19 Mistakes College Grads Make When Finding Their First Apartments

You aren't being graded on your apartment hunt, but you still want to get it right.

Finding your first apartment after college is a big undertaking — it can be hard to know where to start when you’re staring at a stack of listings and the money from your new job is burning a hole in your pocket. And you’re new to all this, so you’re bound to make some mistakes along the way.

But we can help. Take a look at some of these common slip-ups so you can do your best to avoid them as you search for a new place to hang your cap (and gown … see what we did there?).

1. Starting Your Search Too Early

“Generally, the best time to start looking for an apartment is no more than three weeks before your move-in date,” said Margaret Fanney, a licensed real estate agent at Triplemint in New York City. But once it’s time to start your search, you want to make you aren’t …

2. … Underestimating How Much Everything Costs

Whether you lived in student housing and paid on a semester basis, or you are moving to a different state (or even different city) post-graduation, getting your first apartment can be a big financial adjustment. (Still deciding if you want to move somewhere new? Check out these 15 best cities for college graduates.)

You can use the time before graduation to research how much apartments are in the areas you’re considering and what costs you might pay for additional amenities.

3. Not Planning for Expenses Beyond Rent

Most people think about the monthly rent check (or charge, if your landlord lets you pay rent by credit card), but that’s not the only expense you’ll face living on your own. Think about other necessities like laundry detergent, toilet paper and groceries. And remember, there are ways to save on your daily expenses — like making this delicious 16-cent breakfast.

4. Leaving Student Loan Payments Out of Your Budget

“Monthly payments for student loans are often overlooked … because student loans come with a six-month grace period before you have to start making payments,” said Brandon Yahn, founder of Student Loans Guy.

5. Forgetting About Credit

Most landlords look at a version of your credit report as part of the application process. Things like credit cards or loans (ahem … student loans) are impacting your credit. (You can read more about what factors influence your credit scores here.) Depending on how far into the world of credit you’ve ventured, your credit file may be pretty thin. Not sure? Now’s the time to find out — take a look at a free summary of your credit report on Credit.com.

6. Not Gathering What You’ll Need

“Graduates usually rush to find an apartment without contemplating on the requirements for renting an apartment,” Kobi Lahav, managing director of Mdrn. Residential in New York City, said. “They don’t have any offer letters ready, pay stubs or bank statements.”

7. Not Talking With Your Guarantors About Their Essential Paperwork

Once you’ve gathered all your paperwork, it’s important to also remind any guarantors of what they’ll need, as “springing it all on [them] at the last minute is guaranteed to cause delays and frustrations,” Fanney said.

8. Not Brushing Up on Terminology

“[Recent graduates] don’t typically know the difference in rental versus condo versus co-op building,” Greg Moers, a licensed real estate agent at Triplemint, said. “They tend to just shop for what looks awesome and do not take into consideration the process involved with putting together a board package and the cost.”

To get you started, check out this guide that deciphers 16 confusing mortgage terms.

9. Choosing the Wrong Roommates

Fanney suggests comparing schedules and lifestyles to see if living with a particular person is really a good idea.

“You should already be thinking about things like each person’s tolerance for mess and budget, but now that you have your first full-time jobs, you’ll have to make sure the lifestyles can coexist peacefully.”

10. Not Getting Roommate Agreements in Writing

Even if you’re living with your best friend, it’s important to write out responsibilities and agreements you’ve made about the living situation. You’ll also want to outline how bills will be paid and who is responsible for what. Hopefully you’ll never need to reference this for any reason, but you’ll be glad to have it all in writing if things go bad.

11. Not Considering Apartments With Fees

We know, all those fees are the worst. But some of these upfront costs, while painful at the time you see the money coming out of your account, may mean paying less over time.

According to Chelsea Werner, a Bold New York real estate expert, many of the no-fee apartments just add fees to your monthly rent. And, if that’s the case, “although you will pay less upfront, over time it will even out, as you will be paying more per month.”

12. Forgetting to Meet Potential Neighbors

“In college, your neighbors were probably other college students, but that probably won’t be the case now,” Fanney said. “Don’t let that stop you from getting to know your neighbors and finding ones you can trust.”

13. Not Factoring in the Landlord

“It’s sometimes better to pay a premium to be with a better landlord than to pay less and be with a bad landlord that doesn’t fix anything and is hard to reach,” Lahav said.

