Can your tenants afford RENT + UTILITIES? 30% RENT 6% UTILITIES
This is another revisit to a prior blog where I address the issue of tenants and their ability to pay their utilities.
We always discuss how you should only be paying 30% of your monthly after-tax income on rent/housing.
Income and Budget Analysis
Let's take some numbers from 2019. The median household income in Worcester is just over $48k, which translates to approximately $4k a month.
Let's even say you don't pay any taxes!
Budget Breakdown
30% of monthly income for rent: $1200
6% for utilities: $240
First off, there are not any $1200 apartments anymore, so let's call it $1500.
Utility Costs
Internet: $50
Electricity: $100
Heat: $150
This totals $300/month for utilities. Therefore, just rent and utilities have broken your budget at $1800, or 45% of your gross monthly income.
Conclusion
If you don't think tenants can make these payments, you should be selling your rental properties as things will not get better.
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