It’s great when you’re looking for a new place to live, and it’s a lot of fun finding an apartment. But the actual amount of money you pay each month in rent is usually only the beginning of the cost.
Most people simply budget for that one number, without realizing there are other charges they may have never thought about, which could also be affecting their ability to save money.
Read this article, as we will show you all the other, less obvious charges, from utility costs to various fees, and give you the tools to make a fair estimate of how much money you will spend.
Common Hidden Costs When Renting
In addition to your base rent, there may be other monthly costs that affect your overall financial budget. Let’s discuss the three most common categories of expense:
Utilities
Do not assume that your landlord pays utilities. The most common types of utilities you would be responsible for paying include electricity, gas (for heating and/or cooking), and water/sewer. Internet and cable services are typically in your name, so it is also your responsibility.
Before moving in, ask your landlord and/or the service provider for an estimate of their typical monthly charges so you can better understand what you will be charged and how the amounts may vary by time of year.
This way, you will know if you will be charged more during the cold winter months, hot summer months, and other seasonal periods that could result in a higher-than-expected fixed rent charge.
Renters Insurance
It is one of the highest costs you will have to pay as a tenant (many landlords also require it). Renters insurance protects your personal property from theft, fire, or water damage, plus gives you liability protection if someone gets hurt in your rental unit.
Your landlord has renters’ insurance that protects the building, but does not protect anything inside it. The best part of renters insurance is how cheap it is; the average monthly cost is about $15-$30 for really great coverage.
Additional Fees
Take a closer look at one-time fees and recurring fees. The recurring fees can be an administration fee (admin fee), pet rent, a move-in fee, and many other fees. In addition to your monthly rent, there are additional fees for amenities such as a fitness center, pool, and/or concierge services.
It is very important to get all of the additional fees in writing to help avoid surprise expenses that could cost you hundreds of dollars each year.
A Step-by-Step Budgeting Approach for Tenants
Most renters decide on how much to spend on rent based on their current income. To be more effective with this income, this 7-step guide will walk you through creating a clear picture of your monthly expenses and protecting your financial future in the long run.
Step 1: Calculate Your Total Monthly Income
First, determine your net income (the take-home pay, after all taxes are deducted). If you have a variable income, then figure out a conservative average based on the previous 6-12 months, including all income sources you can count on, such as salary, part-time job(s), and/or spousal support, etc.
Step 2: Apply the 50/30/20 Rule as a Framework
Allocate all of your net income using the following allocation: 50% Needs (housing rental, utilities, food, insurance); 30% Wants (eating out, entertainment); and 20% for savings/debt. Total housing costs (rent, utilities, and fees) should be allocated to the “Needs” category.
Step 3: List All Potential Housing Costs
Create a listing for each potential housing cost that was previously discussed, i.e., base rent, electricity/gas, water/sewer, internet, renters insurance, parking fee, pet rent, and any HOA or amenity fee. If you do not know what the average is in your area, look it up online or contact the landlord.
Step 4: Determine Your Maximum Affordable Rent
Take away all your other necessary expenses (groceries, car payments, pre-existing debts) using your “Needs” budget from Step 2. The remainder will be how much you can afford to pay for total housing costs. Next, subtract your estimated utility costs and fees, then determine your max base rent.
Step 5: Factor in One-Time & Moving Costs
The most overlooked step of this process is accounting for one-time and moving costs associated with getting into a new home.
These may include: 1st month’s rent and last month’s rent, security deposits, cost of renting a moving truck or rental, furniture and supplies for your new home, and deposits for setting up utilities. Plan for these as part of your overall financial plan and save them prior to your move.
Step 6: Build a Contingency Fund for Variable Costs
Utility costs may vary; therefore, it’s wise to include a “monthly buffer” within your budget for those months. Unused monthly buffer funds from one month will either be carried over to the next month or used for savings.
Step 7: Track, Review, and Adjust
Your original budget is just an estimate. It may take about 3 months to determine if there are significant differences between actual monthly outlays related to housing and budgeted monthly outlays. In this time frame, you could simply document each month’s outlays related to housing using a simple spreadsheet or a budgeting software/app.
Note that sometimes, unexpected situations can cause you to be late with your rental payment. In this case, communicate with a rental manager in Philadelphia if financial issues arise to discuss your options. This is a more professional and transparent approach that preserves a positive relationship.
Conclusion
Carefully planning all of the costs associated with renting when searching for rentals in advance helps you create a complete financial plan using your estimated rental budget.
Using your detailed financial plan as a protective measure against costly surprises, you will have the opportunity to live within your means and enjoy your home by finding a comfortable home that is affordable, provides quality, and offers a comfortable lifestyle, regardless of the attractive monthly rent.
Admin Recommendation
Home Improvement Reunion Shifting Gears – Will Tim Allen’s New Show Bring the Gang Back?
LookWhatMomFound Giveaways: Your Ultimate Guide to Winning Big!