14. Skimming Over the Lease

In a time when we all just click “next” anytime we install an update on one of our devices, it’s easy to flip to the end of the agreement and sign on the dotted line. But it’s essential you know what you’re agreeing to and negotiate things that you’re not quite on board with.

15. Not Knowing Your Tenant Rights

Tenants (and even applicants) have federal laws protecting them. And, in many cases, there are state laws that help protect you too, so you’ll want to do your research and find out what legal rights you have ahead of time.

16. Passing on Renters Insurance

Renters insurance may seem like one more expense, but just like car insurance, having it may ultimately save you money in the event of a problem. You can read about the little-known ways renters insurance could save you money here.

17. Only Looking at the Bottom Line

“Graduates are very price-sensitive, so they will usually go with the cheaper apartment as their rule of thumb,” Lahav said. “However … they don’t realize that sometimes a cheap deal is not the best deal for them.”

18. Holding Out for Perfection

Apartment hunting can be a lot like a relationship — you start out with a list of ideal qualities, but the odds of finding someone (or some place) that meets all these may not be realistic.

“Regardless of your budget, there is no perfect apartment,” Werner said. “Renting is all about tradeoffs.”

19. Forgetting About What Comes Next

“When looking for an apartment, people have a tendency to not think about a rental as more than a one-year commitment,” Werner said. But, unless you have reason to move, you probably won’t want to go through the hassle. So, that’s why Werner said it’s a good idea to “think about how that unit will fit your life in the next few years.”

Image: svetikd

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5 Ways Being an Airbnb Host Can Cost You Money

should-i-host-on-airbnb

If you’ve ever wanted to make a little extra money on the side by listing your sofa, spare bedroom, guest house or even whole house on a service like Airbnb, you’ve probably wondered just how much money you could make.

After all, there are all those stories of people paying their monthly mortgage payments or annual tax bills through their rental income. What a great way to put an asset you already have to good use, right?

Yes, if your situation is right for the opportunity. When managed properly, these rentals can end up bringing in more than a traditional monthly rent can, though it does require significantly more work due to the constant turnover of renters.

As with any business, though, there are risks that could end up undermining any money-making opportunity your spare sleeping spot might afford. That’s why it’s a good idea to exercise caution and do your due diligence before jumping in.

Here are five things that could end up costing you money as an Airbnb host.

1. Higher Insurance Premiums

Yes, it’s true that Airbnb provides Host Protection Insurance, providing primary liability coverage for up to $1 million per occurrence in the event of a third-party claim of bodily injury or property damage related to an Airbnb stay. But that doesn’t mean you’re not going to need to alert your homeowners insurer that you’re operating as a rental property, even on a part-time basis.

For example, I have a guest house that I considered making available on Airbnb and I talked to my insurer about how that would impact my coverage. In a nutshell, my premiums would have doubled, significantly impacting any income I would’ve made from listing on Airbnb. I decided it wasn’t worth the hassle. Now, sure, I could’ve chosen not to tell my insurer about the rentals and just contact Airbnb with any claims, but that left me feeling very exposed when it came to, well, a lot of things.

As Galen Hayesis, president of El Sobrante, California-based Hayes Insurance, recently wrote for PropertyCasualty360.com, the coverage leaves a lot of gaps for homeowners:

  • Coverage is limited to $1 million per occurrence, $2 million per location. The policy aggregate is $10 million for all insured locations in the U.S. Shared limits are not your friend.

  • Coverage is in excess of any other available coverage. The host must submit the claim to his homeowners insurance and the claim must be denied by that company before Airbnb’s insurance will pay. Presumably, the homeowners insurance may also be cancelled for business use.

  • The summary document lists these other “key” exclusions: (1) intentional acts (of the host or any other insured party), (2) loss of earnings, (3) personal and advertising injury, (4) fungi or bacteria, (5) Chinese drywall, (6) communicable diseases (7) acts of terrorism, (8) product liability, (9) pollution, (10) asbestos, or lead or silica, and (11) insured vs. insured (i.e., host sues Airbnb or vice versa).

  • The coverage is limited to an actual stay, not a booking. No show — no coverage. Overstay or early arrival? No coverage.

