How Much Rent Can I Afford?

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In this article, you'll learn:Anchor


The answer to the question of rent affordability is one part math and one part consideration for your military family’s lifestyle. Priorities vary from family to family, who all rank quality of life topics, such as access to top notch public education or a below BAH rent payment, differently. 


Tough decisions have to be made when determining how much rent is affordable, but using online tools, including a budget and percentage calculator, draw your finances into sharper focus. From there, you’ll have a strong predictor of how much money is available to put toward housing costs. 


And because a one-size-fits-all strategy doesn’t exist, we’re sharing multiple ways to formulate your best plan that takes into account military life specifics, credit scores, and the pros and cons of renting or buying a home. 


Dissect Your Finances and Create a Budget

There are many online budget calculators that help put into perspective daily, monthly, and yearly expenses. Some are very detailed and include daily coffee shop stops, but different calculators put “nice-to-haves” in an overall Entertainment category. Take some time to review a few to see which style fits your personality. 


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Photo from Canva offers a free budget calculator to clearly lay out the big picture of your finances. You’ll need to gather information such as sources of monthly income, expenses, and methods for savings. Even if you don’t have a monthly rent payment to plug in, the end result shows how much money is available to consider for rent payments. 


Now that you’ve worked out your budget numbers, Let’s take a look at a few ways to calculate how much rent you can afford.


The Golden Rule: Spend 30% on Rent


The tried and true rule is to spend up to 30% of your gross salary (the total amount of your salary before taxes are deducted) on rent each month. This figure, in theory, allows the renter to find a comfortable home with modest amenities. High end finishes aren’t likely, but there’s probably an on-site gym  and a shared laundry room in the apartment complex. Or if it’s a rental house, it likely has a modest interior and 2-3 bedrooms and bathrooms. 


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Here’s a numerical example of the 30% rule. A $2,800 before tax income each month allows for an $840 rent payment (30% of 2800). A percentage calculator is a quick tool to plug in any amount of monthly total income while deducting the percentage you choose to pay for rent: normally 20%, 30% or 40%. 


Another Measure: Gross Salary Equals 40x Your Monthly Rent


Another common formula landlords look at in consideration of your ability to pay is that your gross salary equals 40 times your monthly rent. Or, a different way to do the math is: $100,000 salary divided by 40 equals $2,500. This is the target amount you can afford to pay for rent each month. 


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These formulas are a good place to start, but military members and their families face unique spending challenges as it pertains to affordability and rent. The rent amount per month near military bases is driven not only by the local real estate market, but by the publicly reported BAH payments service members receive.  


You can count on your personal BAH figure to be a baseline for rent per month, because that is what local property owners think you can afford, which may or may not be true. Remember, BAH is intended to help afford housing payments, not necessarily pay the entire amount. It’s up to the individual to determine if BAH will cover the lifestyle they prefer. 


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Location Drives Rent Payments


Location is also an important factor for determining how much rent you can afford. A duty station in Hawaii is likely going to cost much more than 30% of your income, which is completely normal for that area. 


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RentCafe, an online apartment search service, reports the average apartment of 1,198 square feet in Ewa Beach, Hawaii, costs $2,918 each month.


 In comparison, a 4-bedroom, 3-bathroom, single family home on Ewa Beach listed on MilitaryByOwner rents between $3,500-$3,800. For a reality check, let’s take a look at the BAH earned by an E-6 with dependents: $3513.00. 


It's easy to see the 30% guideline is a difficult challenge in a high cost of living zip code. To remain near that goal, you’ll need to use strict budgeting in other areas, such as entertainment and other non-essential spending.


The 50/30/20 Rule for Rent


The 50/30/20 rule offers more flexibility for a military family to rank priorities. Your after tax pay is divided into three categories: 


  • 50% of the total is for need based spending (rent, utilities, food) 
  • 30% is for wants (entertainment, travel)
  • 20% is for savings and debts (school loans, TSP) 

You get to distribute which payment fits each category. For example, transportation is a payment that could flex between “need” and “want,” depending on your location and proximity to work. 


How Your Credit Score Affects Your Rent Payment


A credit score is one of several factors landlords and property management companies look at when considering your rental application. Although a credit check may not provide a detailed look at your ability to pay rent each month, it remains one of the foremost investigative tools. 


Before a rental application is denied, it's important to know exactly what appears in your credit report. If there are mistakes that inhibit your chances to obtain housing, there are opportunities to correct the inaccurate information that will improve your rating. Everyone is allowed one free credit report from the three major reporting agencies, TransUnion, Experian, and Equifax through 


Curious as to what are good and bad credit scores? This is what Experian has to say:


“A FICO® Score of 670 or above is considered a good credit score, while a score of 800 or above is considered exceptional.”


A FICO Score is a widely used credit score and is the number computed by the Fair Isaac Corporation. The typical score range is about 300-850. 


