How Not to Move Back in With Your Parents

Finances After Graduation Podcast Episodes

Ins and Outs of Renting
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Pete and Alex discuss some considerations for renting your first place when you graduate

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It’s no secret that when you graduate, you will have a number of options to explore, whether that’s with your first job, your first car, or where to live. This week, we’re looking into what to expect when you rent your first place. While you can’t plan ahead for everything – particularly when you don’t even know what city you’ll be in – you can do your research early to get the basic information you need. We’re giving you a head start right here…

Basic Considerations

Before you make estimated guesses or start building hypothetical budgets – and we can’t stress this enough – do your research. Take a look at what’s out there based on where you want to live, and ask whether or not your options are feasible. You might be in a position where you’re still not sure which coast you’ll move to; or maybe you’re concentrating on neighborhoods, communities, and complexes because you have a better idea of the city where you will be. In any event, you can expect to have options to narrow down: Are you looking at an apartment, a shared house with roommates, or will your living arrangements be set based on your job? Based on where you are searching, are you more likely to have a landlord or a leasing office? In big cities like Chicago or D.C., you could be more likely to live in a house where you rent a room or a basement apartment and have a landlord who owns the house or building. Think about what options you will have for transportation, shopping, and nightlife nearby based on where you want to live geographically.

On top of all that, your financial situation will change. After graduation, you will be in a state of financial flux for likely between 6 months and a year. As Pete and Alex mention, your first month will always be more expensive than your regular monthly expenses because of the additional fees rental owners charge. So, if you find yourself already outlining your month-to-month, don’t forget that you have a ways to go before you start seeing regular billing cycles. Between the time you receive your first paycheck, to when student loan repayment kicks in (about 6 months after graduation for federal loans), and when you finally settle into your month to month living expenses, you can bet to see your expenses rise and fall a few times before you can get comfortable. And just when you start to think things are normal, the seasons change, and your utility bills shift. So, let’s break down what you can expect for your one-time and monthly rental expenses.

What Will You Need?

Part of the reason your first few months can get so expensive is because of all the upfront costs. While some may be one-time purchases, others such as your first trip to the grocery store may only be high at first and decrease over time. In a perfect world, when you get your first new place, you’ll buy everything that you need right around the time you move. But the reality is, you can only do what you can afford. And if you’re moving out of the dorms or shared undergraduate apartment, while you may need new furniture, it might be more prudent to start with the necessities. Do you have or need a couch? How about dishes and a dining room table? Bedroom furniture? Maybe some small kitchen appliances like a toaster or a coffee maker? Don’t forget about the toiletries and cleaning supplies. Even if you don’t have your own washer/dryer, you will need laundry detergent…unless you’re still going back home to do your laundry. However, if you set a vow never to pay for the laundromat again, some apartments have what they call a “washer/dryer hook-up” that will allow you to rent your own and have it in your place.

One-time/Annual Expenses

If you are living in a traditional apartment community setting with a leasing office, expect to pay some upfront costs either once when you first move in, or annually if you live in the same place for more than one year. When you’re building your moving budget, recognize that these expenses tacked onto your monthly rent and utility bills may end up totaling more than double your regular payments, which is why the first month can be such an important time to get your finances in order and prepare for your move beforehand.

  • Renter’s Insurance: Many places require that you have a renter’s insurance policy the day you move in. If you also have a car insurance policy, it’s often a good idea to use the same company for your renter’s insurance to save some money. Whether your apartment requires coverage of $10,000, $100,000, or none at all as long as you just have a policy, the price of renter’s insurance tends to be about $15-30 each month. But you also have the option to pay for the whole year upfront, which usually has a lower average monthly cost.
  • Application Fee: These can vary based on the area you’re looking to move into, but for each person moving into your apartment, apartment leasing companies may charge upwards of $50 just to submit an application. Many places may waive this fee if you work at certain local companies or if you are a graduate student attending school nearby. The application fees fall into the non-refundable category. You only have to pay it once, as it gives them the go-ahead to run a background check on you and check into your resident eligibility. But even if you decide not to move there, once you pay the deposit to apply, you usually can’t get it back.
  • Security Deposit: This fee is like paying incidentals for your apartment up-front, much the way you would at a hotel by leaving your credit card on file in the event that you take food out of the mini-fridge or damage the carpet before you leave. Once you move out, they will assess any damage to your apartment and take any expenses out of what you paid as the security deposit. Beware of the complexes and landlords who are notorious for keeping this, regardless of what shape your apartment is in when you leave. Security deposits may be as high as one month’s rent, but they do not cover the actual last month of rent itself.
  • Holding Fee: If there is a particular floor plan that best suits you to the point that you would be willing to hold out for it for a while, to put it on hold, the leasing office may ask you for some sort of fee with a small window to make your decision on whether or not to choose it. Once you pay this and decide to move in, some places will roll this over into your security deposit or use it as a credit toward your first month’s rent. If you decide not to move there at all, some may also put this fee into the non-refundable category. Just be sure to ask before you make the decision to put a hold on a place to find the perfect apartment or to buy yourself more time before you move.
  • Administrative Fees (use of pool, on-property gym, game room): Some places charge this, and others don’t. Some waive the first year, and others don’t. It’s just always good to know what other first-month fixed expenses are built into your move. Just because you do or don’t have a gym has no effect on whether or not your place will build in this fee. It mostly depends on what other apartments in the area are doing.
  • Pet Fees: These can get tricky. Of course, there are restrictions on the types of pets you can have, but many places will break up pet fees in different ways. Some will charge a one-time fee up-front for the entire year; others will charge half of that in what they call a “pet deposit” (refundable or non-refundable) and will then charge a monthly “pet rent” on top of it; still others will only charge the pet rent. It’s always good to know what the policies are for moving in your furry…or feathery friends. If you already have a pet but maybe it’s staying with your parents, don’t make the mistake of trying to game your lease by moving in your pet part-time and trying to get away with not paying the fees. Most places, if they allow pets at all, will also have a policy for how many days count where the pet is at your place before it is considered a permanent resident. Any time you risk breaking a condition with the lease, you could be asking for more trouble than its worth.
  • First Month’s Rent: Based on the property’s policies around pro-rating (charging you based on the number of days out of the first month you live there), you can expect to pay pro-rated amounts in addition to an advanced month’s payment. So, if you move in on June 20, you will only pay for living there for 10 days that month; but you may also be paying for July on top of that, depending on their policy.
Monthly Expenses

