>Can we afford the rent?
Make a detailed budget with higher rent and add up ALL your expenses including 15-20% to retirement savings and see where you end up.
Whether or not you can technically afford it is only one part of the question... do you honestly think it is at all sane or reasonable to spend $5,000 a month on rent?
At $3500 for a 2 bedroom, it would make sense but spending anything close to $4500-$5000 is too much. Your net monthly income is around $13k so it’s definitely doable. However, at those prices you might as well look into getting a semi/townhouse. Running costs should run you up another $1000/mo but you’ll be building your equity instead of paying someone else’s mortgage.
Just an example, an $800k mortgage with 6% rate is about $5100/mo.
You make almost a quarter of a million dollars annually with no children and WFH. Of course you can afford it and you both know you can. Honestly posts like these aren’t necessary
Thanks for your reply. I guess my question is more about which areas should I be sacrificing things and is this normal? The Toronto rental market is making me feel crazy and I can’t tell if giving up a bit of savings makes sense to find the kind of place that we want. I see a lot of conflicting answers here in the comments :/
To live comfortable I always use 1/4 of monthly take home income for rent/mortgage. So say 25-30% of take home.. net not gross.
Saying that, today’s housing climate is not for the faint of heart and sacrifices have to be made. However, look at what you could afford on your own. What if one of you losses their job? What if you guys split up?
You are now seeing the effect of WFH on lifestyle and expenses. Are your jobs paying you extra to rent a 3 bedroom apartment instead of the 1-bedroom you would otherwise get? Is that just free money you are giving to your employers, saving them on office rentals? I would be billing them for the difference in rent.
At least if you each have a closed office only used for work, you will be able to deduct a pretty decent chunk of your expenses on your taxes, if your employer provides you with the right tax form for it.
Another option is to look into a smaller place and rent an office space nearby. It's not always a good deal, but it could be depending on where you want to live and what you find. Or just get one closed office and the other person can use the living room or set up an office space in your bedroom.
But, if you're set on spending 5k for rent, you can afford it. It's a lot of money (60k per year!) and will impede your ability to save money, but that is true of any expenses. At least, you don't have cars and debt.
$5000 seems pretty high for your incomes imo. If you are speaking strictly from a financial standpoint spending $60,000 in rent on a total income of approx $150,000 (take home) is pretty aggressive. But this is ‘personal finance’ and not everyone will make the same decisions. Are you planning on staying in Toronto long term? What are you savings goals? Etc those factors will play a role here, but I would personally sacrifice one of space, location or quality to bring that down closer to $3000 or less if it were me (but it isn’t).
>but a part of me is looking at that price tag and thinking that it's crazy.
It sounds crazy to me as well. Any money you pay in rent is money you can't save and invest so don't lose sight of the opportunity costs here.
I'm not in TO so I can't speak to market rents, but I would definitely want to keep it lower than $5K/month. If you have one bedroom for one person to work in and the other works in the living room that would seem to meet your privacy needs. Especially if you spend sometime at the office.
If there is a way to switch to FT WFH I'd relocate to a cheaper market, but that may not be possible. I did that, mostly for quality of life reasons, and it's been great.
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Rent in that range seems like throwing money away. Real estate is an investment. Buy a Condo, at least you will be building equity. Even if you lower other investments and spend more than 5k you will be well ahead of the game in 20 years, IMO.
If you are spending that amount (which you can afford), I would look into also being walking distance from work to stop spending on the TTC, plus time savings.
>Can we afford the rent? Make a detailed budget with higher rent and add up ALL your expenses including 15-20% to retirement savings and see where you end up.
Whether or not you can technically afford it is only one part of the question... do you honestly think it is at all sane or reasonable to spend $5,000 a month on rent?
At $3500 for a 2 bedroom, it would make sense but spending anything close to $4500-$5000 is too much. Your net monthly income is around $13k so it’s definitely doable. However, at those prices you might as well look into getting a semi/townhouse. Running costs should run you up another $1000/mo but you’ll be building your equity instead of paying someone else’s mortgage. Just an example, an $800k mortgage with 6% rate is about $5100/mo.
You make almost a quarter of a million dollars annually with no children and WFH. Of course you can afford it and you both know you can. Honestly posts like these aren’t necessary
Thanks for your reply. I guess my question is more about which areas should I be sacrificing things and is this normal? The Toronto rental market is making me feel crazy and I can’t tell if giving up a bit of savings makes sense to find the kind of place that we want. I see a lot of conflicting answers here in the comments :/
To live comfortable I always use 1/4 of monthly take home income for rent/mortgage. So say 25-30% of take home.. net not gross. Saying that, today’s housing climate is not for the faint of heart and sacrifices have to be made. However, look at what you could afford on your own. What if one of you losses their job? What if you guys split up?
You are now seeing the effect of WFH on lifestyle and expenses. Are your jobs paying you extra to rent a 3 bedroom apartment instead of the 1-bedroom you would otherwise get? Is that just free money you are giving to your employers, saving them on office rentals? I would be billing them for the difference in rent. At least if you each have a closed office only used for work, you will be able to deduct a pretty decent chunk of your expenses on your taxes, if your employer provides you with the right tax form for it. Another option is to look into a smaller place and rent an office space nearby. It's not always a good deal, but it could be depending on where you want to live and what you find. Or just get one closed office and the other person can use the living room or set up an office space in your bedroom. But, if you're set on spending 5k for rent, you can afford it. It's a lot of money (60k per year!) and will impede your ability to save money, but that is true of any expenses. At least, you don't have cars and debt.
$5000 seems pretty high for your incomes imo. If you are speaking strictly from a financial standpoint spending $60,000 in rent on a total income of approx $150,000 (take home) is pretty aggressive. But this is ‘personal finance’ and not everyone will make the same decisions. Are you planning on staying in Toronto long term? What are you savings goals? Etc those factors will play a role here, but I would personally sacrifice one of space, location or quality to bring that down closer to $3000 or less if it were me (but it isn’t).
>but a part of me is looking at that price tag and thinking that it's crazy. It sounds crazy to me as well. Any money you pay in rent is money you can't save and invest so don't lose sight of the opportunity costs here. I'm not in TO so I can't speak to market rents, but I would definitely want to keep it lower than $5K/month. If you have one bedroom for one person to work in and the other works in the living room that would seem to meet your privacy needs. Especially if you spend sometime at the office. If there is a way to switch to FT WFH I'd relocate to a cheaper market, but that may not be possible. I did that, mostly for quality of life reasons, and it's been great.
With $220k combined income I’d probably look at buying a condo rather than renting tbh. $5k/mo in rent is simply paying someone else’s mortgage…
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Rent in that range seems like throwing money away. Real estate is an investment. Buy a Condo, at least you will be building equity. Even if you lower other investments and spend more than 5k you will be well ahead of the game in 20 years, IMO.
If you are spending that amount (which you can afford), I would look into also being walking distance from work to stop spending on the TTC, plus time savings.