So, you've decided to move out and rent a home of your own. First of all, congratulations are due. This is a very exciting process! It's important to note, though, you'll have to consider a whole lot of details before signing a lease.
We've gone through our fair share of connecting people to new rental homes. Now, we want to help you with this First-Time Renting Guide.
Let's dive right in!
Chapter 1: Consider your living location
It doesn't matter who you are- chances are you're going to want a say on where you live. Some people value their commuting time, while others may think the cost of the rent is important.
We will discuss the difference between living downtown and in the suburbs of a city.
Downtown (in the city)
Living downtown will always offer more amenities, attractions, transportation, and nightlife. However, the city could be slightly too noisy for some, and rentals come with a hefty price tag.
Here is a list detailing the pros and cons of living downtown.
Pros of living downtown:
- Close to activities, entertainment, shopping centers, and restaurants
- The best location for nightlife
- Transportation services are more accessible
- Shorter commutes to places
- More job opportunities
- A good option is you like a bustling lifestyle
Cons of living downtown:
- More competition in the rental market
- Less space/ Smaller rental units
- Higher cost of living
- Lack of parking
- Higher crime rates
- Higher noise levels
Suburbs (out of the city)
The suburbs are a great option for those who have families or just want a little peace and quiet. You'll also get more bang for your buck. Apartments are more spacious but still noticeably cheaper.
Let's go over the pros and cons of living in the suburbs.
Pros of living in the suburbs:
- A more affordable and less competitive rental market
- Large rental units
- Lower crime rates
- More green spaces, schools, and dedicated nature areas
- A lot more parking options
- Peaceful neighborhoods
Cons of living in the suburbs:
- Less dining, amenities, and entertainment options
- May need a car to get around town
- Less access to transportation services
- More competition in the job market
- Nightlife is not prominent
Like most things in life, it's always good to weigh your pros and cons when choosing your rental home. Living in the city may be a better option for young adults or students. On the flip side, the suburbs may fit a family lifestyle a little bit more.
Chapter 2: Rent costs should be within your financial means
The average monthly rent across the United States in 2021 was $1,124. For some, this may seem either low or high. Living in major metro areas will always mean higher costs of rent. However, you'll be used to lower rent values if you live in the suburbs of smaller cities.
A common misconception is that rent should cost a third or 30% of your monthly income. The reality is that in popular cities like New York City, the average cost of rent is as high as $2,810. Now, it's also been recorded that the average monthly income in New York is $3,319.
In these cases, budgeting for rent to be a third of your income is pretty much out of question. That's why following a strategy like the 50/30/20 Rule is a more sustainable way to budget.
The 50/30/20 rule
The 50/30/20 Rule divides your after-tax income into three categories- Needs, Wants, and Savings.
50% of your monthly income goes towards your 'Needs.' This category encompasses anything you NEED to live. Think rent costs, utilities, groceries, and transportation.
The other 30% of after-tax monthly income will go towards your 'Wants'. Things in this category will be anything that is not considered essential. We're talking about entertainment, take-out, subscriptions, restaurants, and shopping expenses. Any upgrades to services or buying a premium item will also fall under this category.
The remaining 20% of your money heads into your 'Savings'. People have different reasons to save. Some want to build a savings or emergency fund. Others may want to prioritize saving for their retirement. Regardless, it's always safe to put some money aside for savings.
Of course, this rule serves as a template. Every person should customize their budget to fit their lifestyle. If your budget is working for you, you should stick to it!
Chapter 3: Living with a roommate
Saving on rent is a big deal for many people (as it should be, rent is expensive!). The easiest way to remedy that is by getting a roommate.
It immediately removes the burden of paying rent all on your own. Roommates could be friends, relatives, a partner, schoolmates, or even random people.
Down below are some pros and cons involved when living with a roommate.
Pros of living with a roommate
Living with a roommate removes the stress of paying for the entire cost of the rent. Renting out homes with more than one person reduces the cost of living by 30%-50%. You and your roommate can also share other expenses like groceries and utilities.
Roommates can be great living companions. They can keep you company and even become one of your best friends.
It also doesn't hurt that roommates can help out with cleaning and home chores. If you're not at home for an extended period of time, you can usually rely on them to feed your pets or water your plants!
Cons of living with a roommate
Despite the benefits, roommates can also come with some risks. Sometimes, roommates don't align with your lifestyle. They may be too loud or too messy. Others may have financial issues that don't allow them to pay for their portion of the bills.
On top of that, having roommates also means having less privacy and sharing common spaces. If you like being on your own or have an unconventional schedule, a roommate might not be a good option for you.
Chapter 4: Save for upfront costs
A lot of first-time renters don't realize that landing a rental comes with many upfront charges. The costs can come under the guise of deposits or fees.
Below is a list of some upfront expenses that you may encounter when renting a unit:
- Application fees. Before signing any lease, you may have to incur the cost of application fees. Application fee costs will range but are usually between $35-$50 per application. Lighthouse covers application fee costs, so you don't have to worry about that!
- Security deposits. Landlords charge this deposit before you rent a unit to cover any damage caused to the unit. The cost typically amounts to one month's worth of rent. This deposit is only returned to you once you move out and if the place is left in its original condition.
- Cost of the first and last month of rent. This is the biggest upfront renting cost. Most landlords make you pay the first and last month of rent, in full.
- Pet fees. Pets are not exempt from these added charges. Many landlords will charge a pet deposit fee to cover any potential damages that the pet may cause to the unit.
