When looking for properties to rent, most tenants determine their budget based on the maximum amount they can afford. This can be a risky way to determine affordability and could lead to tarnishing your credit score by a missed or partial payment.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa says there is a less risky way of setting a rental budget. “Tenants should also ask themselves how much they ideally want to be spending on a home each month instead of asking what is the maximum they can afford,” he notes.
Typically, Goslett explains that a tenant needs to earn two- to three-times the monthly rental amount to qualify for the lease application. They will also usually need to have saved up for a deposit, which is normally around two-month’s rent upfront. “This can be a good guideline for tenants, but they should also make sure to tailor that budget to their unique spending habits too,” he says.
Explaining what he means by this, Goslett recommends that tenants carefully consider their lifestyle expenses, like the name brand shoes they like to buy every so often or the weekend away that they like to plan every other month. “A person can get used to spending on these kinds of lifestyle expenses, so it is important to think about this carefully before signing up for a 12-month lease on a property that will make it impossible for you to continue to afford these kinds of lifestyle expenses,” says Goslett.
After reviewing their budget, a tenant might decide to cut back on their expenses to afford the more expensive rental, but Goslett says that it is important for them to realise this ahead of time, otherwise they might continue to spend and not have enough money to spare by the time their rent is due.
“If you’re not sure how much you can afford, it can be useful to meet with a financial planner and a RE/MAX estate agent. The financial planner can help you work out your budget and a RE/MAX estate agent can then show you what you can get for that budget. As tricky as it might be, it is far better to find a home that you can comfortably afford than to rent a home that will cause you sleepless nights worrying about how you will afford to keep up with the rental repayments,” Goslett concludes.
Writer: Kayla Ferguson
