THE 30 RULE OF THUMB — TO RENT, OR TO BUY?

1. THE 30% RULE OF THUMB — TO RENT, OR TO BUY? When it comes to deciding whether to rent or buy a property, the 30% rule of thumb is often cited as a helpful guideline. This rule advises that tenants should not spend more than 30% of their monthly net income on their rental home. If your monthly net income is R30 000, you are advised to spend no more than R9 000 on a property per month. While this rule is useful, it can be challenging to adhere to when buying a property. Qualifying for a bond can be difficult, and expenses outside of the bond, such as maintenance and repairs, can

2. quickly add up. This can result in spending up to 50% of your net salary on your home, leaving little room for other expenses. The reality is that the expenses outside of the bond often add up to an even bigger number when adding insurance and utilities to the initial amount. Your initial R9 000 per month then increases to R15 000 per month, increasing 30% to 50% of your net salary. Taking into account fuel costs, internet usage, and school fees (if applicable), you are left with +- R7 000 for the month, if you are lucky, and even then, a large portion of that R7 000 needs to be used for the various maintenance issues that could arise during the month. It is important to remember that the 30% rule of thumb is just a guideline. It is not a hard and fast rule, and many factors can affect how much you can afford to spend on rent. For example, your location, your income, and your financial goals will all play a role in determining how much you can afford to spend on rent. Due to the current economy and stagnant salary rates, property mogul Zahir Vallie suggests that younger people should rent instead of buy for now, to ensure that the 30% rule of thumb is achievable. Renting often provides more flexibility in lease agreements and maintenance costs, allowing tenants to maintain their 30% rule of thumb and have more financial breathing room.