro
Now that we have the base rent, let's take a look at your carrying costs, starting with utilities and hydro. Carrying costs are the monthly costs necessary to "carry" or maintain the rental unit.
Example Continued:
Utilities ≈ $100-$150/month, depending on usage, size, and heating source.
4. Tenant Insurance
Your landlord's insurance covers the physical residence. Tenant Liability Insurance covers your personal belongings. This is a mandatory cost no matter where you choose to rent.
Example Continued:
Tenant Insurance ≈ $25-$30/month for $1M in liability insurance.
5. Internet
Shop around for internet deals—sometimes buildings offer discounts. Be sure to compare providers for the best rate.
Example Continued:
Internet ≈ $50-$100/month
6. Discretionary Costs
Some expenses depend on your situation and lifestyle. These costs can vary but should be considered when analyzing your budget.
Example Continued:
Parking ≈ $150-$250/month
Laundry (if not in unit) ≈ $2.50 per wash and $3.00 per dry
≈ $5.50/load * 3 loads per week ≈ $65/month
Cable & Streaming Services ≈ $0 - $100/month
This puts your total discretionary costs between $175 and $300 per month, depending on your needs for parking, laundry, and entertainment subscriptions.
7. Key Deposit
"[No landlord shall] collect or require or attempt to collect or require from a tenant, prospective tenant or former tenant of the rental unit a fee, premium, commission, bonus, penalty, key deposit or other like amount of money whether or not the money is refundable."
That being said, you will see a wide range from $100-$250 for a refundable key deposit which is due on the day of the key exchange.
8. Rent Deposit
Typically, your rent deposit covers your first and last month's rent.
Example Continued:
Rent Deposit = 2 x Base Rent
= 2 x $2,550
= $5,100
The Final Budget
Monthly Rent
Base Rent = $2,550
Carrying Costs = $175 - $280
Discretionary Costs
Parking = $0
Laundry = Included in lease
Streaming Services = $40
**therefore, you should have $5,100 as a certified cheque for rent plus a separate cheque for the key deposit ready on the day of your key exchange.