Are You Financially Ready to Rent an Apartment?
Posted on Wednesday, June 14, 2017
Want to feel more relaxed about your first apartment? Get financially ready to rent an apartment.
Whether you are downsizing and choosing the rental lifestyle or you are moving into your very first home, the first time you rent an apartment can be both exciting and financially intimidating. What kinds of costs should you expect from your rental? Can you actually afford to live in an apartment?
Getting Your Budget in Shape
Before you move into an apartment, make sure that you are financially ready to take on this commitment. Get your budget in shape, and realistically assess whether you are able to move.
- Understand your real life budget. Before you move, look at how much you pay or will need to pay for all of the essentials and frivolities of life. If you have been living on a frugal budget to save money, will you continue this once you move into an apartment? Be realistic about how much you will actually spend every month.
- Consider all of the costs of living in your own place. For example, if you do not have in-suite laundry, you will need to pay to do your laundry. Forgetting about these additional expenses can leave you financially strapped.
- Do not rent at the very top of your budget. Make sure that you have a little flexibility in case your income changes or you have a consistent source of new expenses. According to The Spruce, "once you've tracked and documented your expenses before rent, add in a 5 percent contingency (just to be sure), and leave some for your savings account, then deduct your total expenses from your net income to see what remains of your paycheck."
- Know how much rent tends to increase every year and make sure that you will be able to afford the rent a few years from now.
- Have an emergency fund in case you have unexpected expenses, so that you will always be able to pay the rent. Ideally, this should be 3 months' worth of rent.
Understand the Ingredients of Your Apartment Rent
Your rent is not just your rent; it also involves a number of costs that you will need to pay monthly and up front. Know these costs before you leap into a rental decision. These costs involve:
- A rental deposit, which secures the rental for you. This will usually involve the first and last month's rent.
- A damage deposit, in case you damage the property while you are living there. This runs from $500 to an entire month's rent.
- A pet deposit, in case your pet damages the property.
- Monthly utility costs, which may or may not be included in the rent. If you have not paid utilities in the past, the utility company may also require a deposit.
- Apartment or street parking, which may cost you a monthly rental fee.
Know how amenities in the building can raise the rent or save you money.
What Raises the Rent?
When you are looking for the best deal on an apartment, what can lead one apartment to have higher rents than the others?
- The neighborhood matters a lot. The more upscale the neighborhood, with convenient access to amenities, culture, and transit, the more it will cost to rent an apartment.
- The amenities of the building matter. If the building has a pool or extensive grounds, these involve upkeep, and upkeep leads to expenses.
- The specific suite matters as well. If the suite has had significant updates, it will likely rent for more than a non-updated suite.
- Flexibility can raise the rent or limit your choices to higher-rental areas. If you are looking for an apartment building that allows dogs, you will have a more limited pool from which to choose.
If you have income restrictions, you will need to decide what is most important to you and what you can live without.
Finding the Best Rates When You Rent An Apartment
If you really want to move to an apartment but it seems a little expensive, how can you ensure that you will be financially well and achieve your dream? According to Bankrate, "a general rule of thumb is that rent should amount to no more than 30 percent of your income, but in some cases it’s likely that you’ll need to pay more — especially if you live in a big city." How can you keep your rent to less than 30-50 percent of your overall income?
- Choose your neighborhood and amenities wisely. Decide what is most important to you. Do not get frills that you cannot afford.
- Look at ways that those amenities can decrease your other costs. For instance, a shorter commute means less money spent on transit or gas. A pool and gym in your building could reduce your fitness costs if you typically purchase a membership.
- If you are moving from a stable living situation, be willing to wait for the right apartment to come along.
- Look into alternative rental arrangements, such as cooperatives. These can be less expensive than typical rental apartments.
- Consider living with a friend or family member who can split the rent with you.
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