Renting a home can be a substantial expense, and the amount spent on rent each month can have a significant impact on your overall financial picture. Rent is likely your highest monthly expense, and it's also a recurring cost that you cannot easily reduce once you've signed the lease. Letting rent payments take up too much of your paycheck can have both short-term and long-term effects on your wallet.
- Rent is often the largest recurring expense faced by households, where too much of your paycheck going to rent can cause both short- and long-term financial problems.
- Lowering rent once a lease is signed can be almost impossible, but there are ways to save on rent by looking for the right place to live before signing a lease.
- Selecting less desirable neighborhoods, getting a roommate or two, accepting lower quality amenities, and properly budgeting your living expenses are good strategies to save on monthly rent.
In the near term, high rent expenses can detract from the ability to make discretionary purchases, like going out with friends or taking vacations. In the long run, the consequences can be much more significant.
If paying rent does not allow you enough leftover cash put toward an emergency fund, a bad month or bout of unemployment could quickly land you in debt. If you don't have enough room in your budget to save for retirement, you'll also put yourself at a disadvantage by giving up valuable years of compounding interest. If you have some existing debt, overly high rent can slow down your repayment and increase the interest amounts you owe.
Spending more than you have to on rent also postpones the day when you'll be able to call yourself a homeowner. Fortunately, there are many strategies for reducing your rent.
Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).
Location, Location, Location
If you decide to live in a highly desirable area, you will pay a pretty penny for that privilege. On top of that, some densely populated neighborhoods will require an additional monthly fee for a parking space or neighborhood association fee.
However, if you live just a few miles away from the center of the hip neighborhoods, you can still easily take advantage of their amenities while paying substantially less each month.
Moreover, when you live within easy walking distance of a grocery store, shops, restaurants, movie theaters, and bars, it's much easier to make impulse purchases or overspend on entertainment. Thus, living further away may force you to give a little more thought to your shopping trips and help control your spending.
Keep in mind that there is a balance to be struck. Higher-paying jobs are often in the same areas that are the most desirable to live in. If you work in one of these areas, don't relocate too far away or the savings in rent may get eaten up by increased transportation costs and reduced quality of life from all the time you'll spend commuting.
Be Flexible in Your Definition of "Nice"
Instead of looking for an apartment with granite countertops and stainless steel appliances, your definition of "nice" could be amended to simply mean a place that is free of major maintenance problems, insect infestations, safety issues, and bad neighbors.
You're unlikely to find a shiny new dream apartment for a bargain-basement price. However, you might be able to find a solid place if you can overlook some things that will have very little impact on your overall quality of life—such as shabby carpets that can be covered with area rugs or an ugly building exterior that you'll rarely have to see).
Find a Roommate (or Two or Three)
Acquiring just one roommate can shave 30% to 50% off your basic living expenses, including rent, utilities, and even food if you're willing to share groceries.
If you're able to sacrifice some privacy and peace and quiet, having roommates can allow you to spend less, get a nicer place, or live in a nicer location. If you play your cards right, you may even be able to capture all of these advantages, and you may even make new friends.
Be a Smart Rental Market Shopper
Although it can require a significant investment of time, patience, flexibility, finding an apartment at below the market rate is not impossible. In addition to perseverance, you'll need some familiarity with the real estate market. Do your research in advance so you'll know what constitutes a high, low, and average rent in your target neighborhood.
You'll also have to stay on top of the listings so you'll be able to view places as soon as they go on the market. Apartments that are a good value get snapped up fast.
Know what you're looking for in advance, which puts you in a position to take decisive action if you find the right place. Make a list of the key qualities your apartment must have, must not have, and would be nice to have.
Finding a Place
When you're out looking for a place to live, be sure to bring all the information that you will need to complete a rental application, particularly information you may not have memorized. Be ready to submit an application on the spot by having your Social Security number, employment history, personal references, and the names and numbers of any previous landlords on hand.
In competitive markets, don't hesitate to attach a short note to your application detailing why you'll make an ideal tenant. This will set your application apart from the others.
Be patient, though—there's a lot of low-quality and overpriced apartments out there. You'll probably have to look at a lot of places before you find the right place. But don't settle for less than what you really want. You're going to be spending a lot of time in this place after all. Also, listings are sometimes outdated, and you may think you've found your new home only to learn that someone else has already rented it.
The more places you look at, though, the better able you'll be to evaluate each additional apartment you view. Keep in mind, however, that many places charge a modest fee (typically $35 to $75 per person) to run your credit and otherwise process your application, so keep the application process saved for the ones you're truly interested in.
Above all, know that just because the going rate for units in your target neighborhood is a certain price, this doesn't mean you have to pay that much. Just as there are upscale units that may cost well above that price, there are also bargain units that will cost less.
Get the Details
If your rental application is approved, don't impulsively sign the lease. First, ask your potential landlord lots of questions about the unit before you contractually obligate yourself to a year's worth of rent. Ask if the unit and building have had any insect or rodent problems or other significant issues, plus any noise issues. Perhaps your neighbor-to-be has a baby or there is an airport nearby that you aren't aware of.
Also, be wary of large security deposits. In most areas, it's possible to move in with just the first month's rent and a deposit equivalent to one month's rent. Some landlords will ask for the first month's rent, last month's rent, and a deposit, but that can be harder to come up with when you're young. Local laws will dictate legal limits for deposits. If you have a pet, it is normal to pay an additional pet deposit or even a small monthly "pet rent."
Know the Potential Costs of Any Outcome
Be aware of the rules for breaking your lease before you sign it. If you end up hating the apartment or the neighborhood, what are your options for leaving? What if you have to relocate for a promotion or job change? Make sure the penalties for leaving and the rules for subleasing are clearly stated in your lease. Don't take the landlord's word on anything.
The lease should also outline any fees for late rent payments or the repair of problems caused by you (such as unclogging a drain or letting you in if you lock yourself out). Also, ask about the typical rate and amount of rent increases. Some areas have rent control or reasonable landlords who stick with cost-of-living adjustments (COLA).
The Bottom Line
If you're willing to make compromises on the less important things and to invest the time to read lots of ads and look at numerous places, you're likely to find the perfect apartment for you at the perfect price. The extra time and effort spent finding the right place will pale in comparison to the amount of time you can spend regretting rambunctious neighbors, a shoddy unit that's always in need of repairs, or a huge rent check that forces you to sacrifice other goals like taking a vacation, paying off debt or saving for a down payment on a house.