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If you wing it and don’t do your homework before renting an apartment, you will learn the hard way the costs of not doing that homework. And the hard way always means more money out of your pocket. So, in order to help you do your homework, below are some important things to know/do before renting an apartment:
- Lease Terms
- Term of the Lease – Month to Month, 1 Year, 2 Year or 3 Year Lease?
- Repairs – What happens if something breaks? Who do you call? How far away from your apartment is the Repair Company/Repairman? Who is responsible for what? How long will it take to fix what broke?
- Is a Security Deposit Required? If so, how much? When can the Landlord withhold repayment of the Security Deposit?
- A First and Last Month’s Rent Deposit is typically required. You get this back at the end of the lease. Under what conditions can the Landlord withhold a refund of your First and Last Month’s Rent, when the term of the lease ends.
- Auto Renewal – Is there an Auto Renewal Provision built into the Lease you are signing? If so, does it come with an automatic rent increase? If there is no Auto Renewal, can you do a month to month rental of the apartment, after the lease expires? If so, will the rent remain the same?
- Rent Increases – Does the Lease stipulate when and how much the Rent can increase?
- Penalties – Rent is typically due within the first three days of the month. If you are late on your rent, is there a Late Payment Penalty? If so, how much?
- Pets – Are Pets allowed? if so, is there a Pet Security Deposit required?
- Rental Payment – How do you pay your Rent every month? Is the Rent automatically withdrawn from your bank account? If so, when?
- Affordability – Can you afford the Rent? If the Monthly Rent payment is more than 35% of your Net Pay, you will likely struggle making the Rent Payments.
- Renter’s Insurance – Renter’s Insurance protects the Tennant and Landlord from the costs of someone getting injured in the apartment. This includes Medical Expenses, Liability Protection, Attorney Fees. It will also protect a Tenants personal property. Renter’s Insurance costs about $25/month or $300/year. Some Landlords will require Renter’s Insurance. If required, it should be spelled out in the Lease.
- Security Deposit – The Security Deposit may be separate from the first and last month’s Rent Deposit requirement. At the end of the Lease, the Landlord is required to refund you the Security Deposit. It is typically = to one month’s Rent. The Security Deposit may also be lumped into a Three Month Rent Deposit requirement, which covers the Security Deposit and the 1st & Last month’s Rent. If you break something in the rental unit, the Landlord will require you to fix what you broke. If you don’t, the Landlord will subtract his cost of repair from your Security Deposit.
- Credit Check – Most Landlords will have you authorize them to run a Credit Check on you. If you have a low credit score or payment issues on your Credit Report, the Landlord can turn you down or require a higher Deposit Amount.
- Adjoining Neighbors – Before signing the lease on an Apartment, you should ask three neighbors about any issues they have. This will give you a feel for the Apartment Neighborhood, as well as how responsive the Landlord is to problems. Ask Neighbors about Apartment Security – have there been any recent break ins?
- Inspection of Apartment – Since the Landlord can withhold some or all of your Security Deposit, you should take a video of the Apartment on the first day. If you find anything broken during the initial days, immediately contact the Landlord so you are not assigned blame for whatever needs repair. Things to do during your Inspection to make sure things work as they should:
- Flush all Toilets
- Run Water Faucets to make sure they work and that the sink drains properly.
- Turn on every Light to make sure the Lighting Fixtures work.
- Turn on Air Conditioning Units to make sure they work.
- Make sure Heating works.
- Open Cabinets to make sure Cabinet Doors work properly.
- Look for Mouse droppings, Roaches.
- Are there an adequate number of Outlets? Make sure each Outlet works?
- Furnishing Apartment – Most rentals are not furnished. Some are. Make sure you know before you sign the Lease. Most rentals include a refrigerator. Some rentals have a dishwasher and a washer and dryer. If there is no washer and dryer, find out if there is one of each available for common use by all tenants.
- Utilities – Are Utilities included in with the Monthly Rent Payment Amount? If not, then you will need to reach out to the Utility companies to set up an account and turn the gas and electric on.
- Subletting – Are you allowed to Sublet (Rent Out) the Apartment you are renting?
- Breaking a Lease – What are the terms of breaking a Lease early?
- Moving Expenses – When are you permitted to move into your apartment? If you are not moving yourself into the rental, then you will need to pay a Moving Company. Moving Company cost factors:
- Distance of the Move.
- Amount of Furniture being moved.
- Quality of the Moving Company’s Services.
- Number of Boxes required for the move.
- Essentials – Some of the essentials you will need include: Bed Sheets, Pillow Covers, Pillows, Dishes, Glassware, Towels, Cleaning Supplies, Microwave, Toaster or Toaster Oven, Coffee Maker, Pots, Pans, Paper Towel Holder.
- Air Conditioners – If the apartment does not have Central Air Conditioning or Air Conditioning Units, are you allowed to install one or more Air Conditioner Units?
- Parking – Where are you allowed to Park your car? Are there any Parking restrictions you should be aware of?
- Apartment Security – Ask Landlord if there have been any recent break ins? Ask neighbors?
- Landlord Requirements – In order to rent an apartment the Landlord will likely ask you to provide him/her with the following:
- One or more Pay Stubs.
- A Copy of one or more Months of your Bank Account Statement.
- Co-Sign – If you are young and this is your first apartment rental, the Landlord may ask one of your Parent’s to Co-Sign the Lease.
- Copy of Driver’s License or some form of ID.
- Your Social Security Number – The Landlord will need this to run a Credit Check on you.
Tom Corley is an accountant, financial planner and author of “Rich Kids: How to Raise Our Children to Be Happy and Successful in Life”, Effort-Less Wealth, Change Your Habits Change Your Life, Rich Habits Poor Habits and “Rich Habits: The Daily Success Habits of Wealthy Individuals.”
