Tips for First Time Renters – All you need to Know about Renting

We landed in US on August 13th 2005. Since then we are renting even after deciding on staying in this country at least till I enjoy my work here. Why we are still renting? I tried to justify my point in this post, should I buy or continue to rent?. In these last 8 years we stayed in different cities and multiple apartment and condos. This post is about the lessons I learned in all these years.

If you are going to be a renter soon, you must know the specifics of renting before you get into the lease agreement with your landlord. From the lease to renter’s insurance, to the hidden costs of renting, there are a lot of aspects of renting to learn about.

(Related – 10 Tips For Negotiating Lower Rent)

The first thing that comes to my mind when we first started renting is credit report. I didn’t have any credit history in 2005. I had to submit my employer’s recommendation to secure a place to stay in an apartment association.

Application and Back ground Check

Application process can be started anytime but, no later than 4 weeks before you need a place on rent. In some case the background check and paper work may take more than 4 weeks. If you don’t have a credit history, you may try to first secure a room mate who has some credit history. Or, like us, you can negotiate through your employer.

We even had to appear for interview with the housing association representatives once. Every association has the separate rule. Most of them do check credit records and criminal history though.

The Lease Agreement

We just signed our renewal lease this month.This year we may buy our home so we added a special clause that in case we move out and we arrange for a new qualified renter, then there will not be any penalty resulting from our lease breakage. Lease document is very important to read before you sign on it.

What is a Lease agreement?

A contract between a lessor and lessee that allows the lessee rights to the use of a property owned or managed by the lessor for a period of time. The agreement does not provide ownership rights to the lessee; however, the lessor may grant certain allowances to modify, change or otherwise adopt the property to suit the needs of the lessee. During the lease period, the lessee is responsible for the condition of the property – Business Dictionary.

Constituents of a lease:

• Names of landlord and renters
• Address of the property being rented
• Amount of monthly or lump sum payment
• Dates the tenant will be renting in between
• 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 and repair specifics: who takes care of what
• Insurance needs, if any
• Pet and guest policies
• Some do’s and don’ts from a renter’s perspective
• Lease breakage terms – what happens if you vacate the property before lease term is over

It is mandatory that you sign and initial all pages and at every added clauses on the agreement. I would always keep a copy of the signed document. Landlords keep the original though. The lease agreement copy is an accepted address proof document as well.

Breaking a Lease

Lease breakage is a breach of contract. In most of the states, this is financial crime. It may affect your credit records at times. If you are renting with an apartment association, chances of getting lease breakage waiver is very difficult, as they work as per the set rules of the corporation.

Getting the lease breakage waived or lowered is easier when you rent a condo. One of the reasons, we are renting with individual home owners only since last 5 years. We look for owned condos with service contract. This gives us best of both world. Service quality of an apartment association and less stricter rules and conditions.

Often explaining the reasons behind your lease breakage leads to penalty waiver or reduction when you are dealing with individual home owners.

There are ways to get out of a lease without paying penalty or paying lesser penalty

• call of 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
• threat to your life if you stay longer

More information on ways to avoid/reduce lease breakage penalty can be found here.

One of the alternatives, when the reason behind the lease breakage is a new job or an internal transfer, is to ask for lease breakage coverage when you negotiate your salary.

As mentioned earlier, we added the early lease breakage clause in this year’s lease. All we need to do is getting new tenants, which is pretty easy in our case. We have many immigrants working with us, there’s no dearth of getting one of the new comers to stay when we leave.

Costs of Renting

Fortunately, there are less hidden charges of renting as compared to hidden charges of home ownership.

After signing a lease you’ll probably be responsible for two months of rent, the first and the last month, 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.

As a renter you, almost always, don’t pay for the home fixture damages and electronic equipment maintenance/replacement, like Freeze, AC, heater, Cooking Units etc.

Small items – like light bulbs, shower heads door nobs etc. are renter’s responsibility to fix/replace.

(Related – Practical Tips On How To Save Money While Renting)

Renter’s Insurance

Insurance is a necessity in life because it is a defense against all odds. Be it your life, your car or your health, insurance protects us from getting in to financial disaster. By paying small regular amounts you secure your future payouts, if needed.

Renter’s insurance helps protect the items in your apartment, that you own, in case of theft, fire or damage caused by acts of god. The renter’s insurance will also cover you in case a visitor in your apartment gets injured or their items get damaged.

Home owners insurance would cover the home and the electronic equipment your owner own. Renter’s insurance premium is very low as compared to other insurance premiums. They usually cost less than a meal at a fast food joint.

Renting with Bad Credit

Even if you have a bad credit, you’ll need a place to stay,  Better you start looking for places well in advance as you might face rejection multiple times. You may also have to pay higher security deposit. You may also be under watch, if you miss payment, you may face eviction notice. Sometime your landlord may ask you to deposit multiple months’ rent before you move in.

So save sufficient money before you start renting. As much as possible avoid taking a loan to meet the criteria. You have a bad credit most probably because you didn’t handle your debts well in the past.

I’d rather advice, don’t rent on your own if you don’t have enough money saved, try looking for paying guest, co-accommodation or room share opportunities.

Paying monthly rent

Make sure you pay your rent on-time or before time. Almost all the places we rented in, the due date was 5th of every month. I have set up auto check bill payment from my Bank of America account.

Every month, paper check arrives at our landlord by 2nd. You may want to set up similar auto payment, if your bank offers this facility, last time I checked all big national banks offer paper check bill payment facility, including Wells Fargo and Chase.

(Related – Automate Your Life, As Much As You Can)

Before you Move out

Moving out is equally important aspect of renting as the moving in. You should return the property back to the owner in good condition. The repair and cleaning cost are usually deducted from your security deposit.

We have mixed experience. First time we didn’t pay much attention and paid the price very heavily. The apartment association deducted more than $500 towards cleaning charges. We now hire professional cleaners. For about less than $75 towards professional cleaning had saved us almost our entire security deposit. In our last three renting, we didn’t let the landlord deduct any money out of the deposit.

Readers, what tips do you have for first time renters? What do you wish you would’ve known when you started renting?