When you set out to look for an apartment, it's common to worry about the issue of affordability. But with some thinking and planning, you should be able to conquer those fears and have a clear sense of what you can afford.
If you're afraid you might not be able to afford your rental, kudos to you for thinking of the financial aspects of apartment living early on. Too many people begin an apartment search without knowing what they can afford and without being familiar with the types of expenses they should expect to pay as an apartment dweller.
As a result, they see their apartment applications get rejected or they encounter unpleasant surprises at lease signing or during their lease term.
It's not surprising that many apartment hunters fear they won't be able to keep up with the rent and other expenses. For nearly all renters, apartment costs are their highest expenses, and the consequences of not paying in full and on time can be as serious as losing your home. Also, if this is your first apartment and you've lived rent-free with parents or others or in a school dorm, it can be scary to make this transition toward greater financial responsibility.
How to Lose Your Affordability Fears
Fortunately, there are things you can do to feel better about the financial aspects of renting an apartment and not be afraid that you won't be able to afford your rental:
- Don't let the fact that you'll be paying a lot toward your apartment living make you sick. In the United States and many other countries, decent housing isn't cheap. Whether you rent or own, much of your income will likely go toward covering housing costs. It's generally advisable to pay no more than a third of your income on rent. If you follow that advice, it's a significant amount. Many people choose to spend even more so that they can live in certain geographic markets. Also, many apartment hunters who can find a decent apartment for less choose to pay a little more for an apartment that's bigger or has more amenities. It's helpful to maintain this perspective when you start an apartment search so you can be comfortable with financial expectations. Otherwise, you may feel queasy and think you must be spending too much on housing.
- Get familiar with apartment living expenses. A large part of why many apartment hunters are afraid they won't be able to afford their rental is they don't know what they'll need to pay, and so they're understandably scared that apartment living may turn out to be much more expensive than they had imagined. The best way to allay such concerns is by becoming more informed. In addition to getting an idea of the range of rents for apartments that fit your requirements (by reviewing listings and talking to a broker), read about the various related expenses you'll be expected to pay. Find out what you'll need to pay before you sign a lease and what you'll owe around lease signing, and then learn what expenses you should expect each month while enjoying your rental.
- Start a budget. If you don't already have a budget and you're expecting to rent an apartment, now's a great time to create one. Budgets aren't just for large families or even couples. Single people also have a need to keep track of their income and expenses and plan their finances. Once you create a budget, it takes little effort to maintain it through the year. You'll feel in control of your finances and more confident that you'll be able to afford your apartment.
- Consider buying a renter's insurance policy. The notion of spending money to save money may sound strange, but your wallet may thank you some day if you purchase a renter's insurance policy, which covers you for liability and property loss. Many renters don't realize that their landlord's insurance doesn't extend to personal items they keep in their apartment. So, without your own policy, you won't be covered if your belongings get damaged or destroyed. On the other hand, having a policy will help you sleep better at night. And it probably costs less than you think.
When You Know You Can't Afford a Rental
Being afraid that you might not be able to afford your rental is one thing. But sometimes, apartment hunters find themselves in a situation in which they know they can't afford their apartment.
Maybe the landlord did little to no tenant screening. Or maybe circumstances changed significantly since your landlord approved your application. For instance, perhaps you just learned that you're getting laid off from your job and you don't know what you'll do for income.
No matter what the circumstances, if you're in a situation in which you know you can't afford your rental, the best thing to do is not sign the lease. Remember that a lease is a binding contract and entering into a lease means agreeing to pay rent each month through the remainder of the lease term. Although you may lose some nonrefundable fees and experience some inconveniences, not going ahead with the lease signing is the best option if you believe you won't be able to pay. You'll avoid putting yourself in a situation in which you might face eviction for nonpayment of rent and have your good record tarnished for when you're ready to apply for your next apartment.