It is not an illusion that more of your paycheck is going to rent. Statistics show rents have increased approximately 15% between 2009 and 2014. Depending on where you live, the cost of renting may have amplified even more. Metropolitan areas have seen the sharpest gains. The tightening inventory and increased renter demand just seem to be driving them ever higher. Even as construction is on the rise, the delivered units are not satisfying the demand.
Metropolitan areas are often at the heart of these discussions, particularly larger cities such as New York and Los Angeles. According to Bloomberg.com, Los Angeles is considered one of the least affordable metro areas to rent in, with an average family spending more than 49% of their median income on rent.
So how can an average renter find a bargain and lower the cost?
The first way is expanding your search. Step outside of those trendy metro areas. It can be as simple as moving your search a few subway stops or highway exits away from a preferred area. The difference in rental price can be substantial, just by looking slightly outside your optimal neighborhood. Just be aware that if you decide to go for a suburban location, there may be additional transportation cost to factor in. These could include a car with its maintenance, gas and other monthly costs.
Another point is to set a budget and stick to it. When it comes to apartment shopping, a renter can find it hard to say no to a well-staged apartment with a fantastic location. Yet by having a budget and sticking to it, a potential renter will not have renter’s remorse later. A budget will also help track saving for potential emergencies. Remember that rent is not an investment with any return. The typical budget should not have more than 30% of your income devoted to rent. According to research by Zillow, when more than 30% of income is devoted to rent or housing expenses, the household has little to nothing in the way of savings.
Be sure to budget for anything not covered in the lease that the renter will be responsible for. Utilities, cable and Internet are just a few of these types of incidentals. Be careful that they do not push you past your 30% budgetary limit. If they do, a renter might want to consider cutting back on some of these incidentals or looking in a different neighborhood.
Get to know how maintenance is handled for an apartment before you sign the lease. After all, those unexpected repairs can cost you time and money. If there are any out of pocket costs, make sure to have a copy of the reimbursement policy. Otherwise, a renter might find themselves in a financial bind covering various repair costs without a guarantee of a refund.
Another way to reclaim some rental income is by considering a roommate. This can help reduce the monthly costs in half. Additionally, a neighborhood that may have been out of reach before might be more accessible with a roommate. Be sure you know what the potential costs might be to end the lease early, or if your landlord decides to sell the property during the lease period. By understanding your rights and responsibilities, a renter can count the cost of a potential home and neighborhood. A potential home can be beautiful and located in a wonderful neighborhood, but if it takes a renter outside of their budgetary comfort zone that might not be the right home or neighborhood for them.