You always hear about the hidden costs of homeownership, but there are also hidden costs associated with renting.
We’ll update you on the current rental market, and share what questions to ask before you rent to uncover those hidden costs. We’ll also point out how to lower your costs, including how to buy renters insurance.
The Rental Market Post-COVID
The rental market was not immune to the distress caused by the COVID-19 lockdown, and first-time renters especially were able to take advantage of better-than-normal incentives.
Perks that were extended to renters included giving the first month free or an additional half-month free, offering flexible payment plans, replacing one-year leases with rolling month-to-month agreements, and discounting rents.
Those perks would certainly help you absorb hidden costs. But now that we’re in a post-pandemic mode, the pandemic pricing and perks seem to be officially over.
According to the Apartment List National Rental Report, the national index increased by 2.3% from April to May, representing the third straight month of record-setting rent growth. Rents are starting to recover from the spring-winter 2020 rental price declines as Americans sheltered in place.
That’s why it’s more important than ever to look into hidden costs.
Questions to Ask Before Signing the Rental Agreement
The one thing that is not hidden when it comes to renting is the cost of the rental.
The first thing to do when you’re thinking of renting is to determine how much rent you can afford. Look at your gross monthly income and calculate what 30% of that would be. You shouldn’t spend more than that to keep up with other debts and contribute to savings.
That’s your starting point. Now it’s time to get inquisitive.
As you’re asking questions when you visit rental properties, take notes. There’s a lot of information to keep track of. Being able to refer to it will help you make the best choice to suit your budget.
What does the rent include?
Although the rental agreement should spell out the rent and what it includes, confirm the rental price and find out upfront what additional costs you won’t have to worry about. Also, ask how often the rent increases.
When you find out what utilities you will need to pay for, ask the average cost for each. This is something potential renters often overlook. If the representative showing you the property can’t provide that, call the specific utilities.
As you tour the property, continue asking about the possibilities of additional fees such as charges for amenities like a pool or a gym. This is another item potential renters often forget to review.
What fees are involved in getting the rental?
To get approval for a rental and to secure it, the typical costs are an application fee and a security deposit. Ask for those amounts, including what is involved to ensure your deposit is returned in full after you leave the property.
How to Save on Apartment or Home Rental Pricing
Do your research: Know your state’s regulations regarding rental application fees. While most states have no limits on what a landlord can charge, a half-dozen have limits, and Massachusetts and Vermont don’t allow a landlord to charge this fee. Research pricing in the area to ensure the rental price is competitive.
If a landlord asks for a fee and shouldn’t, asks for one above what is allowed, or quotes a rental price that’s markedly higher than area rentals, those are red flags signaling you to walk away. Who knows what else that landlord will try to get away with charging you?
Have excellent credentials: The better your credit and rental history, the more you can avoid a landlord attempting to raise your security deposit. Poor credit or problematic rental history demonstrates that you could be a risk, so they might want to see more money upfront.
Try negotiating: A glowing report from your rental application can also gain you opportunities to lobby for cost reductions. Try to ask about pricing discounts first. If they stay firm on price, offer to sign a longer lease for a discount. When my husband and I opted for a 15-month lease instead of the usual 12-month one, we saved one month’s worth of rent.
Also, take advantage of the higher chance of negotiating success if you’re renting a house from a private landlord. Find out what they least like to do and offer to do it. When my husband and I lived in the Boston suburbs, we took care of outside maintenance for a $200 monthly rent reduction.
Act fast: Your due diligence on research and on having all of the information at the ready that you need for the paperwork will give you an edge on getting through the process quickly and being able to jump on your desired rental property.
Incidental Rental Charges to Check
Here are a few of the miscellaneous items that should be on your rental checklist to avoid financial shocks.
If you have a pet or plan to get one, ask if pets are allowed if there are any restrictions, and what additional costs you would incur. Some landlords ban certain breeds of dogs, which is sometimes prompted by their insurance policies.
Most landlords and rental companies charge a pet deposit and a pet fee, which can range on average from $100 to $500.
Parking and Storage Fees
Despite parking often being problematic, potential renters usually don’t bring it up. Ask if there are any parking charges. Inquire about any parking restrictions for yourself and your guests so you don’t incur costs involved in getting towed.
Also, see if there are additional parking and storage options. If you are moving into a smaller home than you had before, you may want to take advantage of extra storage options.
Some apartment complexes have a limited number of garages available for parking or storage, or even smaller storage spaces, but at an additional cost. Plan on asking about storage options and if there is an extra cost before your move.
You might decide to have a significant other moves in with you. Or you might need to add a roommate to help cover expenses if your circumstances change.
Your landlord will want to know if there’s another person living onsite, so find how that would modify the lease, especially how it would affect costs.
How to Save on Extra Rental Fees
Shared storage: If you need some extra storage, but you don’t have enough items to completely fill a storage space, share the space and the cost with roommates or with other renters you know and trust. When I lived in an apartment complex, I knew of several renters who did this to save a little money.
Declutter: You can save on needing any additional storage space at all by taking inventory of what you own before you start packing. Designate three piles: keep, donate or sell, and discard.
My husband and I did this when we moved from a four-story rental home to a two-bedroom apartment. Not only did we not need any extra storage space, but we saved over $800 on our final moving cost compared to the initial estimate from the moving company by decluttering.
What to Ask About Renters Insurance
If you had renters insurance in college, then you know how beneficial and affordable it can be. Some property management companies and landlords require renters insurance, so ask upfront if they do and how much it costs.
Even if it’s not required, it’s a worthwhile additional cost.
Despite what many renters think, your landlord’s insurance only covers the dwelling, not your personal belongings. Every renter is a good candidate for renter’s insurance because they should have a resource for being compensated when your worldly goods are damaged or stolen.
Additionally, renters insurance typically covers liability, helping protect you against damages or medical bills that you may owe if someone is injured in your rental and you’re found legally responsible. Liability coverage may also help protect you if you damage the home you’re renting.
Renters insurance also typically covers additional living expenses, such as temporary housing if your rental becomes uninhabitable.
How to Save on Renters Insurance
Although renters insurance is very affordable, costing on average $12 a month for up to $30,000 in coverage, you could still shave that rate.
Don’t assume a renter’s insurer offers the best price: If your rental property management company requires renters insurance, don’t automatically take the renters insurance with the insurer with which they have an agreement.
When my husband and I signed a lease for a rental that required renters insurance, we pursued our own insurance and saved over 33%.
Talk to your existing insurer: Contact the company you have auto insurance or current renter’s insurance with. Bundling your renter’s insurance with your car insurance could save you 10% to 25% on your premium. Being an existing customer could also help you take advantage of additional discounts.
Shop around: Obtain at least three renters insurance quotes, because not all insurance companies or policies are alike. Weigh each quote along with the insurer’s coverage, reputation, company ranking, and customer reviews.
There are many benefits to finding out about hidden costs when you’re preparing to rent. Not only will you have peace of mind, but you’ll also have a better idea of how costs will impact your budget and be able to investigate ways to save on them.
You’ll also help avoid misunderstandings and complications, enhancing the landlord-tenant relationship so that you’ll end up asking for a tenant reference letter instead of penning a tenant demand letter.
Karen Condor writes for the insurance comparison site, ExpertInsuranceReviews.com. She combines her research on insurance and rental trends with several years of experience in real estate and as a renter herself. Her goal is to provide valuable information and savings opportunities to her readers.