# Rent Calculator Spreadsheet: How Much Can You Afford?

Traditional advice says we should spend 30% of our gross income on rent. But the current cost of living (in many places) says otherwise. My rent calculator helps you figure out your expenses and how much you can really afford to spend on rent.

You can access my recent calculator spreadsheet and get started right away. Here’s the template in Google Sheets. You may also want to make one from scratch.

### Formula to Calculate Affordability

Traditionally, I calculate rent affordability by multiplying someone’s net income by 30%. That’s a 30% debt-to-income ratio. It’s also what I use for the max rent calculation.

Here’s what that looks like in Google Sheets.

`=X*.3`

In this case, X equals net income. Of course, a more robust spreadsheet helps you calculate your net income and provides additional insight into your expenses.

Some of the things I recommend adding to a more in-depth rent spreadsheet include:

• Tax Rate: Youâ€™ll need the Tax Rate to calculate your Net Income. If your country has a variable tax rate, look up your effective tax rate for this calculation.
• Individual Expenses: You can add one input that includes all of your costs. However, I recommend creating multiple categories, including insurance, payments, groceries, transportation, utilities, etc.
• Net Income: A space for results to show whats left from your income after all expenses are taken out.
• Rental Calculation: Figure out how much of the net income youâ€™d like to spend on rent.

• One-Off Payments: like a security deposit and removalists.Â
• Cost of Living: When adding values for your utilities, groceries, and other expenses, make sure they match where youâ€™re moving to, not where you currently live.
• Debt: Consider your existing debt and account for any recurring payments towards it.

### Using the Rental Calculator

I’ve created a simple rent calculator template that can be used in Google Sheets and Microsoft Excel.

There are two steps in the main rental calculator.

In Step 1, youâ€™ll use the input section to enter your income streams, tax rate, and expenses.Â

The spreadsheet then calculates your true net income and show you what percentage of your post-tax income expenses.

Step 2 allows you to choose a percentage of your leftover funds to spend on rent and provides a maximum rental payment amount.

Remember, banks usually use a 30% DTI to evaluate whether someone can afford a home. I’ll use that as the baseline for rent affordability.

### Optional Additional Features for Apartment Landlords

I also included another sheet in the rental calculator for landlords to calculate the profit or loss their property is making, considering the monthly gross income and expenses.

You may be able to use the losses to negatively gear your income tax, depending on where you live.

## What You’ll Need to Calculate Rent Affordability

Before you can calculate how much you should pay for rent, you need to understand your finances.

### Net vs. Gross Income

Net and Gross income are two similar-sounding financial terms, but they describe different aspects of a person’s income.

• Gross Income is the total income you earn before deducting expenses. This can include salaries or wages, as well as rent, bonuses, or investment profits. It is often referred to as your pre-tax income.
• Net Income is the total income left after deductions from gross income. This includes taxes, retirement contributions, and other deductions.

In short, net income is the money you can spend freely, whereas your gross income is what you earn.

Note: Net income does not normally account for spending on non-essentials, but for our calculator, you should still include regular leisure spending in the Other section.

### Fixed Expenses (Monthly Rent, Utilities, Etc.)

Fixed expenses are costs that remain the same over a specific period. Your budget’s fixed expenses can be a baseline for your financial planning.

Fixed expenses include rent, insurance, loan payments, and subscription services.Â

### Variable Expenses (Groceries, Entertainment, Etc.)

Variable expenses are the costs that can change every month based on your usage. You can’t predict these expenses exactly, but you can always have a good idea with careful planning.Â

When using a calculator such as the monthly rent one I have provided, you should use the maximum amount you consider any variable expense could be. That way, you wonâ€™t be left short of funds.

## Use Rent To Income Ratio To Determine Maximum Affordable Rent

The classic rent-to-income ratio is 30% of your take-home pay. Given the cost of living, this may not be an is not really an appropriate estimation anymore.Â

But Iâ€™ve included an extra sheet that can perform this calculation so you can make comparisons.

You may have noticed that the main calculator accounts for all of your expenses first and then allows you to check how much youâ€™d like to spend on rent from whatâ€™s left over. This method is closer to how banks ensure you can afford a mortgage and is a much safer way to calculate a sensible rental amount.

With that in mind, you may also want to consider buying a property instead if you have a lot of extra income left over in your monthly rent budget.

Buying and Renting a house can have pros and cons depending on the circumstances.

Renting a house offers:

• Flexibility as leases are typically short-term.Â
• Smaller upfront costs
• Fewer maintenance costsÂ
• Limited control over renovations or alterations

• You own an asset that generally appreciates over time
• You can make changes as you see fitÂ
• Significant down payment and maintenance costsÂ
• Potential dramatic cost increases with interest rate hikes

### Property Taxes for Homeowners

If you do decide to buy a home, there are a few things you need to know about property taxes. Your government sets these and are sometimes included in the monthly mortgage payments.Â

The assessed value of your house can change over time, usually after every three years, which may alter the taxes.

Local tax rates can also change, as local governments can change them for a set period or permanently.Â

Homeownership can also have some tax benefits. For example, there’s an Illinois property tax credit. It comes with some strings attached, but it can be a huge relief for taxpayers in that state.

Taxes differ in every country (and by state), so make sure you look into it for your area.

## Conclusion

Finding the amount you should pay for rent based on your finances can be challenging. Understanding your finances is winning half of the battle. Use our rent calculator to determine how much you can spend.Â