For many future homeowners, renting is an important step at the beginning of the buying process.
If you’ve ever weighed the pros and cons of renting vs. buying a home, you may find that renting now and saving up for a home in the future is the best plan for you. There are certainly a lot of benefits to renting. Deferred maintenance, a lower cost of entry, and a more liquid pool of assets all can lead to the conclusion that renting is more cost-effective and practical for certain times in life. However, if you are currently renting and are hoping to buy in the near future, there are some easy–but vital–steps you can take to prepare and save for a home.
Properly Budgeting for Rent:
In order to add to your savings, you first have to stop living paycheck to paycheck. The first step is to ensure that when you rent, you’re not attempting to live above your means, and that translates to more than simply brown bagging your lunches.
The rule of thumb is that only 30% of your gross income should be going to rent each month (in fact, many property managers or landlords will refuse an applicant who does not provide proof of income 3 times the rent amount.) Unfortunately, all the budgeting in the world will not make up for living in a rental situation that you, realistically, cannot afford. Opt for a smaller rental or a roommate situation, if necessary, but stick to this rule.
Rent negotiation is not always an option, but there are circumstances in which a good tenant might have more negotiation power. If you have lived at a property for at least a year, you may find yourself ready to renew your lease. At lease renewal, if you would like to negotiate rent or find out that you are due for a rent increase, have a professional and honest conversation with your landlord. Your landlord may be willing to work with you if they’re concerned about losing you as a renter.
This conversation will only work if you get along with your landlord and have a history of on-time rent payments and if your landlord’s rental expenses allow for a percentage of wiggle-room when it comes to rental income. If your landlord is not able (or willing) to budge on your rental price, there are other amenities for which you may be able to negotiate. A free parking space, new upgrades to the apartment, free storage, or waived fees at the gym are all cost-saving benefits that landlords or property managers may be more willing to negotiate.
Saving on Additional Rental Expenses:
Remember, while you can’t always negotiate on rent itself, utility expenses can be flexible. Put dollars in your pocket in simple ways. Save money by switching your ceiling fan direction for the season, using energy efficient bulbs, and just unplugging items when not in use. Every step adds up to measurable savings.
Don’t forget to research the most efficient ways to keep your utility bills down by season. There cost-effective methods to keep your house cool in summer and heat your space winter don’t have to break the bank.
Other Things You Can Do To When Planning to Buy:
Report Rent Payments to Credit Bureaus
Did you know that landlords have the ability to report your rental payments to credit bureaus? One of the smartest ways to prep for home buying while you are renting, is to request that your landlord report your on-time rent payments. Why not ask, and ensure that one of your largest regular payments is helping your credit score! Having a great credit score will help you get better loan terms when it is finally time to purchase the house of your dreams.
Choosing to buy your first home–or simply your first home after renting long-term, has a lot of decisions factoring into it. Once you have decided that homeownership is in your future (even if it seems a bit distant) you have the ability to directly impact your savings and your credit score through small changes. The home buying process may take a lot of thought to navigate, but thankfully, these easy ways to save are painlessly simple.