Creating a budget in preparation for your first apartment can be tricky. Above all, you will be faced with how much an apartment can cost. Rent is a major expense for tenants, but there are additional costs that add up to the total renting expense.
Let’s break down all the potential expenses you may incur while renting an apartment.
Renting almost always includes additional fees. Here are some of the more common fees tenants encounter:
An application is a formal document that starts the rental process, and submitting an application for consideration usually includes a fee. The fee amount depends on the area and type of apartment for which you are applying. It’s worth knowing that the application fee is non-refundable, and it typically ranges from $30 to $100.
If you apply to a property that the management company overseas, you might be asked to pay an admission fee, which is separate from the application fee. This fee covers the credit check, background check, and any additional efforts the community’s leasing office must use to approve the rental application. The fee is usually only refundable for the first few days after submission, and it ranges between $100 and $300.
Keeping a pet can be expensive, especially when renting. There is generally a one-time, non-refundable pet deposit that you have to pay to share an apartment with a pet. Sometimes, landlords will allow tenants to pay a refundable pet deposit along with additional monthly rent payments for their pets.
A security deposit is refundable but you still have to pay it upfront. The amount is usually one or two months’ worth of rent.
Once you move into the apartment, you should expect to pay certain expenses monthly. These include the following:
Rent consumes the largest share of your living expenses. There usually are no big rent increases during the lease term unless you’re in a month-to-month agreement. The exact monthly figures depend on where you live and the rental rate set by the landlord or property manager. Rent may cost anywhere from a few hundred to thousands of dollars.
The electricity bill is a separate expense that’s not included in the rent. The cost of electricity will depend on the size of your apartment and how often you use appliances that require electricity. Consider replacing current devices with smart and energy-efficient devices to reduce electricity costs.
Gas is not an expensive utility and may be included in the rent amount. It may cost you between $50 and $70 depending on whether you have gas appliances in your apartment.
The monthly cost of water is generally included in the rent amount, but if you have to pay it separately, it can cost you around $50 monthly.
You might get internet and cable access for free if you rent a furnished apartment. Otherwise, it will be up to you to pay the bill, which will vary depending on the plan you choose.
Some landlords require their tenants to purchase a renters’ insurance policy. The thing you need to know is that the landlord’s insurance policy will not cover any of your belongings if they are damaged. How much it would cost depends on the amount of coverage and options to which you subscribe.
Pro Tip: Get insurance quotes from multiple companies before deciding on a policy.
Thus far in 2021, the average monthly rent for US apartments was $1,124. However, due to the pandemic, the real estate market has seen a decline compared to previous years. Some states with the highest cost of living saw a dip in more expensive rental rates.
There are different rules of thumb when it comes to deciding how much is “right” to spend for rent. The most popular guideline has been that you should not pay more than 30% of your monthly income on rent. Landlords also follow this rule while screening potential tenants, and property managers even set it as qualifying criteria on the rental application.
For example, if you earn $6,000, you can afford to live in an apartment with a rent payment of up to $1,800/month. If you are not sure about your monthly income, you can add up your annual earnings and apply the 30% rule to that.
Similarly, the rule for utility expenses is that you should not be spending more than 25% of your monthly income on utilities. For example, if you earn $6,000 monthly, you shouldn’t be spending more than $1,500 on utility expenses.
Before you make a move, truly explore how much your new apartment will cost you each month. In doing so, consider all the expenses, including upfront fees, before searching for an apartment. An apartment may have lower rent, but the cost of living there could be higher. Find a sweet spot where you can comfortably live while applying the rules of 25% for utilities and 30% for rent.
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