Being out on your own for the very first time can bring about a lot of mixed emotions: excitement, scared, anxious, joy…the list goes on and on. Renting your first-ever apartment is a huge step in embracing your independence and starting a new life journey. There are many things to contemplate before signing a lease agreement. The first one is usually money. First-time apartment dwellers may be shocked to discover all the added costs that come with renting.
Having a rental is much different than owning a home. Maintenance and repairs are included in rent, so you don’t have to pour out money for upkeep and when an unexpected issue occurs. Renters may not be consistently burdened with pricey expenses like homeowners, but apartments do have their costs. It’s a good idea for first-time renters to brush up on financial planning, so they can start to save and prepare for their new place. Below are some guidelines on planning and budgeting for your first apartment home:
Location, Location, Location
Where you move can greatly affect your proposed budget. Apartments in cities are typically more expensive than apartments elsewhere. Real estate experts recommend spending no more than 30% of your annual income on rent, which include utility expenses.
If you move into a high-cost housing area, be prepared for flexibility within the budget because you’ll probably be spending a premium on rent. San Francisco is a high-cost metro and yearly asking rents have encroached to 40% of median incomes in the area - that's 10% more than the recommended allocation. The Big Apple is also recognized for its steep living expenses; price tags for apartments range from district to district, with popular neighborhoods like Upper West Side starting at $4,600 and Upper East Side seeing $5,000+ in 2015.
Wherever you call home, make sure to plan around a realistic budget, keeping in mind after-tax income and the cost of utilities.
What to Expect with One-Time Fees
The apartment is on point with price, but did you calculate in the initial fees? Many first-time renters aren't familiar with one-time fees because they've never had the experience of signing a lease.
Landlords and property managers typically charge an application fee (which can range from $50-200), a security deposit, last month's rent, and a pet deposit if you have a furry companion. These fees can add up quickly, so save early to lessen the financial blow!
Scope out a Roommate
Rooming with another person is an idea if you need to cheapen the rent and bills. Many renters, specifically out-of-college renters, typically move in with a roommate or two they know personally. Your friend is a friend for many reasons, but moving in with a friend can sometimes turn the relationship sour if they’re not the most financially responsible or clean.
Find a roommate that is a great match for you by conducting an interview. Ask them questions like "Do you prefer to keep the kitchen sink clear of dishes" or "How do you feel about overnight guests crashing on the couch?"
Staying on Top of Bills
Utility and service bills are another thing to budget for when seeking your first apartment. Depending on the apartment community, you may have free utilities – just ask the landlord to be certain. If you don't, you will need to set up an account with local providers. Be sure to follow up with them to make sure your electricity, air conditioning, heating/gas, water, Internet and cable are up and running before you move in.
In some cases, water may be included in your rent and AC may be built-in to the electric bill.
Additional expenses you may need to cover are renters insurance and parking if space is limited in the area. Roommates will need to sit down and discuss with each other how bills are to be paid.
Save for a “Fun Day” and “Rainy Day”
Just because you’re out on your own, paying bills, and being responsible, doesn’t mean you stop having fun. Little extras cost money too, so a “fun day” fund is an excellent way to save for those special occasions. When you have a little spare cash to go out to dinner with friends, see a concert, go to the movies, or even sign up for a gym membership, you won’t rack up as much on your credit card – which adds to your collection of bills!
You might want to consider opening a “rainy day” fund as well, because you never know what life is going to toss your way unexpectedly. Now with renting you don’t need to pay for the apartment maintenance, but a cash supply to foot a car repair, emergency vet appointment, or furniture replacement is great to have on hand.
You now have the tools you need to know how to budget for your first place! When it’s time to start looking for an apartment, be sure to check out the listings on Apartment Finder! We have some unique tools to help you locate a great first home on a budget. Our Pricing Tools will filter any search to exclusively show apartments that are of Best Value, apartments that are Top Deals in the area, and apartments with current Rent Specials and promotions.