Rent an apartment or home? Here’s what experts say you need to know

It can be stressful to look for an apartment or a house to rent.

Rental prices have risen well above their pandemic lows and are now among the biggest inflationary pains for US consumers along with food and gas prices. Several factors have contributed to the rising rents, including low housing inventories. It is a vicious circle: Smaller inventories drive up house prices and result in more potential home buyers choosing to rent, which in turn drives up rental prices.

Take New York City as an example. Data provided by StreetEasy shows a dramatic increase in the housing market. As of February, rents in Manhattan have risen 36% year-over-year, and rents have risen more than 15% in the suburbs of Brooklyn and Queens. But rising rents are not limited to metropolitan areas. Demand for single-family homes is rising as rents rose a record 12.6% year-over-year in January, according to a recent report by CoreLogic.

The current dynamics of the real estate market make it even more important to know your budget and have all your documents ready as the first steps when you begin a home search.

Preparation of a housing budget

When it comes to deciding how much you want to pay for a new place, it is crucial to know what you can afford. People need to consider more than just the monthly rent when creating a budget, according to Sophia Bera, a certified financial planner and founder of Austin, Texas-based Gen Y Planning. “People have to calculate their current expenses,” Bera said. “Do they have any monthly expenses, such as student loans, credit card debt or car payments?”

She recommends using a rent calculator like the one available at rentcafe.com. People can enter the zip code they are looking for a rental within, their monthly income, pre-existing debt, and then will recommend a budget. A good rule of thumb for renters is to spend about 30% of the monthly return on rent, according to Bera. Paying up to 40% can start to affect how much you can save and spend on other activities.

Expenses for rental application

Many landlords or property managers charge an application fee when you are interested in renting a property. This can be as low as $ 20 (where New York City limits the fee), but run as high as $ 50 in many places.

States, cities and apartment complexes can all have different requirements. Still, most rental applications require similar information for each applicant so that they can confirm your identity and your ability to pay rent. Information may include your personal contact information, social security number, current and past addresses, employer information and proof of income and credit reports. Having these documents ready can help get you approved faster.

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The fee should not be a deal breaker, but because the application process often includes a background check and credit report on a potential tenant, the application fee can be assessed per. Any current credit report you can offer instead of having a credit check done again can help reduce application fees.

“It’s always worth trying to negotiate with a landlord so you might be able to pull past reports to avoid it,” says Jeff Andrews, a senior market analyst at Zumper, a rental platform. But he added: “It’s probably not worth getting into a huge battle because you have a larger recurring expense to negotiate that would have more effect to cut down. Rent.”

Real estate agent fees

There is a much larger expense to be included in a rental budget when working with a real estate agent – a brokerage fee if you end up signing a lease. When you start a rental search, you want to make sure that you have enough savings to cover this fee, which can be high.

A brokerage fee is like a finder’s fee, typically around one month’s rent or 10% to 15% of the annual lease. While you may be able to find an apartment without a realtor, it gets harder in larger cities, Andrews said. Most online housing platforms allow you to filter a search for apartments that do not require the payment of a brokerage fee.

While such a hot real estate market as the current one provides less leverage for the tenant, it can be helpful to rely on personal networks, social media and online bulletin boards if you want to avoid a fee (however, be careful with online bulletin boards as brokers also use them). In some smaller towns and cities, you can do your own search, drive around neighborhoods you target, and look for signs for rent right out in front of properties.

No matter how you search for an apartment, be sure to ask any real estate agent you end up working with if there is a brokerage fee involved, because unlike a deposit, you will not get this back.

Security deposit

Typically, landlords will ask new tenants for a deposit, which usually equates to one month’s rent, as well as the first month’s rent, before the tenant moves in. After a lease is terminated, tenants should get their security deposit back, minus any costs for repairing damage to the apartment. However, there are a few basic steps to take at the time of the rental to increase the chances of a deposit being returned in full.

Documentation is your best friend, Andrews said. “First, make sure you are familiar with what the lease says about the security deposit. If it is not detailed, push the landlord to have the details inserted into the lease,” Andrews said. If a tenant owns a pet, make sure you are aware of the damage to the pet that you may be on the hook for.

Landlords often hire property managers or maintenance personnel to service anything that may break in the apartment. They do not want tenants to try to make their own repairs. If something breaks, such as a lighting fixture, refrigerator or toilet, it is best to alert your landlord as soon as possible.

