One of the biggest surprises first time renters run into is underestimating the true cost of living on their own and how to budget for expenses beyond a monthly rent payment.
It is important that every renter understand there are expenses that need to be factored into their budgets in addition to a rent payment. Items like move-in costs, deposits, one time fees, recurring fees, and utility payments all need to be considered when determining how much a renter can afford to pay when deciding where to live.
Property managers and landlords are advised to accept rental applicants who can afford a monthly rental payment that is 30 percent their monthly income. A good landlord or manager will not try to trick a tenant into signing a lease without the tenant’s full understanding of all the costs associated with living in the rental property. That type of trickery not only sets the tenant up for failure but could lead to non-payment of rent, a costly eviction, and a vacancy, all at the landlord’s expense.
By being transparent about all the costs associated with renting, landlords and managers can find tenants that can afford to live at their rental property, ensuring that the tenants pay their rent in full every month.
The price of rent is only one of many costs one must factor into a monthly budget when deciding where to live. Much like owning a home, there are additional fees one will incur when moving into a rental property.
Here is a list of expenses to think about when pricing out a new place to rent, all of which will give a renter an idea of how much to save before signing a lease in order to be prepared for all the upfront and long-term costs of a new rental lease term.
Upfront Fees : Move-In Fees and Moving Costs
Besides regular monthly expenses, the amount of money required to move from one rental property to another requires some planning, budgeting and saving from your tenants.
To secure a rental property, you typically have to go through an application process that includes a background check. Property managers and landlords charge an application fee to pay for the credit, criminal and eviction reports they must purchase in order to evaluate your good renter qualifications. Application fees can also cover the administrative costs associated with the time it takes to verify income, employment, rental history and references.
Move-In Fees: First and Last Month’s Rent, and Security Deposit
After approval and upon signing a lease, your landlord or manager can ask that you pay as much as first month’s rent, last month’s rent, and a security deposit upon moving in. In some cases this means you need to have thousands of dollars immediately accessible in order to secure a rental property. Local and state laws dictate how much a landlord or manager can collect for a security deposit. Some states also do not allow landlords to require tenants pay last month’s rent upfront, be sure to double-check with your local and state landlord-tenant laws to see what is acceptable in your area.
Refundable Move-In Fees: Security Deposit
A security deposit is intended to be refundable, as long as the tenant does not damage the property and pays their rent. A security deposit is typically equivalent to the first months’ rent, but can be lower or higher, depending on where you live. 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.
Any charge that is referred to as a deposit should technically be refundable- this includes security deposits, pet deposits, and cleaning deposits. If the charge is non-refundable the manager should refer to it as a fee, for example: move-in fee, cleaning fee, pet fee.
Pet Fees: Pet Deposit, Pet Rent, Pet Fees
If you plan on living with a pet, expect to pay more for a pet friendly rental. Landlords can reasonably charge pet owning renters an additional pet deposit, as long as it does not exceed the state’s maximum deposit amount. Pet deposits are similar to security deposits and intended to cover the cost of property damage or required cleaning from a your pet. Ideally, your pet will not cause property damage and the deposit will be refunded.
Some management companies have adopted a pet fee policy, wherein they collect a nonrefundable pet fee at the start of tenancy, used to cover the cost of property damage, community pet rule enforcement or amenities, and cleaning upon vacancy. Additionally, you might be required to pay a “pet rent” which is typically $10-$20/month per pet.
Non-Refundable Fees: Move-In Fees, Cleaning Fees, Association Fees, Late Fees
Move-In fees are a relatively new requirement from some apartment managers. Move-in fees are nonrefundable charges that are used to make a rental property move-in ready for a new tenant during turnover like changing locks, reprogramming buzzers, updating directories and mailboxes. They are not intended to cover property damage expenses from a previous tenant.
Cleaning fees may be a required nonrefundable fee that pays for carpet cleaning and basic cleaning services to restore your rental property back to its original condition upon vacating. Tenants can sometimes avoid paying a manager cleaning fees by providing receipts from a professional carpet cleaner or cleaning service they hire themselves when moving out.
If renting a condo or home that belongs to a homeowners association, you could be asked to pay a one time fee for association dues or even a separate move in fee paid directly to the association.
Most management companies and landlords will charge you a late fee for rent payments that are not received on the due date. If you are forgetful about due dates, theses fees can add up quickly.
Besides the upfront costs paid to your landlord or manager to secure a new rental property, do not forget to think about moving costs like: movers, packing materials, truck or van rentals, transportation costs, storage, etc.
Recurring Monthly Fees: Rent, Amenities, Utilities
On top of your monthly rent, find out what other expense you will need to pay your management company or to another service provider for utilites.
Some recurring monthly expense to consider include:
- Apartment communities that offer luxury amenities may require an additional facility usage fee on top of your monthly rent.
- Parking: Is parking provided or do you need to rent a spot through the manager or purchase a city parking pass?
- Storage: Do you have enough storage in your rental unit or do you need to rent a storage locker from the apartment or pay for an outside storage unit.
- Utility Fees: Go over what costs are included in rent and which are not, so you can budget your monthly utilities. If utilities are paid directly to your landlord or manager, they should be able to provide you with an average monthly cost. If utility services are paid to the city or a private provider, visit the company’s website or call them to find out an estimated monthly cost for service in your area. Renters should budget for the following utilities – electricity, gas, water/sewer, trash/recycling, landscaping/yard maintenance, internet and cable.
- Renters Insurance: Some rental agreements require tenants to obtain renters insurance, which typical costs renters $10-$20 a month. Even if a lease does not require renters insurance, getting a policy is a low cost way to protect yourself and save money if you ever need to make a claim.
Besides the items stated above, additional living expenses renters should factor into their monthly budgets when considering rent affordability include laundry costs if the property does not have an in-unit washer and dryer and transportation costs if the property is located in a remote area.
As a property manager or landlord, offering success tips for great tenancy for your current and future residents and reminding your applicants about additional costs associated with renting your property, can help ensure they follow the rules outlined in your lease agreement including paying their full rent on time, every time.