Finding an apartment is hard enough. Understanding the calculus of finding an apartment you can afford could make you wish you’d paid more attention in math class.

According to the latest annual report by the National Low Income Housing Coalition (NLIHC), "in no state can a minimum wage worker afford a one-bedroom rental unit at the average Fair Market Rent working a standard 40-hour work week, without paying more than 30% of their income."  In a market driven by supply and demand the scales may seem tipped against the renter, but it’s important to realize that property owners are also in a bind in that they need dependable cash flow to maintain operations, and the individuals whose income has to stretch beyond 30% to cover their monthly rent will likely also present a payment risk. In these days where consumer credit worthiness is in the doldrums, perhaps it’s time to re-think what percentage of income should be allocated to housing. Would 40% make more sense? That’s a larger conversation for bigger math minds than mine.

For now, let’s look at what renters really need to know in budgeting for a new rental home. Take for example costs associated with a new one bedroom lease in rental markets like Charlotte, South Carolina or Austin, Texas. Here’s the math you have to assemble your budget:

1.       Twelve months rent @ $1,000 per month = $12,000. Anyone can get that far, but that’s only half the story.

2.       Twelve months rent @ $1,000 per month = $12,000 + one month rent security deposit @ $1,000 = $13,000, assuming your credit is less than perfect to go to lease signing. (Note, security deposit requirements can go up to as much as two months of rent if your credit score is seriously below the prescribed threshold.)

3.       For the sake of discussion, let’s assume there are no broker fees of 10-15% of the total annual rent (an additional $1,200 to $1,800 in cities like New York of  San Francisco), but there are other standard lease signing costs of approximately $300, which brings the total first year cost for someone with less than perfect credit to $13,300. That’s $1,300 in addition to the basic 12 months of rent equation most people use when searching for their next rental.

4.       As importantly that $1,300 needed on top of the first month of rent required at lease signing brings the total needed to get keys to your new place to a whopping $2,300. Let’s be serious – there aren’t too many wage earners below $50,000 who have that kind of savings in the bank, let alone a whole bunch of folks who can come up with that amount of cash without a) having to borrow it, b) drain any personal savings thus limiting their ability to pay their $1,000 rent consistently throughout their lease, or c) come up late on other rent related charges somewhere in their lease like utilities.

5.       Failing to pay lease obligations in a timely manner can add as much as $300 to $400, increasing your total first year cost or renting over $13,500.

6.       Peeling back your financial onion one more layer, If you’re outside of a major market and renting an apartment at $1,000 per month, chances are your annual salary is in the $40,000 to $50,000 range, representing the current industry norm of 30 to 35% rent-to-income ratio in approving someone for an apartment lease. Subtract another 28% for taxes from your annual  income, and you’re left with something in the neighborhood of under $25,000 to live on throughout the year. Wouldn’t it be nice if you hadn’t had to pay the security deposit of $1,000 to move into your new rental home?  For perspective, that would about 4-5% of your annual cash on hand still in your wallet or bank account.

While the above calculus is a more complete summary of what you need to budget for a new rental home, it still doesn’t solve the problem of having enough money to hand over to your new community at lease signing. It also doesn’t solve the problem of needing to budget very tight finances to make sure that rent can be paid on time each month so that the next time you go to apply for a lease your credit won’t add up to even more costs to qualify. Many rental operators are adopting new lease offer strategies that give rental applicants an option to security deposits. The most effective of these options is a rent budgeting program based on payroll deposits that works in much the same way as a college account. You (the renter) ask your employer to send a part of your paycheck to a rent budgeting account throughout the month before rent is due – in May so you have money put aside for rent on June 1^st, in June so you have money put aside for rent on July 1^st and repeat throughout each month of your lease. Your community is willing to waive the security deposit when you automate rent budgeting in this manner because they know your rent will be prioritized from payroll. At an average cost of under $15 a month that’s a pretty hefty discount for taking care of the major expense you have to take care of anyway – and easier on the wallet with a small monthly fee versus the larger fee upfront at lease signing. That’s math that adds up to real savings when you go to create a realistic rent budget.