Have you ever purchased something that wasn’t quite within your price range? We’ve all done it, and we all know we should have been more sensible and budgeted beforehand.
The same applies to renting a property.
Rent is possibly one of the largest financial outgoings we make on a monthly basis. Fortunately, we’ve put together a guide on what to look out for when it comes to your finances and keeping on top.
Read on to find out how to watch your budget when renting a property and become a smarter tenant.
Working out what you can afford
Before you embark on a rental, you need to establish if you can afford the ongoing monthly rental costs. Keep in mind that the cost of living is always much higher than you anticipate it to be.
What considerations, therefore, should you take into account when watching your rental budget?
Your monthly salary
Most rental agents require an applicant’s gross salary to be at least 2.5 times the monthly rent, just so they can assure the landlord that you aren’t going to default on your rent payments.
You won’t just be paying out for rent each month. Expect to have to pay:
- Water, gas and electricity bills.
- Council tax (you can check council rates here)
- Service charge
It’s also an option to ask the landlord, previous tenant or rental agent for an idea of monthly bill costs.
You then have your own personal outgoings to consider:
- TV License
- Contents insurance (the landlord will cover the buildings insurance, so you just have to ensure your belongings are covered)
- Tenant insurance
- Car insurance (the cost of this may change if you’re moving to a different post code area)
- Mobile phone
Keeping your budget in mind, it’s important to also include all the miscellaneous costs that will eat away at your monthly income, such as:
- Transport costs
- Gym membership
- Car costs
Once you’ve taken into account all of your regular monthly outgoings, you’ll be left with a rough estimate of how much you can afford to pay towards rent each month, thus determining what property you can and can’t afford.
Always be cautious and try to overestimate, rather than underestimate outgoings. You don’t want to find yourself running out of cash a few months down the line because you forgot about a large payment, such as a student loan.
Before you move in, you’ll be expected to pay up to three months’ rent in advance, as a deposit for when you move out. This is in case anything is amiss and the rental company or landlord needs to pay for any damages. If renting with pets, you can expect this to be a much higher amount.
If there’s no damage, you’ll get all of your deposit back. You can then use this as a deposit for the next rental property, but until you have this buffer, you’ll have to factor it into your budget.
If you can’t afford the deposit, speak to your local council about any rent deposit, bond or guarantee schemes that they might offer. Some rental companies won’t accept this, but it’s always worth enquiring.
Letting agent’s fees
While recent announcements from the Queen’s speech in June of last year explained a planned scrapping of letting agent fees, the legislation has yet to be drawn up.
As of currently, the average tenant pays £233 in letting agent fees, but it has been noted that some tenants can pay up to £700. These fees typically cover:
- Mandatory inventory fee
- Tenancy reference fee
- Renewal fee
- The agent’s own admin fee
If you rent through a private landlord, these fees tend to be less.
You’ll need to consider the cost of moving when switching properties, which can cost upward of £500.
In addition, should you be transitioning into a smaller house or apartment, you may also need to pay to store your excess furniture and belongings elsewhere. Keep this in mind when you’re looking for a new place to rent.
When you move into any property, furnished or unfurnished, check who is supplying the electrical white goods, and what condition they’re in. You have to supplement what is provided, or you may have to buy them yourself.
If you move into an unfurnished property, you’ll have to buy all the furnishings to make it habitable. These costs can quickly add up.
Using an affordability calculator
A useful tool to use to work out how much rent you can afford is an affordability calculator. This helps you get a good idea of the funds you will need to move forward with renting a property and to avoid any nasty surprises.
Finally, it is worth remembering that if you default on a rent payment, it can not only damage your relationship with your landlord, but it can negatively affect your credit rating. If you don’t pay your council tax you can be prosecuted, and if you don’t pay your utility bills, you can find yourself cut off.
If you keep on top of your outgoings, taxes and any other additional costs, you’ll have no trouble understanding your budget and making sure you’re renting within your means.
Once the essentials are calculated, you’ll be well on your way to renting the best property possible!