Finding a new home is not as easy as it seems. In fact it can be downright difficult! I wanted to provide some tips to help make the process easier, smoother, less stressful, and overall more successful.
Tip #1: Figure out Your Budget (How much can you afford)
This is an extremely important first step, and one that many people leave to the end of the process thinking that if they get approved that means they can afford it. This is NOT always the case, some landlords will approve you even when you don’t make sufficient income assuming that you are the master budgeter and will figure it out on your own. This is a recipe for disaster! This is more likely to lead to your eviction and ruining your credit than it is a comfortable home you enjoy. Avoid this by comparing the rent to your income. You should NEVER plan on spending more than 1/3 (3x the rent in income) of your after tax income on rent. Ideally you’d be at 1/4 or 1/5 (4x rent, and 5x rent in income respectively). Another factor to consider is your non housing debt load. You should limit your total debt and rent monthly payments to no more than 65% of your monthly after tax income.
Tip #2: Understand Your Credit, Qualifications, and Rental History (Approval Factors)
Your credit score, rental history, and criminal history are the most common factors that are considered when you apply for a rental home. The more informed you are on these factors the better off you’ll be and the better equipped you’ll be when discussing with a potential landlord. If one or all of these factors are not in your favor you should consider looking for a property that is very easily affordable based on your income. This might encourage the landlord to take a bit more of a risk on you. Alternatively if state laws permit you can offer to pay a higher security deposit to offset the landlord’s risk. Credit repair companies can also help to improve your credit history which will certainly help your approval odds.
Tip #3: Determine the Type of Home that Suits your needs
Depending on the city in which you live you may have lots of options available. Low rise, high rise, townhouse, single family home, mobile home, etc etc. Each have their pros and cons. By determining what you’re looking for this will help to narrow your focus on your search.
Tip #4: Think About Your Priorities
What is most important to you? This could be just about anything, examples would include having plenty of money left over to save, invest, or spend, a prime or prestigious (to you) location, specific amenities offered in or near the building, parking, social activities, energy efficiency, pet friendliness, etc.
Tip #5: Location, Location, Location?
The best location to you might not be the best location to your friend, neighbor or real estate agent. Think about your daily routine, or your desired daily routine, and try to picture the location that would best suit your lifestyle. If you’re one that’s all about exercising and coffee shops, then homes within walking distance of a gym and/or park might be favorable over a single family home in the suburbs.
Tip #6: Ask Everyone you know for Input
Most people have rented at some point in their life. That means that almost everyone you know could be a useful source of information. Some information may be dated and less useful than you’d like (thanks for the advice Grandma!), while others may be just what you’re looking for. Your circle can provide you with information on the best and worst landlords, locations, costs, and more!
Tip #7: Consider Hiring a Pro
Depending on your city or circumstances it may make sense to hire a real estate agent to assist you. Not all agents are well informed, so do your homework before you select your agent. It’s more common in larger markets to have an agent working on your behalf, but be aware this may require you paying their commission if the landlord won’t. Have that conversation before your professional relationship starts so there is no confusion or unrealistic expecations.
Tip #8: Roommates
Roommates can save you tons of money. Often times a 2 bedroom is just a little bit more expensive than a 1 bedroom, and the utilities might be about the same. This means that even just having one roommate can reduce your cost of living by half or slightly more. Having 2, 3, or 4 roommates (if appropriate with your home) can reduce it still further. Having roommates can make the difference in being able to afford a home or not if your budget is limited.