Let’s talk about bills, shall we? Some of your bills will be included in your rent, based on how your leasing company or landlord has decided to pay their bills. For example, some places will give you a flat rate each month for water or trash, or maybe they will just bill them directly through the apartment regardless of a fixed expense. Others, you will set up your water and energy bills through the local companies and pay them monthly to the separate companies. It’s also helpful to know ahead of time, if your apartments are sending you the bills, how they break them up. Do you have your own water heater, control your own heat and A/C, and pay your bills based on how much you and the people you live with use each month? Or are those bills metered by your whole building? If you live in an apartment building with 10 other people, for example, the apartments may total up the water bill for the whole building, divide it by 10, and that’s your water bill, whether you (and your neighbors) live alone or with 4 other people. So, let’s talk about what those utilities are.

  • Water: Plain and simple – how much do you use? For one person, you might pay about $35/month.
  • Electric/Gas (some places use both energy types; many only use one, often electric): Some food for thought here – if your place is all-electric and the power goes out, you will lose everything, including your heat. But if you live in a place where maybe your kitchen stove and your heat are gas and the rest is all electric, you may lose your lights and TV but still have heat and can cook. With both energy types, it may mean you’re paying more bills, and they will fluctuate depending on the season and how much you use of each during certain times of the year. Either way, you could be looking at around $100/month for one person.
  • Trash/Sewage: Trash is usually a fixed expense, upwards of about $10. It may not seem like much, but in many cases, once you tack on the cost of sewage, you may be looking at paying double what you pay for water for the month. Flush wisely.
  • Parking: This will depend on the city you live in and how limited parking is in the area. For example, if you want to live in Maryland, just outside Washington, DC, you may be looking to pay $50/month for a spot in a parking garage. But in Indianapolis, in a place with open parking, if you don’t need a pass, parking will probably be free. However, if you want a private garage or carport, your apartments will charge based on the number of months you rent them out. Don’t forget to think about whether or not you need a parking pass or sticker for your neighborhood or city and if you will also need one for work.
  • Internet/Cable/Home Phone: Now might be a good time to consider whether you want these add-ons. Some rental properties will include these into your rent with limited options, based on packaged deals they have with certain companies.
Roommates and Landlords

With all these financial considerations (and maybe having had a bad situation in college with leasing), you may be thinking about moving out, having your independence, and living alone. But your budget may not realistically allow it. If you are looking to pay about $600/month in rent alone, you may be surprised at how little you’ll get by yourself, based on the city where you want to live. In Chicago, for example, you could be looking at a decent apartment with older kitchen and bathroom appliances and fixtures, in a decent neighborhood, with a couple roommates, maybe a dishwasher, likely no washer/dryer, and close access to public transportation. In New York, you will likely be looking into a share house in Queens or Brooklyn, also with older fixtures and close transportation access – but forget about the add-on appliances.

If you are looking into getting roommates, choose wisely; talk about your finances openly; and have the hard conversations early about money, rental policies, and the “what ifs” for financial pitfalls while you live together. In fact, if you’re having issues with your current roommate(s), don’t forget to look into Student Legal Services while you’re still a student. It’s also important to realize that legally, you all are bound according to what’s called “joint and several liabilities,” which means that whoever you are leasing from, they consider you and your roommates at one entity. So, if one of you drops the ball on rent for the month, you are all still liable for making sure the entire rent gets paid, not just your portion. Some landlords and properties will let you know about this, and others won’t. That’s why it’s always a great idea to check into the people who are leasing your apartment. Whether it’s a company or an individual, there are laws out there to protect you. Do some research on the creepy guy who wants to lease you a room in a house to see if there have been any reports out on him about bad business practices with tenants. Ask lots of questions to the leasing office ahead of time to make sure all your bases are covered. The last thing you want is to find out how poorly they conduct business after you move in, when you have a water leak in your place or when you move out and they start charging you for a ton of unanticipated expenses.

Bottom line: Whether you are moving with roommates or alone, do your research. Find out what your expenses will be, and really look into where you’ll be living. Just remember – live like a student now while you’re in college, so you won’t have to when you graduate. Get used to a certain budget and standard of living based on a moderate living situation, or what we like to call the controlled poverty environment that is college. Then, expect to work your way up in the coming years. Living large can wait.

Season 4: 01/26/2015