If you’re not going to stay in the area for at least two years or you’re not financially ready to buy a home, renting is likely your best option. At the same time you’re renting, you might also be preparing to buy a home, and you can use the time to improve your credit or save up for a down payment. Here are 15 financial tips to help you optimize your finances when renting.
1. Save for and Understand Your Security Deposit
You’ll be required to pay a security deposit before you move in. It helps to save up for the deposit ahead of time. In addition, it’s important to understand the laws surrounding the security deposit. In California, for example, it’s illegal for a landlord to say that the security deposit is nonrefundable, because the landlord must refund it unless you leave owing rent or cause damage.
When you move in, take photos of the entire apartment, document repairs that need to be made and have the apartment manager sign off on them. In addition, get clarification on how and when to report future maintenance issues. This documentation can help you avoid losing some of or all your security deposit later when you move out.
2. Put Aside Money for the Apartment Application Fee
Landlords often charge a nonrefundable application fee or application screening fee to potential tenants. The fee is meant to cover their costs of doing background or credit checks — or both. As with the security deposit, each state has guidelines that landlords must follow. Washington and California, for instance, forbid landlords from charging more than they pay for the background checks.
You might need to work on fixing your credit report if your application is denied. The landlord typically must give you a reason for the denial if the information in the credit or background check was a factor in the decision.
3. Budget for Pets and the Pet Deposit
Budget for a pet deposit if you plan to bring your furry friend with you. The deposit amount will depend on the landlord. The landlord might charge a monthly feed in addition to the deposit, or ban pets altogether. Other landlords might have restrictions on the types of pets you can have — no reptiles, for example, or certain dog sizes or breeds. The landlord might also limit the number of pets you have. Clarify these policies before you apply so you know what to expect.
4. Don’t Waste Money on Storage — Get Rid of What Can’t Fit
The size of the apartment influences how much your rent will cost, so moving into a smaller home can save you money. This might mean you’ll need to downsize your belongings and get rid of the items you don’t use.
As you tour rental properties, think about how much space you absolutely need. Be judicious, and consider the following before opting for the larger space: Each year, Americans waste $24 billion in storage unit rental costs and occupy about 2.3 billion square feet of these units just to store stuff, according to Forbes.
5. Understand the Utilities You Need to Pay
Each apartment has its own policies when it comes to utilities. Some apartment rentals include water, relieving you of at least one utility cost, whereas others expect you to pay for it. As you choose between apartments, determine what utility costs you’ll be responsible for so that you can budget for them.
Once you move in, lower your utility bill by limiting your electricity, gas or oil usage. Also, pay your utility bills on time to protect your credit and make it easier to eventually qualify for a new rental or borrow money to purchase a home.
6. Consider Location and Commuting Costs
Location can affect how much you pay for rent. Generally, the closer you are to the city center, the more rent you’ll pay. You should consider moving a few miles out to save on rent, especially if you take public transportation to work, according to RentHop, an apartment-hunting website. But keep in mind how far the area is from the places you go to regularly.
Alternatively, it might be wise to live close to your job if you drive to work. Living closer to work can, in some cases, drastically reduce the amount of money you spend on gas and car maintenance. Finding a balance between a lower-cost apartment and lower commuting costs might help you find the perfect solution to your situation.
7. Make Your Rent Payment on Time
Paying your rent on time each month helps you establish and protect your credit, and it saves you money and hassles with your landlord. Overdue payments often incur late fees, which can add up quickly. Late payments can also affect your credit report and make it difficult to move to a new apartment or qualify for a loan. A budget can help you set aside the money you need to stay current on your payments. Late payments will also affect if you’re seen as a valuable tenant or not. If you consistently make late payments, your landlord might not want to renew your lease when it’s up.
8. Get Renters Insurance
Renters insurance offers low-cost protection for the personal belongings you keep in your apartment. The insurance helps you repair or replace possessions that are damaged in a covered incident or stolen from your home. It can also cover your living expenses if your apartment is deemed uninhabitable due to a fire or other catastrophic event. In addition, it offers liability coverage that can protect you if someone is injured in your apartment and sues you to recover damages.
Find Out: The Best Renters Insurance Options
9. Find Ways to Save on Rent
You can save money on rent each month, using any of several methods. One option is to get a roommate. You might even save by renting a two-bedroom apartment that you share with a roommate rather than renting a one-bedroom apartment by yourself, according to a RentHop study, although the savings is likely to vary based on where you live. A roommate can also help you save by paying half of the utility costs.
Finding a rent-controlled apartment can reduce future rate increases. In Los Angeles, for example, rent-controlled properties limit the landlord to one rent increase each year at a limited percentage. If you can score a rent-controlled apartment, hold onto it.
10. Get Ready to Buy a Home
You might be renting while you work toward home ownership. Knowing how to save money on everyday expenses will help you achieve that goal. Rather than worry about how to save for a house while renting, just take the first step by creating and sticking to a budget. Establishing better money habits now will help you purchase a home in the future.
Cleaning up your credit report by paying off old debt and making on-time payments can also help, in part by allowing you to qualify for better mortgage terms. Qualifying for a mortgage eliminates reliance on sketchy options like renting to buy, which is often associated with scams, or, even when legit, often has a complicated contract that works more in the landlord’s favor than in the tenant’s.
11. Take Advantages of Amenities
Many larger complexes offer amenities like a pool, gym and outdoor spaces. You might save money and time by exercising at the clubhouse and swimming onsite instead of spending money on gym and pool memberships. Taking advantage of these amenities can free up money in your budget for other goals. If you know you’re a gym rat, for example, look for an apartment, or a job, that has a gym to cut down on other monthly expenses.
12. Save on Moving Costs
Moving companies can make moving easier, but they often come with a high price tag. A local move can average about $2,300, and an interstate move averages around $4,300, according to Moving.com. You might have no choice but to use a moving company for a long-distance move. In that case, shop around to compare prices and find out about any hidden costs you might incur. Also research the moving companies’ reputations. Renting a truck and moving yourself can save you money on a local move for which you might not need professional movers.
Keep Reading: Money Traps to Avoid When Moving
13. Save Money by Subletting
Subletting is an option if you need to break your lease early. Before you sublet your apartment, you’ll need to make sure your lease allows it. Either way, you’ll need to notify your landlord and sign any necessary agreement between you, the landlord and new tenant. Subletting is an important option to consider if there’s a chance your employer might relocate you before your lease is finished.
14. Walk Away If Rent Goes Up Too Much
Some landlords impose yearly rent increases. Tenants often stay because they don’t have enough savings to start from scratch with new rental application, security deposit and utility costs. Building your savings to cover these items lets you walk away and find a better deal if the increased rent cuts too far into your budget.
Another option is to negotiate a lower rent with your landlord to see if you can find a way to stay in the apartment. This might be easier if your home was offered for rent by an owner, because private owners set their own rules.
15. Get Your Security Deposit Back
You’ll need to wrap things up with your current landlord before you begin moving into a new house. States have different guidelines for when a landlord must return a security deposit. In California, it’s 21 days after the tenant moves out. Landlords have 30 days in Massachusetts.
Taking good care of your apartment and leave it clean to ensure you’ll receive your entire deposit back. Ask your landlord to do a walkthrough with you before you leave so you can address issues and make sure you both understand any repairs that need to be made.