- t’s imperative to shop hard and shop smart when looking to rent. The cheaper your rent, the more you can sock away towards a down payment.
- Given the high rental costs on most cities, if you’re fortunate enough to have parents or other family members in the same town, I’d recommend to move in with them.
- If you don’t have a car, you won’t need a parking space. Offer to give it up in exchange for discounted rent.
I see this all the time, you get a new job, move to a cosmopolitan city, only to be surprised by the fact that your rent is about half of your salary.
When I first moved to New York, I made the classic mistake of thinking that I needed to live in an uber luxurious building. Sure, the apartment came with a doorman, elevator (yep, that’s a bonus in New York), onsite gym, swimming pool, rooftop lounge, and unrestricted views of the city, basically the works. All these perks did not come cheap, rent, even after splitting with my roommate, was half of my monthly salary, for a one bedroom (we had a partition).
Although the COVID-19 meant that most young people left cities and moved back home, as the summer winds down, more people are heading back to the city. And while rent prices have recently fallen, in a lot of cosmopolitan cities such as New York, San Francisco, Los Angeles, Chicago, Boston or Washington, DC, rent is still pretty expensive!
Why You Shouldn’t Spend Much On Rent
I’m here to tell you no, don’t fall into the financial trap of spending a disproportionate amount of your income on rent. It’s one of the worst financial decisions you can make. Here’s why:
- Renting doesn’t allow you to accrue equity in your home – since it’s not ‘your’ home; It’s like tossing money away each month for what most likely is a tiny apartment or private room with roommates.
- When you move out, you get nothing except hopefully your security deposit back.
However, renting is a necessary evil for most of us. And with rent prices so absorbently high in most cities, it can feel like you’re spending so much money on rent, making it difficult to save towards a down payment on a house.
It’s imperative to shop hard and shop smart when looking to rent. The cheaper your rent, the more you can sock away towards a down payment. Of course, you shouldn’t compromise on safety just to save on rent. You also probably shouldn’t live so far away that you need to take two buses and a subway ride to get anywhere just to save some extra dough. The opportunity cost of your time, energy, and effort most likely isn’t worth it.
Do This To Save On Rent
Avoid Broker Fees
Some cities like Boston and Chicago are actually quite rare in that the tenant moving into the new apartment is on the hook to pay a broker fee (usually one month’s rent or up to 15% of the annual rent). While this might be the case for the majority of apartments, there are ways to avoid these fees. First, turn to your social network, let your Facebook friends, Instagram followers, and Twitter-verse know you’re hunting for a new place, and you may be able to go straight to a landlord without much effort. SImilarly, real estate sites like Streeteasy.com, NakedApartments.com, zillow.com and Craigslist offer “no-fee” search options and often contain direct listings from landlords and property managers.
Search During The Off-Season
Secondly, landlords are more likely to not charge a broker fee if they are having a hard time renting out the apartment. How can you tell this? If the apartment has been on the market for a while (you can check this on some real estate-listing sites) or you’re trying to find a place in a newly constructed apartment complex. With COVID-19 affecting real estate, many landlords in places like New York have been offering a lot more perks than usual.
Avoid Fancy Neighborhoods
When moving to a new city, especially if it is your first apartment, sometimes it is tempting to stay in the most impressive neighborhoods. You know, the cute neighborhoods we all imagine our first apartments to be in. But do you know what else comes with a glitzy neighbourhood? Exorbitant rent prices. So, before you overspend on an apartment just because it is in a certain neighborhood, ask yourself, how much time will you actually get to spend in your apartment? Is this where you will spend most of your time on weekends? Apartments can oftentimes cost an extra couple of hundreds of dollars simply because of the neighborhood, so don’t be afraid to explore other neighborhoods that aren’t necessarily on your radar.
It’s Okay To Move Back With Parents
Something that’s becoming increasingly more common? Moving in with parents. Given the high rental costs on most cities, if you’re fortunate enough to have parents or other family members in the same town, I’d recommend to move in with them. There is nothing wrong with living with family for a year or two while you build up your savings. That extra money you save for a year or two could go towards many expenses like student loans, car payments, down payments.
Negotiate Your Lease
Negotiate when you sign or re-sign a lease. Landlords want to keep good tenants. It costs them money to move you out and bring someone else in. That means you have a little bit of leverage. Research similar apartments in your area and come in with a number in mind. If the landlord won’t budge, tell them you’re going to look elsewhere. If you’ve been a good tenant, they’ll want to keep you. Word of caution: Know who you are dealing with. Independent landlords have a lot more wiggle room than a property management companies. Maybe they have multiple renters in the complex and aren’t willing to make concessions, so try to sweeten the deal by offering something in return.
Pay up front
Offer to pay the entire lease or at least a few months up front for a discount if you can afford it. The landlord will cut a deal to have cash in hand, but it’s only an option if you have enough savings to cover and then some. You don’t want to rack up credit card debt because you emptied your bank account to save a few hundred dollars on rent. The savings would be lost to credit card interest. And if you do pay up front, make sure you pay the money back into your savings each month.
Sign an extended lease
What a landlord wants is stability. You can give it to them by signing for a year-and-a-half or two years instead of six months or a year. The longer the lease, the lower the landlord should be willing to go.
Give up your parking space
If you don’t have a car, you won’t need a parking space. Offer to give it up in exchange for discounted rent. The landlord would be able to sell the space to another tenant, who might need extra parking.
Look for Apartments in the Winter Months
Landlords have a tough time finding renters in winter. It’s cold outside and people aren’t willing to leave their cozy homes. Vacancies can go on for months, and with each month landlords are losing money and getting more desperate.
Prices get expensive in the summer months. Some of that has to do with the weather, and a lot of it has to do with the school schedule. College graduates flood the market during this time of year, and high school graduates enter the market in college towns. Families with children in elementary school will wait until the school year is over to make a move to ease their children’s transition to a new school. All that makes for an increase in demand which equals higher prices in the summer.
Look for apartments in the winter, and offer to sign an extended lease that ends in the summer. That ensures the apartment hits the market at a good time for the landlord when you move out, and the landlord gets some stability in the meantime. They’ll be willing to work with you for those tradeoffs.
Get a Roommate
This one is pretty obvious, and it will save by far the most money. The average cost of a one-bedroom apartment in 2019 was $1,216. The average cost of a two-bedroom apartment was $1,332. Divide that second number by two and it’s $500 cheaper per month and $6,000 cheaper per year to share costs with a roommate than live alone. And that doesn’t include shared expenses like kitchen supplies, toiletries and groceries.