Personal Finance

How to get an apartment without going bankrupt

Key Points
  • Prepare before moving.
  • Know what a landlord looks for in an ideal tenant.
  • Asking about landlord concessions can save thousands on a lease.
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Millennials are continuing the long migration from those school days to the concrete jungle — but they're not always prepared for the move.

The expense of city living can be a challenge for new grads juggling student loans on a starting salary. The average urban household spent nearly 27 percent more than rural households in 2015, according to the Bureau of Labor Statistics.

Housing can be the biggest line item, with tenants spending 30 percent of their monthly income on rent. In cities with the most expensive housing, such as New York and Miami, that number can rise above 50 percent.

What's the point in working so hard if you can't have a little bit of fun with your money?
Ariel Anderson
CFP at Society of Grownups

With that in mind, finding and securing an apartment that meets your needs is crucial when moving to a new place. Here's how to do it without breaking the bank:

Know before you go

Preparation should begin long before move-in day. Start by creating a new savings account specifically for the move, said Ariel Anderson, a certified financial planner at Society of Grownups, a millennial-focused money management company.

Separating those funds can help motivate you and keep you from spending frivolously, she said.

"Connecting it to a specific goal creates an emotional tie, and it can cause you to think twice about spending that money," Anderson said.

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Next, check your credit score and make an effort to boost it. A bad score can preclude you from a big chunk of a city's real estate market.

When deciding on your housing budget, Anderson recommends the "50-20-30" rule.

Fifty percent of take-home pay should be spent on basic needs: Student loans, rent, groceries, and other living expenses, she said. Twenty percent should go toward long-term priorities, such as savings and investments. The remaining 30 percent should be spent on your quality of life — the reason many millennials move to a city in the first place.

"What's the point in working so hard if you can't have a little bit of fun with your money?" Anderson said.

Know your audience

Spending hours to find the perfect apartment is no better than daydreaming if a landlord throws your application in the trash. Even if your credit score is up to snuff, it's important to recognize what a landlord is looking for in an ideal tenant.

"A landlord really cares about three things," said Jeremy Wacksman, chief marketing officer at Zillow. "One, that you pay your rent on time. Two, that you don't wreck the place. And then three, that you're a good tenant for all the neighbors."

Being a decent, considerate person in an apartment building shouldn't be a lot to ask, but paying rent on time every month can often be a challenge. StreetEasy's Grant Long says a good measure of affordability is having an annual income at least 40 times your monthly rent, in major urban markets.

Landlord concessions

When signing a lease, expect to pay your first and last months' rent, along with a security deposit, before moving in. It's "basically unavoidable," Anderson said. If you use a broker, you might also owe a one-time fee of as much as 15 percent your annual rent.

But prospective tenants are finding new opportunities to negotiate through "landlord concessions" — financial perks that landlords offer — according to New York City data from StreetEasy's Long.

Concessions usually take the form of waiving at least a months' rent, or recouping a broker's fee, Long said. The share of StreetEasy's listings with concessions rose to 16 percent in December, compared with 9 percent a year earlier.

Landlord concessions could save thousands on a new apartment lease, but they can be easy to miss. They are sometimes only offered when asked, and many applicants aren't prepared to negotiate, he said.