The Real Cost of Renting: How Much Can You Afford?

The Costs of Renting: How Much Can You Afford?

The price of rent is only one of many costs you need to factor into your budget when deciding where you want to live. Much like owning a home, there are additional fees you will incur when moving into a rental property.

Here is a list of expenses to think about when pricing out a new apartment, home, condo, or townhouse for rent, all of which will give you an idea of how much you should save before signing a lease so you are prepared for all the upfront and long-term costs of a new tenancy.

Security Deposit

Landlords are allowed to charge a security deposit when renting out a residential property to a tenant. The amount that they can charge varies with each state’s security deposit limits, but some states do not impose limits on how much a landlord can charge. Laws also vary for when the landlord must return the deposit to the tenant after the lease is over.

The deposit is insurance for the landlord in the event that you cause damage to the property or break terms in the lease. As a renter, a security deposit is typically equivalent to the first months’ rent, but can be lower or higher, depending on where you live. Save up at least double or triple the rent payment so you can be financially comfortable for the first couple of months.

Whether or not this money will be given back to you directly depends on your responsibilities as a tenant, which is why it’s important to keep the property in good condition.

Pet Deposit

The rules on pet deposits vary by state. In some states, landlords are allowed to charge a separate deposit for pets, which may be returned to the tenant at a later date, or a pet fee, which is not refundable at the end of the tenancy. Others must include it with the security deposit, so long as the overall amount does not exceed the state’s specified limit.

If you have a pet, you are most likely looking for a pet friendly space to begin with. It is the landlord’s choice if they want to allow animals in their investment property as part of the rental terms. Ask the landlord whether they allows pets, and if so, whether they charge a pet fee or require a deposit. The cost varies, but deposits tend to be around $200+ for a one-year lease, and/or a monthly fee of around $10-$50, depending on the type of pet you own and the state you live in.

Insurance

Your landlords may ask you to get renters insurance to insure your valuables and possessions in your apartment. This is to protect your property should there be a fire, flood, or theft in the building. You can get tenants insurance from most insurance providers, or ask your landlord for a referral. The cost will depend on the type and amount of coverage you want, the deductible you want, and the location of the rental. The average cost for renters insurance in 2010 was around $185/year.

Utilities

When searching for a rental, find out if the utilities are included in the rent price. This will include gas, water, and electricity. Some landlords will cover gas and water, and have tenants set up their own electricity. Go over what costs are included in rent and which are not, so you can budget your first month’s utilities. The landlord should be able to provide you with an average monthly cost. Also note that if you do not already have an account with a utility provider, there may be a first time fee to get set up.

Moving Expenses

Depending on how much you own, and your access to a truck or van, or even your availability to move, you will incur moving expenses one way or another.

Hiring movers to pack and deliver your stuff may take some stress off of you while you are taking care of other responsibilities. Movers usually charge by the hour and your costs will change if you are moving locally or if you are relocating farther away. Trucks, tolls, gas, and packing may be charged separately.

You can save money by moving on your own, but it may require more effort on your end. Instead of doing it all yourself, enlist friends or family to help you. In this case, set aside some money for gas, or a thank you gift for those who pitched in.

Furniture

If this is your first rental space, you are acquiring more square footage, or you moved out of a place that you were living with someone else, such as a roommate or partner, then you may need to list out the furniture or appliances you need for your place if you don’t already have them. A list will help you prioritize what you need, versus you want.

Accepting items or furniture from friends and family can be a frugal way to get yourself situated without spending a lot. You can always upgrade your things once you are settled, or when you have rebounded from the initial costs of moving. Another money-saving alternative is to buy things second-hand or look in the classifieds for items you need.

Commute

Is the rental property close to your workplace, your doctor/dentist, your family, your bank, or any other place you regularly visit? Think about the location, and the transportation cost of commuting to and from your job every day, or to the gym/bank/library you frequent. Gas prices and transit passes should be included in your budget, as well as your time spent commuting, as it will all add to your cost of living.

Repairs

Generally, your landlord will include repair provisions in your lease agreement. If a repair is needed, such as a leaking shower, or the oven doesn’t work, these costs will be covered by the landlord. However, if you broke something, you may be responsible for the damages. While this may not seem like a cost you should anticipate, it’s always important to be prepared or set aside a rainy day fund for these unexpected costs.

Parking

Is parking available near your building? If so, do you have to pay extra for a stall? This is important to know, because some buildings charge an extra amount per month for a stall. If you own a vehicle, having a parking space is essential. If parking is free, then that is one less cost you will need to worry about.

Miscellaneous costs

Other costs to anticipate include:

  • Cable, telephone, and internet subscriptions and installation
  • Laundry costs if there are coin or charge card machines in the building, or you have to visit a laundry mat to wash your clothes.
  • Trash removal
  • Late fees on rent; many landlords will charge a flat fee per day on every day you are late with your rent payment
  • Rent increases; if you are not locked in a fixed term lease then you may be subject to rent increases over the months. Keep this in mind when signing your lease, as it could affect your future cash flow.

Pricing out the Perfect Rental

Your home should be a place of peace and comfort, not a heavy cost that is going to drain your bank account. Research and budget out a space that you can afford, and one that you can sustain the costs of over several months. When you’re struggling to make ends meet because your rent costs are taking up a good portion of your pay check, it’s probably not a place you can afford to live in to begin with.

If you find that you simply cannot afford a place to rent on your own, a roommate can help with the costs of living—by splitting both the rent and utilities of the rental.

Most importantly, ask the property manager or landlord for full disclosure of all costs associated with the rental so you can stay within your financial limits, and enjoy the space you are in.

What other costs should tenants be aware of when renting? In your opinion, what percentage of a pay check should go towards rent?

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Kristy DeSmit

Marketing Specialist at LawDepot
Kristy is an avid blogger, Twitter enthusiast, and company legalese interpreter.
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