The Finances of Apartment Leasing, Why You Should Always Read your Lease Thoroughly!
The Finances of apartment leasing are actually something that I find extremely interesting, and that I have only just started to touch on recently in the past few months, due to a friend of mine being in the field and teaching me a lot about the industry. Out of the myriad of things that I’ve learned about apartment leasing, there are two big takeaways that I found can be good advice for the everyday renter, the first is to always, always, always read your lease cover to cover before signing, or really even after signing if the price is right. There are so many residents that never read their leases, that never know what pet fees are, what transfer fees are if you need a room transfer, what the exit clause is if one exists, and much more. Secondly, I would tell you to always do whatever it takes to keep your credit score healthy and as high as humanly possible. And while there are a few reasons for this, one of the main reasons is that it is a hard credit pull each time you put in an application for a new apartment, ie. a 30 point drop, and that if for some reason you do need to try and fight to get rid of your lease, keep in mind that your apartment complex will ruin your credit, so avoid this at all costs but make sure you have an 800 credit score minimum if you are going to go this route, and so without further ado, here’s a few things that I’ve learned about the finances of apartment leasing. For more information on apartment leasing and on all things finance, be sure to comment down below and to subscribe to our blog for additional details and information.
Other top reasons reading your lease is important:
Greater financial education
Know what you’re signing
Greater real estate education
Practice for buying a home
Greater legal education
Possibility of an Additional Career Field
Learning more about your community
Learn rent prices
Learn maintenance fees
And a host of other benefits, read on or subscribe to our blog for additional details and information.
The Finances of Apartment Leasing, Why Reading the Lease Pays Dividends
So, aside from all of the above mentioned qualities, reading your lease has some other benefits, namely in the form of education for yourself. Every single time you read your lease, which I’m assuming you are on the younger side if you are reading this because this is pretty much the market for apartment renters, you are learning more and more about personal finance and about real estate. If you can learn that lease for one apartment, there is usually a pretty solid chance that you can learn it for another, which means that you’ll know what you’re getting yourself into each and every time you get an apartment. Want the option for an exit clause? Read the lease and make sure its in there. Wondering what the sublet or room transfer fee and process are, read the lease, pet addendum? Read the lease! You get the picture, there is a value in knowledge and this is no more true than in the apartment leasing market.
How Much does Leasing an Apartment Cost?
Typically, for at least the Florida market but pretty much for most areas that aren’t super Urban, these are going to be your price ranges by housing:
Student housing with roommates – $600 to $900 per month depending on quality and location
Single Multi Family Apartment – $1200 per month pre utilities, $1350 per month post utilities
Two Bedroom Multi Family Apartment – $2,000 per month
Three Bedroom Multi Family Apartment – $2500 per month
Single Family Home – $250,000 to $350,000, for Mortgage of $875 to $1500 per month depending on interest rate and duration of the loan.
Renting out a single family Home – $1500 to $2,000 per month depending on home price, tack on another $200 for utilities.
For those reading this that are just about to go and get a single apartment fresh out of college, my advice to you is to wait as long as humanly possible and to try and live with roommates till your late 20’s to save up money, you WILL NOT regret it in your 30s. If you look at the math between being in a single paying $1350 per month from age 23 to 30, vs. paying $800 per month from 23 to 30 and roughing it with the roommates, you save $550 per month, which contributed to a a 401K after the match becomes something like $8500 per year, over a 7 year period including a modest 4% rate of return, you are likely looking at something like $70,000 to $75,000, sitting a 401K just for you living with roommates until you’re 30>>>a small price to pay for a massive start to your retirement savings at this age.
Which is Better to Rent or Lease?
I personally prefer leasing to renting a home on a handshake deal, any time that you lease anything, make sure to read the lease and then read it again. For someone leasing out your home and for someone renting out someone’s home, it is absolutely imperative to get everything in writing. A security deposit, which I usually like the $300 non refundable option over the $1250 refundable option, because they are highly likely to find something in the room and ding you for it if sign up, in that it is safer and less cash out of your pocket up front.
How Much Credit Do You Need to Lease an Apartment?
You’ll typically want a minimum credit score of around 650 to lease an apartment, I have heard of apartment leasing consultants not even considering someone with a credit score below 650 even if they have the income and assets to back up the purchase. Also fun fact, you typically cannot pay more than two months rent up front, so say that you have bad credit and that you have a bunch of cash lying around….it is still going to be hard to get an apartment lease. The reason being that you cannot pay more than two months of rent up front because the apartment complex does not want to be tied up in the probate courts were the worst to happen, so keep a good income and keep your credit score good if you plan on leasing in the future!
Final Thoughts on The Finances of Apartment Leasing, My Review
And so, in my humble opinion, apartment leasing is one of the absolute most under-taught features of your own personal finance. Most kids out of school even with a finance degree are not aware of how credit scores of apartment leases work, and are completely unsure of what happens in many different scenarios of their lease. I think this should be much more heavily taught in most degree programs, and am glad that I have had friends who work in the industry that have taught me the importance of a credit score and of reading your lease. For more information, read on and subscribe to our blog for additional details and information!
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