- Renters insurance. Renters or home insurance is mandatory for many rental properties. If your landlord requires you to have insurance, it will be stated in the lease. Lighthouse offers quick and affordable renters insurance coverage.
- Utilities. Many rental units only cover the cost of some utilities. You may very well have to pay for your internet, water, gas, or electricity.
- Moving costs. You may need to hire a moving truck or a moving company. Of course, that depends on the amount of furnishings you have or if you're coming from a ways away.
Chapter 5: Determine your non-negotiable items
Let's face it- some of us just have those things we can't live without. Before searching for a rental unit, determine what specifics you have to have in your home.
These items could vary from having a parking spot to in-unit laundry to your living location. Figuring out your non-negotiables before searching will make the process a lot easier!
Check out this chart we made of non-negotiable items you may want to consider.
Chapter 6: View multiple listings
As we all say- the more listings you view, the merrier. Visiting prospective rental units in person will give you a clear view of the condition of the home. To build off of that, the chances of finding your 'perfect home' will be higher if you view more listings!
You also get the benefit of feeling out the place and neighborhood. You might realize during a viewing that the unit is smaller than in the pictures. Some others figure out that the area doesn't suit their lifestyle.
Chapter 7: Protect yourself from rental scams
Even the rental market can't escape scams nowadays. It's important to keep an eye out for 'rental red flags' to protect yourself from scammers.
Two of the most popular scams are phantom rentals and hijacked ads. Phantom rentals are scammers who make up listings of places that don't exist. Hijacked ads are modified rental ads that are placed on other listing platforms. The rental unit exists, but the people behind the listing are not real property managers.
Below are some tell-tale signs of rental scams:
- The landlord claims they're out of the country.
- The landlord won't show the unit.
- The landlord insists on being paid before a lease is signed.
- There are grammatical errors in the listing.
If you believe you are being exposed to a rental scam, report it to the FTC or contact your local police agency.
Chapter 8: Save money using cash back or referral programs
We've all come to terms with the fact that rent isn't cheap. But, there are things we can do to help that! And saving money is always a welcome bonus.
Many property management companies offer referral programs. By referring a new tenant to their building, they'll discount your rent or give you a fixed profit.
Another method to save money on rent is by using cash back programs. Lighthouse partners up with landlords to offer you cash back when you sign a lease. Our team of housing experts even helps you find a rental and waives the application fees.
Chapter 9: Requirements that may impact your rental application
Rental application fees can quickly add up. And on top of that, they're pretty time-consuming.
That's why we strongly recommend checking the prerequisite rental requirements before applying. It'll make your chances of getting accepted a lot higher. You'll also get the added benefit of understanding their eligibility criteria.
Below are requirements that are commonly required to rent a unit.
Having a criminal record may impact your eligibility when applying for a unit. Unfortunately, it's going to hinder your chances of getting your rental home.
Some larger management companies have policies against those who have a criminal record. Although, many make exceptions if you have a co-signer or if your conviction was not violent or drug-related.
Another option is renting privately. Many private landlords will usually offer more leeway. They like to build more personal relationships with their tenants. That means they'll often overlook your past to give you a chance.
Having a lower credit score (between 300 to 579) may also present some trouble if you're trying to rent. Landlords want to ensure that you can pay rent on time.
If you have bad or no credit, you still have some options. Many landlords will disregard your credit score if you have a cosigner. You can also pay upfront, or you could lease a unit with other people.
You could also consider renting during a low-peak season. At these times, landlords may be in a pinch and want their units rented out quickly. As such, they may be more inclined to excuse your credit history.
Landlords will oftentimes look at your rental history. They will frequently call your references or past landlords. The reason being is that they want to determine if you have a history of being a good tenant.
Prospective landlords will also investigate some other factors. Checking your eviction history, social rapport, payment history, and tenancy is also common.
Having a good rental history will make you seem like a reliable tenant. This increases your chances of being picked for the rental!
Chapter 10: Understand your lease agreement
Leases are very simple but complicated at the same time. Simple because they're typically straightforward. They include rules, regulations, cost of the rent, details about living in the building, etc.
The complicated part is because this is a legally binding contract. You should read it carefully, so you know what you're agreeing to.
We totally get it! Reading over your entire lease may seem tedious. But you must understand what you and your landlord are liable for. You'll both have different responsibilities and rules, so you don't want to go into it blindly.
Many rental properties will pay for some of your utilities. That could be anything such as trash, sewage, water, gas, Wi-Fi, or electricity.
Landlords will usually mention what utilities are included in the rent. If they do include any, make sure they're clearly stated on your lease agreement.
As a tenant, you'll be tied to a contract once you sign your lease agreement. These agreements are set for certain times lengths and are legally binding. Most lease lengths are a year long.
Some of you will know beforehand that you plan to break your lease. If so, you'll want to find out what the cost of the termination fee is before signing. Every lease is different and will abide by state rental laws. Termination fees in some states can be as high as three months of rent. That's a hefty price to pay, so it'll be worth it to figure this detail out early on.
Subletting your rental unit
It's also going to be essential to check if you can sublet your unit. This precaution comes in handy if you want to move out early (and don't want to pay rent for a place you're not living at).
Many property managers will re-rent your unit if you break your lease early. If you find a new tenant yourself, many landlords will also allow them to take over your lease.
Despite these circumstances, you may still have to pay an early termination fee. You also can't forget to supply that 30-day move-out notice!
With that being said, you've reached the end of our guide. We hope we covered all of your questions and uncertainties about the rental process!
What was something new that you learned from this article? Leave your questions and comments down below.