Andrews also recommends taking detailed photos of the condition of the apartment before and after moving in and moving out. “It’s also best to create a paper trail, so sending an email to the landlord or property manager with the photos when you move will help you later if you need to prove you have not damaged the property,” he said.

Each lease will be different, Andrews said, so it’s important to address any concerns with the landlord. If a new tenant owns a pet, make sure the terms are specified, as the landlord is likely to want the tenant to convert any damages.

Your credit score and rental

Since many rental applications include a credit check, there are a few things you can do in advance if you are concerned that your current credit score is adversely affecting your rental chances and want to improve it. Nr. 1: Pay any debt you can to improve your score quickly.

“If [you] have a credit card with a low interest rate or zero interest rate, then pay it off, “says Bera.

She also recommends that you call your credit card company to find out if they will increase your credit limit to lower your credit usage. Let’s say you have a limit of $ 5,000, but only spend about $ 2,500 a month. This is a utilization rate of 50 per cent. But if you can increase your limit to $ 10,000, the $ 2,500 will now be a 25% utilization rate. If you have recently started earning a higher income, banks are likely to offer you a higher limit.

In addition, Bera says that while talking on the phone with a credit card company, ask if they will lower the interest rate on any outstanding debt. “In some cases, banks will offer 0% interest for 6 months,” she said.

Requirements for first-time tenants

When someone rents out for the first time, landlords will often have a guarantor to sign the lease with the tenant. A guarantor is a person who guarantees a tenant’s payment on a lease. If you are unable to find a guarantor, it can convince the landlord to waive a guarantor if you can prove ample savings and a strong credit rating. Renting from a small business or individual landlord can also work to your advantage.

If you have been approved to move into a new building or dwelling, the landlord or property manager will ask you to sign a lease. “Read your lease! It’s a legally binding document you sign. Do not be afraid of legalization,” Bera said.

“Anything that looks sloppy, unprofessional or incomplete is a big red flag. The lease must be detailed and comprehensive,” Andrews said. He recommends reviewing each page of the lease. “I think it’s best to have a comprehensive understanding of the lease so you know what you’re getting into. Through that process, things that are scary or unpleasant for you will come out,” he added.

Before signing anything, read it at least twice. Fines for late rent are common. There may be clauses in the lease that prevent you from subletting the apartment and specific time frames that you must meet if you want to break the lease ahead of time. Some landlords will also include clauses about the number of guests tenants may have over and the duration of their stay. It can also help to get a friend to re-read the lease to make sure you have not missed anything. If you have a friend or family member who is a lawyer, even better.

Relocation costs

If you are approved for rent and have covered all the direct fees and expenses, do not forget to include an extra large budget item: the relocation costs. Moving across state lines will be far more expensive than if you just move within a city. People should also decide how much service they need. If you plan to move alone or with roommates, it will be cheaper than hiring movers, but more physically demanding and time consuming.

For people planning to take the do-it-yourself method, compare prices between different truck rental providers. Also consider what supplies you will need – boxes, tape, moving blankets, stretchers.

Websites like Moving.com can help you estimate how much it will cost you to move with a cost calculator. There are also plenty of costs to consider, ranging from fuel costs to the size of your move, relocation supplies and relocation date. Weekend removals tend to be more expensive than mid-week removals. Relocations that take place during the high relocation season, typically April – September, can also be more expensive.

If you hire movers, the weight of your belongings will affect the cost. For long-distance movements, that’s about $ 0.70 per pound of goods for every 1,000 miles, according to Joshua Green of My Moving Reviews. For shorter, local moves, he estimates it’s around $ 60 an hour.

When hiring movers, do not forget to budget with a tip of around 15% to 20%.

Tenant insurance

Finally, tenant insurance is a must-have according to Bera. Not only is this insurance affordable, but some insurances include additional protection for pets or expensive electronics. Online insurance platforms like Lemonade.com offer insurance rates that start as low as $ 5 per person. month. Insurance customers can often get better rates when they collect insurance from a provider, so if you already have car insurance, for example, it’s worth asking your current insurance company what rental insurance options they offer.

Andrews says tenants should definitely take out insurance if they have something valuable in the house that could be lost or damaged in a fire.

Also check with your local government as some cities require renters to purchase insurance.

Finding a place to rent can be stressful, especially if it’s your first time looking and it’s under a booming real estate market. Knowing how much you can spend on your monthly income, budgeting with rent search and moving expenses and having your essential documents ready in advance can prepare you to act fast when you find your new place.

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