How to Save Money on Rent: Six Ways to Lower Your Rent
If you’ve been in the market for a one-or two-bedroom apartment recently, you know you’re digging deeper and deeper into your wallet every year to find a place to live.
Rent affordability – the percentage of income spent on monthly leases – has soared close to 30% since 2010. By comparison, Americans spent 25% of their income on rent before 2000.
Why is Rent so Expensive?
On the other hand, mortgage affordability, the percentage of income spent on a mortgage, has only been about 15% since 2010.
What’s happened is that the cost of renting has exploded, while wages have stagnated. The median cost of rent, according to the US Census, increased 19.5% from 2007-2016. That is about $192 a month, meaning it costs $2,304 more per year to lease today than it did in 2007.
Much of that has to do with demand, which shot up dramatically when the housing market crashed at the end of 2008. Unfortunately, the rental market wasn’t ready. The economy was reeling and construction of new apartments couldn’t keep up with the demand.
According to data from Yardi Matrix, 2010-2012 produced 133,000 new apartment units on average, by far the fewest number of apartments since 1997, the first year that data was collected.
The good news is that construction has picked up again. Almost 286,000 new apartment units were built in 2016. That number was the most in 20 years, and is expected to increase by 21% in 2017.
The cost of rent should level off with more apartments on the market. That being said, prices still increased by 2.4% in 2017, however, it had been increasing by an average of 4.2% the previous five years.
Time will tell where the numbers go, but pay attention to rental rates in your area. Know what the market value of your apartment is before you re-sign that lease, and use these tips to save on rent in the meantime.
How to Save on Rent
- Get a roommate. This one is pretty obvious, and it will save by far the most money. The average cost of a one-bedroom apartment in 2017 is $1,166. The average cost of a two-bedroom apartment in 2017 is $1,332. Divide that second number by two and it’s $500 cheaper per month and $6,000 cheaper per year to share costs with a roommate than live alone. And that doesn’t include shared expenses like kitchen supplies, toiletries and groceries.
- Negotiate when you re-sign a lease. Landlords want to keep good tenants. It costs them money to move you out and bring someone else in. That means you have a little bit of leverage. Research similar apartments in your area and come in with a number in mind. If the landlord won’t budge, tell them you’re going to look elsewhere. If you’ve been a good tenant, they’ll want to keep you. Word of caution: Know who you are dealing with. Independent landlords have a lot more wiggle room than a property management companies. Maybe they have multiple renters in the complex and aren’t willing to make concessions, so try to sweeten the deal by offering something in return.
- Pay up front. Offer to pay the entire lease or at least a few months up front for a discount if you can afford it. The landlord will cut a deal to have cash in hand., but it’s only an option if you have enough savings to cover and then some. You don’t want to rack up credit card debt because you emptied your bank account to save a few hundred dollars on rent. The savings would be lost to credit card interest. And if you do pay up front, make sure you pay the money back into your savings each month.
- Sign an extended lease. What a landlord wants is stability. You can give it to them by signing for a a year-and-a-half or two years instead of six months or a year. The longer the lease, the lower the landlord should be willing to go.
- Give up your parking space. If you don’t have a car, you won’t need a parking space. Offer to give it up in exchange for discounted rent. The landlord would be able to sell the space to another tenant, who might need extra parking.
- Look for apartments in the winter months. Landlords have a tough time finding renters in winter. It’s cold outside and people aren’t willing to leave their cozy homes. Vacancies can go on for months, and with each month landlords are losing money and getting more desperate. Prices get expensive in the summer months. Some of that has to do with the weather, and a lot of it has to do with the school schedule. College graduates flood the market during this time of year, and high school graduates enter the market in college towns. Families with children in elementary school will wait until the school year is over to make a move to ease their children’s transition to a new school. All that makes for an increase in demand which equals higher prices in the summer. Look for apartments in the winter, and offer to sign an extended lease that ends in the summer. That ensures the apartment hits the market at a good time for the landlord when you move out, and the landlord gets some stability in the meantime. They’ll be willing to work with you for those tradeoffs.
Don’t Use Credit Cards for Rent
Watch out for advice to pay rent with a credit card so you can cash in on mileage rewards or cash back from credit card companies. Property managers typically hit you with a service charge that will exceed any sort of cash-back, plus you’re risking overloading your credit card.
It will hurt your credit score, and the last thing you want to do, while trying to save money, is to add credit card debt.
Zillow (2017 August 8) Housing Affordability in the United States, 2017 Q2. Retrieved from https://www.zillow.com/research/q2-2017-housing-affordability-16323/
United States Census Bureau (2016) Median Gross Rent. Retrieved from https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk
Otet, A (2017 August 2) Apartment Construction at its Highest Level in 20 Years, with Denver, Nashville joining NYC as 2017’s Hottest Rental Markets. Retrieved from https://www.rentcafe.com/blog/rental-market/us-apartment-construction-at-a-20-year-high-in-2017/
Adobo (2017 December 1) National Median Rent. Retrieved from https://www.abodo.com/blog/december-2017-national-apartment-report/
Balint, N (2017 December 1) Apartment Rents Stabilize in November Around the Country, While Mid-Sized Markets Remain Active. Retrieved from https://www.rentcafe.com/blog/rental-market/apartment-rent-report/rentcafe-apartment-market-report-november-2017/