Learn more about finding a home with less than stellar credit in How to Rent a Home with a Bad Credit Score. 


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Tenant Screening Services 


Landlords are interested in your ability to regularly, and without interruption, pay rent on time. This is why they often use tenant screening services, which not only include a credit report, but could include background checks, county/city records, and bank statements. Don’t forget social media is fair game; the behavior you showcase online is searchable by savvy landlords who aim to protect their investment.


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Although you should expect that property managers and landlords will, at minimum, request a copy of your credit report, some may not and are completely fine with a glowing recommendation from a mutual friend or neighbor. 


This is a scenario that regularly occurs within the connections between military families. Some homeowners find enough comfort knowing the U.S military pays you each month, and if necessary, they could discuss with your chain of command your payment delinquencies. 


To find out more details about how credit scores are related to your qualifications to rent a property, read, Does Your Credit Score Matter When Renting a Home?


Options if You Have Bad or Zero Credit

If your credit score is lacking, the goal is to definitively show a property owner you are accountable and have the income to pay all of the rent, every month. There are a few ways to achieve this goal. 


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1. Pay more.

This may be easier said than done, but an offer to put down a larger deposit or several months’ rent in advance could convince the homeowner to give you a chance. 


2. Ask a co-signer. 

If a family member or friend has complete faith that you will pay your rent in full each month and is willing to make the payments if you cannot, ask permission to submit their name as a co-signer. In a landlord’s view, this is a strong back up plan for guaranteeing money each month.


3. Consider a lower priced rental home or apartment.

A zero or bad credit rating could support a smaller rent payment. Think of this move as a temporary one one until your credit improves. The smaller rent payment may also lead to a healthier overall budget and a beefed up savings account to apply to future rentals, or to possibly buy a home in the future.


Is It Cheaper to Rent on Base or Off Base? 


If only there was a clear cut and dry answer to this question for everyone! The answer is truly personalized to the size of your family and your priorities for a comfortable lifestyle.


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As it is the industry standard, the private company who operates the on base housing is going to take the servicemember’s BAH, whatever that amount is, and whether or not an improved house (bigger, better) is available to you at promotion time. 


Here’s more information for Understanding Privatized Military Housing


There are exceptions to this rule, here and there, according to the needs of the housing company, across military bases. Less than desirable homes are not always, but sometimes, offered to families for a reduced rate. This tends to be true around bases with plans for housing renovations or with a student population that is only assigned to the base for months instead of years. For reduced rent, you should expect housing options that are smaller, and with less amenities. 


The location of your duty station plays a big part in calculating affordability. A high cost of living is not unusual in several of the military’s most densely populated areas. You can probably guess that NAB Coronado, Alexandria, VA, in the National Capital Region, and bases located in Hawaii are going to strain a budget far more than bases located in areas without a major metropolitan or expensive real estate, regardless of a military presence. In these situations, living on base tends to be less expensive, but has its own host of challenges including wait lists and health and safety issues.


Learn more in Living in Military Housing: What You Need to Know.


Certainly there are many more affordable areas where military members are stationed. Both the Carolinas and Texas are known for their reasonable costs of living and often appear on “Best of” lists that are geared toward military members. The likelihood of getting more house for your rent money off base increases in lower cost of living areas. 


You’ll have to review your budget in totality and reach out to military families already living on or near the base you’re considering. They can inform you of costs to be aware of that you don’t have on your radar. These are a few examples of how a location impacts a rental budget. 


  • Utilities: California has notoriously high gasoline and water bill payments.
  • Transportation: Washington, D.C., parking and Metro access is expensive. 
  • Education: Some schools are on base, some are off, and there are mixed opinions on DODEA vs. local school systems. This may lead to the need for the extra expense of private education. 
  • Food: There are high prices in Hawaii, Guam, and Alaska because of shipping limitations. 

Is Buying a Home a Better Option than Renting? 

If homeownership is particularly interesting to you, you’ll not only need to take into account all of the previously mentioned costs and location affordability, but add in closing costs, homeowners insurance premiums, taxes, and a reserve of money to tackle improvements, both necessary and cosmetic. A reputable real estate agent or mortgage broker can help you break down the costs of renting vs. buying on a short timeline.


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Buying a house requires an informed decision. Review these posts for additional information:

Military homeowners also have to consider their feelings about becoming a landlord and property manager. Unexpected orders throw off the best laid plans, leaving the ownership of the home in question while at the same time, firmly placing the possibility of landlord life, even from afar, in your lap. A rental home business also requires another round of money to properly operate. Think about this full circle—it will now be your turn to decide the credit score you want your tenants to have!


All of the resources included above were created to help determine the best course for planning a rental budget strategy. From detailing your monthly expenses, to thoughtfully considering renting on or off base, there’s information available to guide your decision but, ultimately, you’ll have to do the individualized financial work to come up with the best plan for your family. 


By Dawn M. Smith






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