“Thanks so much, everyone! Guess what?! I’m going to use my gift money to rent an apartment!” This was the announcement that my niece, Madison excitedly made at her high school graduation party. Her parents gave me the side-eye across the room…clearly pleading, “Can you talk to her?”
Since I work in the real estate industry, they thought I could dash her hopes and dreams, convincing her to stay home forever! I had to calmly reassure them to cool their Helicopter jets so we could have a real, teaching discussion here. Obviously, there are a lot of things Madison is failing to consider here. I get the need for independence and helped when my daughters were ready to navigate their own way. Doing it realistically in a manner that sets them up for success, that’s the trick. Here are some things to consider.
What can you afford?
As a rule of thumb, your rent and utilities should not exceed 30 percent of your gross (pre-tax) monthly income. Some landlords go even further, requiring that rent and utilities not exceed 25 percent of your gross income. Just a few common utilities and additional costs to consider:
- Security deposit (typically the same amount as one month’s rent)
- Heating/cooling (oil, gas, electric?)
- Cable and/or internet
- Garbage pickup
- Renter’s insurance
Consider the 50–20-30 budget rule.
What is it? It’s recommended by financial experts to allocate 50 percent of your income to “needs”, such as rent, utilities, groceries, car payments, insurance, etc. 20 percent would go towards savings, and 30 percent could go towards “wants”- entertainment, hobbies, vacations, etc.
Let’s break it down. Let’s say for example you earn $3000/mo. gross (pre-tax), plan on:
$1500 (50%) Rent & Utilities
$600 (20%) Savings
$900 (30%) Wants
If you can’t afford it alone, you may want to consider finding a roommate to share the cost.
Think about location.
What is the proximity to your workplace or school? Will you have to do a lot of traveling? That could increase your fuel expenses or cause quicker wear and tear on your vehicle resulting in higher monthly costs.
Research safety. Is the parking area well-lit and relatively close to your front door? Several websites can provide crime data/statistics about a neighborhood.
Wants vs. Needs
This is a big one! I want hardwood floors and stainless-steel appliances. I need floors and appliances. Go back to junior high grammar lessons. Figure out your noun (need) before adding your adjectives (want). If your budget allows…add more adjectives!
Home wasn’t built in a day
When first starting out on your own, the process to furnish a new apartment/home is exciting, but it can be pricey! Miller looked back at her own start, saying, “When I moved into my first apartment, I felt a rush to make sure my home matched my style immediately! Stick to the basic necessities and then tackle just one room for a month to give it personality. It gives your creativity some time to plan ahead, look for sales, and decorate with pieces that match your style instead of just what is available.”
What to have ready for the application process
First-time renters should come prepared. According to Liesa Miller, Regional Property Manager with Burkentine Real Estate Group, plan to pull together at least 2-3 months of your most recent pay stubs. If you are starting a new job, have your employer draft an offer letter with your new salary information. If you make commission or earn tips, they should pull together at least 6 months of pay stubs and/or your most recent tax returns.