Renting 101: What You Should Know Before You Sign
As I think about what post-Japan life will be like, I can’t help but think about what it’ll be like to sign on my first official apartment.
Renting is something a lot of twenty-somethings will be doing in the next couple of years, but many have no idea about the specifics of renting an apartment or any other living area.
It’s important that all soon-to-be renters know the specifics of renting before they get themselves into a situation they don’t understand, or can’t afford. From the lease to renter’s insurance, to the hidden costs – renting has a lot of variables that are a lot easier to understand when the idea of renting is in the near future and not an immediate necessity.
Here are the basics that’ll provide you some framework on the renting experience so that you’re prepared and you’ll be able to smoothly transition into the next stage of your life.
The most common word you hear when renting is discussed is lease.
A lease is a contract between the lender (landlord) and the renter (the tenant, or you) that states the tenant is renting the living space from the landlord for a previously agreed upon amount of time and money.
The lease can be very detailed and should be read thoroughly by the renter to avoid any problems down the road. Here are some of the items which will be convered in the lease:
- Names of parties involved
- Location being rented
- Amount the tenant will pay either in lump sum or in installment payments
- Dates the tenant will be renting
- Renewal terms – what happens when the lease is up
- Details of a security deposit and if/when it will be returned to the tenant
- Maintenance specifics: who takes care of what
- Insurance needs
Please note that the landlord has the right to do a credit check and call references to see how responsible you are as a tenet. This is one of those times in life it pays to have good credit so get to work on that now while you have some time.
Types of Leases
- fixed-term lease
Usual terms are one or two years and the tenant agrees to live in the apartment for that designated amount of time. These are the most common lease types as they allow the tenant to live in the apartment for an extended period of time. Realize that the landlord may request a 15 month lease or a different amount of time that fits his or her agenda and business better.
- month to month rental agreement
The name says it all as this type of lease is short term, but has its advantages. Getting out of a fixed term lease can be a tricky situation and can be costly. With a month to month rental agreement you have more leeway as the tenant in case you need to move suddenly. If neither the renter or tenant discusses the lease at the end of the month, the lease automatically rolls over to the next month.
Breaking a Lease
This is a situation that should not be taken lightly as a bad experience with a lender can cause a huge hit to your credit score which can make it difficult and costly for you to get leases in the future.
The terms of a broken lease should be discussed between the tenant (you) and the landlord before you sign your name. Breaking a lease will probably result in a fine as you did agree to pay the payments for the extent of the lease (12 months, maybe 24).
A lease is a business agreement so be respectful of the landlord’s situation. Give an extended notice that you will be breaking your lease so the landlord has adequate time to find a replacement.
Most states require landlords to “mitigate damages” which means they can’t just hit you with a fine the minute you say you’re breaking your lease. To make things go smoothly, help your landlord find a replacement (ask friends, family, co-workers) so that he or she doesn’t hit your records with an infraction.
Be honest and up front with your landlord. People change jobs, get married, and have new life situations all of the time and the more you’re helpful and honest with your landlord, the less painful the situation will be.
There are a couple of ways to get out of a lease:
- called to military duty
- serious injury that requires you to be transferred to a different living area
- the landlord doesn’t maintain the apartment and his side of the lease
- natural damages to your apartment
Costs of the Apartment
Like a lot of bigger purchases, we tend to be distracted by the sticker price and not pay attention to the hidden costs of renting.
After signing a lease you’ll probably be responsible for two months of rent, a broker fee, and a security deposit. Also include renter’s insurance, utilities, and internet/tv into the monthly budget so that you’re prepared for the true cost of renting.
You don’t want to bite off more than your paycheck can handle and only realize it after you’ve moved in.
Insurance is a necessity in life because risking life without it is a dangerous financial move that devastates people every day. Renter’s insurance is another cost that you need to carefully consider and plan for before renting.
Renter’s insurance helps protect the items in your apartment in case of theft or damage. The renter’s insurance will also cover you in case a visitor in your apartment gets injured or their items get damaged.
Your landlord will also have different types of insurance, but rental insurance is not covered by your landlord. You can get it from major companies like Aflac, Geico, or Allstate and it’ll probably only cost less than $30 a month. It’s definitely worth the small investment.
Renting with Bad Credit
Every day people with poor credit rent apartments, so don’t be ashamed if you have bad credit and you’ll be renting soon. There are some things you should know before you go apartment hunting.
Since you’re a risk to the landlord, he or she will probably require you pay a higher security deposit or several months of rent before you move into the apartment.
Don’t let this discourage you from searching, but make sure you have enough money saved up to pay for the increased fees you’ll see when renting.
This is just an introduction to renting, but these core principles will provide you with some starter knowledge as you prepare to rent for the first time.
Good luck and if you have any questions or comment please leave them below!
Current renters, what tips do you have for first time renters? What do you wish you would’ve known when you first started renting?