Whether you’re moving to your first or 50th rental property, you may budget differently depending on where you live. For instance, sometimes utilities are included in the monthly rent amount, while other times, you must pay each utility separately. Additionally, your expenses while living in a home may differ from your rental expenses. So, if you’re wondering how to create a rental budget, read along as we review some tips for renters.
Contents of This Article:
- Why Do You Need a Rental Budget?
- Expenses to Account For in a Rental Property
- How to Create a Rental Budget
- Tips for Sticking to Your Budget
- Find the Right Rental Property for You
Why Do You Need a Rental Budget?
No matter where you’ve living, you’ll need to create a budget for your living expenses. If not, you could realize that your costs exceed your income. That said, finding a rental property comes with several expenses. So, when you create a rental budget, you’ll need to factor in your finances, costs, wants, and needs.
Tenants pay a lot to live in rental properties, whether it’s monthly or one-time fees. Remember, most property managers in Washington, DC, require an application fee. Then, you need to consider a security deposit, usually equal to one month’s rent. Additionally, if you’re moving with a pet, you’ll generally pay a one-time pet deposit and sometimes monthly pet fees.
Next, there’s the first month’s rent due upfront and utility costs throughout the month if not included in the rent. As you can see, there’s a lot to account for, so you need to create a rental budget. If not, you may realize you cannot afford your monthly expenses. Later, we’ll discuss how to create a rental budget. But next, we’ll go over the most common expenses to account for in a rental.
Expenses to Account For in a Rental Property
While cheaper than purchasing an entire property, rental properties come with many expenses. Most people only think about the monthly rental fee before moving into a new property. However, there are several more expenses to consider. As such, here’s what to include when you create a rental budget.
- Moving Costs- The initial costs of moving into a new rental property are quite significant. For instance, there’s usually an application fee, a security deposit, and a pet deposit, if applicable.
- Monthly Rent- The most significant expense you’ll need to save and budget for is the monthly rent. The median rent in Washington, DC, is around $1,795, which is quite significant. As such, you’ll need to budget correctly to ensure you’re paying on time each month.
- Utilities- If utilities aren’t included in your monthly rent price, you must pay each separately. Generally, utilities include water, electricity, gas, garbage, internet, and more.
- Renters Insurance- While not always necessary, most landlords recommend getting renters insurance to protect your personal property in a rental. It’ll usually cost around $10 and $30 per month.
- Parking- Depending on where you live, some landlords charge for a parking space in addition to your monthly rent. This is common in more populated cities where finding parking can be an issue. So, if you’re charged monthly for parking, you must add that to your budget.
- Pet Fees- If you have a pet living with you, you’ll likely need to pay an initial large or smaller monthly pet fee. Don’t forget to add this when you create a rental budget.
How to Create a Rental Budget
Now that we’ve reviewed some of the main expenses to worry about, you can create a rental budget more easily. However, there’s still some work to be done to create a budget and stick to it. Here’s what to consider while creating your budget according to your income and expenses.
- Know What’s Included
- Calculate How Much You Spend
- Choose a Savings Strategy
Know What’s Included
Not all rental properties, landlords, or property managers are the same. As such, even though utilities were included in your last rental, it doesn’t mean they will be in your next. So before you move into a new property, make sure you know exactly what you must pay for.
Ask the landlord or property manager about application fees, security deposit fees, pet fees, and any other initial fees. Additionally, ask about the monthly fees they charge. For example, is parking included, or must you pay a monthly fee? Knowing each expense you have before moving into a new rental property is crucial.
Calculate How Much You Spend
We’ve gone over the main rental expenses to account for. However, to apply them to your budget, you’ll need to figure out how much each one costs monthly. Once you have the exact costs, you can fit them into your budget. Then, you’ll need to calculate how much of your income you spend on other expenses, like needs or wants.
Once you know how much you spend on necessities and wants, you must consider your income. For example, can you afford to live in your rental property? Where could you cut down on unnecessary spending? There are plenty of ways to lower your monthly expenses, like reducing utility costs and eliminating personal expenses, like going out to eat.
Choose a Savings Strategy
Several different budgeting strategies exist, but choosing one that you can follow is crucial. An easy method to follow is the 50/30/20 rule. This rule states that you should spend 50% of your income on necessities, like bills and other living expenses. Then, you’ll spend 30% on wants, like clothes shopping, and the remaining 20% goes to savings and debt repayment.
If you want a more basic budgeting method, try the 30 percent rule. This rule is based on the idea that you should spend no more than 30% of your income on rent. However, this rule doesn’t apply to everyone, as some people must spend more than 30% of their income on rent–especially in larger cities.
Tips for Sticking to Your Budget
Creating a rental budget is the first step to covering all your monthly bills. However, it’s pretty useless unless you put it into practice and stick to it. If you have trouble with budgeting plans, consider these three tips for your rental property expenses.
- Adjust Your Budget If Necessary- Some months, you’ll spend more money than others. Adjusting your budget may mean cutting out unnecessary expenses for one month to meet your necessary bills.
- Leave Yourself Some Leeway- Your rental expenses shouldn’t take up so much of your income that you live paycheck to paycheck. Living comfortably enough for a little wiggle room in your budget for other expenses is ideal.
- Consider a Roommate- Your monthly rent and other expenses can add up very quickly, and it’s not cheap by any means. If you simply can’t afford rent on your own, consider getting a roommate to split the costs of living with.
Find the Right Rental Property for You
No matter where you live, it’s crucial to budget appropriately for your monthly expenses. For instance, if you’re a tenant, create a rental budget to help keep you on track for all your monthly fees. In addition, if you’re preparing to live in a new rental home, you’ll want to keep several initial expenses in mind, like a security deposit and application fee.
That said, contact Bay Property Management Group if you’re looking for a new rental home that fits your budget and needs. Our dedicated property managers can help you find the right property for you. On the other hand, if you’re looking for someone to manage your properties, we offer full-service management for landlords near Baltimore, Philadelphia, Northern Virginia, and Washington, DC.