For many of our readers, moving into their own apartment is the ultimate goal. You want a place of your own, whether that means sharing an apartment with friends, or finding a studio you can call yours. But how do you get there? Earlier this year, we did a three part series on the topic. Now it’s time for a refresher course on how much money you’ll need each step of the way.
So, let’s dive right in! First and foremost, in 2013, the rental market is very tight. According to Reuters, the national vacancy rate in apartments is now 4.3% , down from 8% in 2009. And if you are looking for a place in NYC, San Francisco, Chicago and many other major markets it’s much lower. In other words: there aren’t many open apartments – and there are likely more people who want apartments than suitable apartments to go around. Which means that if you’re searching for a discount, or a deal, you’re unlikely to find one. It’s the simple reality of many hunters and few vacancies. If anything, you may have to pay a premium to get the place you want. So start saving! If you are a new grad making about $40,000, you’ll need $3,000 (detailed at the end of this post) in the bank before you can move.
Your Steady Income
If you’re looking to live in a place of your own, it’s best to have a steady income. You’ll be far more likely to secure a place, and you’ll have piece of mind once you move in. There are two common ways to determine the amount of apartment you can afford. Either:
- Divide your monthly take-home income by three, or
- Divide your gross annual income by forty
The resulting number is the absolute maximum you should pay in monthly rent. If you’re renting over your means, you’re going to be stressed every single month … and there’s never going to be a let-up. So stick to what you can afford. (If you don’t have a steady income, or you’re looking for work, or you’re looking into renting a share, see our tips for getting an apartment without meeting the income requirement. (Warning: you may need to have even more money saved.)
The Down Payment
Just because you meet the income requirements for a given price range, it doesn’t mean you’re done just yet. Scoring an apartment means putting down a security deposit. The security deposit is usually the same amount of money as one month’s rent. You’ll also likely be subjected to a background and credit check – which you’re often charged for, to the tune of $30-$100, depending on the management company. So that means that you’ll need to have roughly double your first month’s rent, plus $100 or so and you’ll need to be able to cut a check for that amount as soon as you want to secure a place. (Yes, you’ll eventually get back your security deposit, but that won’t be until the very end of your lease, provided you kept the apartment in good shape. In the meantime, it’s a thoroughly non-liquid asset that you need to save for.)
Don’t overlook this expense. Likely, it will either be for a moving-truck rental, or for a full-service move. Price each in your area. If you’re renting a moving truck in-town and doing the rest yourself, expect to pay around $40-$150 for the truck and supplies such as tape, boxes, etc. This is the recommended choice if you can live with a few dings to your furniture, you’re comfortable securing stuff in the back of the truck, you can drive a huge vehicle with aplomb, and you have recruit-able friends.
Generally speaking, if you’re doing a small full-service move in-city with a good company, expect to pay around $300-$600. If this seems like a lot, that’s because it is; that said, if you find a good company and you have nice stuff, there’s a lot of value in having someone carefully move it into your new place.
It’s unlikely you’ll get your moving expenses all the way down to zero. If you do, my hardy congratulations: you have great, strong friends and free access to a large vehicle. If this describes you, all you need to consider is the expense of getting your new place outfitted with the basics: toilet paper, cleaning supplies, light bulbs, paper towels, a dish rack, etc, etc. Expect to pay about $50-100 for apartment move-in basics, all told – and on the higher end, if you’re starting from zero.
If you already have furniture, you’re in luck – you likely paid more to move, but now you’re done in this department. If you don’t have much furniture, remember that furniture is commodity for which you can pay almost any price. We have articles on how to furnish your place for under $500, under $1,000 and under $2,000. Paying more for furniture doesn’t guarantee a better product, but if you are patient and knowledgeable, you’ll be able to get long lasting, nice furniture if you spend a bit more money. That said, your first apartment doesn’t need to be Versailles. Spend an amount you’re comfortable with – and remember that aside from the basics, you don’t need to buy everything all at once. Consider visiting thrift shops intermittently. End tables, lamps, bookshelves and the like can be purchased gradually – so think of furniture as a recurring expense for the first year, rather than as one lump sum.
We’ve ran an article with a breakdown of utility costs. Executive summary: you should expect to pay roughly $200 a month in utilities (which includes internet, a webstreaming service, and renter’s insurance in addition to the usual heat and electricity). Keep in mind that this is per unit, so if you’re sharing an apartment with friends, your individual cost will be significantly less. We’d also like to note that, as tempting as it may be to ignore, renter’s insurance is a must have. It’s less than $150 a year, and should you suffer a fire, flood or break-in, you’ll be able re-purchase your possessions and have someone else put you up in a hotel until your place is livable. So, get renter’s insurance!
Total Target Savings
1st month’s rent $1,000 – $40,000 salary/40
Security deposit $1,000 – one month’s rent
Moving costs $0-$500 – depending on if your are moving furniture (bed, etc.)
Furniture $0-$500 – if you moved with furniture $0, otherwise you’ll need some basics (bed, etc.)
Miscellaneous $500 – utility deposits, credit check fees, renter’s insurance, starter supplies