What You Need to Know Before You Sign That Lease
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Maybe you’re just starting out, or maybe you’re looking for your first place without roommates—whatever your situation, renting an apartment can be more costly than you expect if you’re not careful.

Between security deposits, broker’s fees and charges that are sometimes well-concealed within the fine print of rental agreements, the process can easily blindside those who fail to do their homework.

To help you keep your budget and sanity intact, here’s what you should know before you sign your next lease. (And check out the video below too for more on what it could cost you if you don’t read the fine print.)

Figure Out the Deal-Breakers

Before you decide on a rental, think about what’s important to you and what you’re willing to compromise on. Do you want to live in the heart of the city or in the suburbs? Are you open to living with roommates or are you set on living on your own? Questions like these are key because they directly affect how much you could end up paying.

“I always encourage folks to write down the most critical things—the deal-breakers,” says Certified Financial Planner Philip Olson, owner of The Art of Finance. “But it can’t be more than five, otherwise everything’s a deal-breaker. Instead, choose two to four that you really care about, then release the rest.”

Making a few tradeoffs is how you’ll land an apartment you like at a reasonable price, Olson says. If, for example, living downtown is non-negotiable, you may need to swallow the fact that it’s only affordable with roommates.

If you do opt to live with others, make sure to hash out the details on paper. “As is the case with any scenario where a large amount of money is exchanged, it always pays to have a written agreement,” says Andrew Sacks, a licensed real estate salesperson with CitiHabitats in New York City.

Set a Budget That Covers More Than Rent

Remember, the general rule of thumb is that your housing costs shouldn’t exceed 30 percent of your monthly income. So, let’s say you’re bringing home $3,000 a month. That means your rent—as well as utilities and any extras, like parking—should add up to no more than $900.

“That’s a healthy ratio because if you go north of 30 percent, you’re going to have a tough time covering the rest of your expenses,” Olson says.

To prevent dipping into your savings or swiping your credit card, it helps to plan ahead for any potential expenses. Olson suggests budgeting as much as an extra 20 percent to cover possible mishaps (like locking yourself out, say, or spilling something on the carpet) and expenses you may not have planned on initially, like storage fees or moving fees that end up higher than you’d expected. 

Get Your Papers in Order

Once you’ve found an apartment you’re happy with and are ready to apply, you’ll likely be asked to undergo a credit check and often you’ll also have to put together a lot of paperwork.

If you’ve rented before, this may sound familiar. But agents point out that requirements can vary according to your location and apartment building, so it’s worth making sure you’re prepared. Here’s a comprehensive list of  all that you could be asked to provide:

1) A letter of employment or offer letter stating your position, salary, opportunity for bonuses or commissions and duration of employment.

2) Your last two tax returns (the first two pages of the 1040 should suffice).

3) Your last two pay stubs.

4) A copy of your photo ID.

5) A letter from your last landlord verifying that you paid rent on time and are generally a good tenant and neighbor.

6) In some cases, a guarantor, depending on your financial situation and city. In Manhattan, for example, Sacks says prospective new tenants may need to prove they make 40 times the monthly rent in annual income. (So $2,000 in monthly rent translates to a mandatory $80,000 salary.) Because of the sheer number of people looking for housing at a given time in New York City, landlords there can afford to be selective. If you don’t hit that income mark, you may need someone to cosign. Similarly, no matter where you’re looking, poor credit will likely require either paying more money upfront or getting a guarantor.

7) Cash on hand. Again, it varies, but Sacks says to financially prepare for the worst: first month’s rent, last month’s rent, a security deposit equal to one month’s rent and, potentially, a broker’s fee if you’re in a city like New York (which Sacks says can equal as much as 15 percent of your annual rent).

Read the Fine Print

Passed the paperwork phase? Making sense of your lease is the last hurdle. According to Sacks, it’s the rider—a clause that’s often added to a templated lease agreement, and easily overlooked—that you need to pay special attention to.

“The real meat and potatoes are often put in the rider because landlords don’t normally adjust the lease,” he says. “Riders are where landlords lay out their specific rules—for example, no smoking in the apartment or a stipulation that tenants must obtain a renter’s insurance policy.”

Make sure to read through each and every page carefully. Is there a non-refundable move-in fee hiding in the fine print that no one mentioned? A utility setup fee? A surcharge for writing a paper check instead of paying rent through an online portal?

If you do uncover surprising rules or charges, speak up and try to negotiate the terms before you sign. Otherwise, you could be in for some serious sticker shock once the ink dries on your signature.

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