“What if a guest breaks into the host’s gun safe, steals guns and goes on a crime spree? Is there coverage for the host from any ensuing lawsuits? Probably not,” Hayesis wrote. “Vacation rental websites like Airbnb are doing their best to protect themselves by offering what looks like insurance to their hosts. But hosts are shouldering a lot of risks with limited protection. So before you sign up or rent your home again, you may want to think twice. The bottom line appears more red than green.”

Airbnb did not respond to Credit.com’s request for comment, but does provide the following on the Airbnb website:

Here are some examples of what the Host Protection Insurance program should cover:

  • A guest breaks their wrist after slipping on the rug and brings a claim for the injury against the host.
  • A guest is working out on the treadmill in the gym of the apartment building.
  • The treadmill breaks and the guest is injured when they fall off. They bring a claim for the injury against the host and the landlord.
  • A guest accidentally drops their suitcase on a third party’s foot in the building lobby. The third party brings a claim for the injury against the host and the landlord of the host’s building.

Some examples of what the Host Protection Insurance program doesn’t cover:

  • Intentional acts where liability isn’t the result of an accident.
  • Accusations of slander or defamation of character.
  • Property issues (ex: mold, bed bugs, asbestos, pollution). Auto accidents (ex: vehicle collisions).

2. Turned Down for a Mortgage or Other Home Financing

Banks also are closely scrutinizing how properties are being used when it comes to writing new mortgages and even refinancing. The issue is primarily about how to classify loans for homeowners hosting through Airbnb and other services Are they a primary residence? An investment property? Both? Mortgages on investment properties have traditionally been viewed as riskier.

One example is Brad Severtson, a resident of Seattle whom the Wall Street Journal recently profiled. Severtson had reportedly earned about $30,000 in 2015 renting out a cottage in his backyard. The Journal reported that he thought the extra income would work in his favor when he wanted to refinance a home-equity line of credit.

“The bank turned him down, saying it didn’t allow home-equity lines of credit on properties in which the homeowner is operating a business, including Airbnb,” the Journal reported.

3. Higher Taxes

Yep, if you’re making rental income, you’re going to be expected to pay taxes on it. Airbnb says on its website “as a host, your earnings may be subject to U.S. income taxes. To assist with U.S. tax compliance, we may collect your taxpayer information. Even if you’re not a U.S. taxpayer, we may still require certain information from you.”

There are some exceptions to keep in mind, though.

According to the Internal Revenue Service, if you use your home or vacation property as a personal residence and rent it for fewer than 15 days in a calendar year, you do not have to claim that income on your personal taxes. In this case, do not report any of the rental income and do not deduct any expenses as rental expenses.

Likewise, if you rent your home or vacation property to others that you also use as a personal residence, limitations may apply to the rental expenses you can deduct, according to the IRS. You are considered to use a dwelling unit as a personal residence if you use it for personal purposes during the tax year for more than the greater of 14 days or 10% of the total days you rent it to others at a fair rental price.

It is possible that you will use more than one dwelling unit as a personal residence during the year. For example, if you live in your main home for 11 months, your home is a dwelling unit used as a personal residence. If you live in your vacation home for the other 30 days of the year, your vacation home is also a dwelling unit used as a personal residence, unless you rent your vacation home to others at a fair rental value for 300 or more days during the year.

4. Losing Your Lease

If you have a landlord and want to host on Airbnb, the very first thing you should do is talk to your landlord and get their permission to advertise your sofa, your spare bedroom or the whole property. And get it in writing.

There are literally hundreds of horror stories of folks not talking to their landlords, only to be sued or have their leases terminated as a result.

5. Being Cited for City Ordinance Violations

Many cities have restrictions about hosting on sites like Airbnb, whether you are a homeowner or a renter. That’s why it’s a good idea to first check on the Airbnb site about what regulations may apply and then follow up with your local government. The last thing you want is to be cited for being in violation of local ordinances.

As Airbnb states on its site, “When deciding whether to become an Airbnb host, it’s important for you to understand the laws in your city. As a platform and marketplace, we don’t provide legal advice, but we do want to give you some useful links that may help you better understand laws and regulations in your town, city, county, or state.”

Remember, making a little extra money from a side gig is a great way to boost your savings abilities or help pay off any debts you might owe (you can see how your debt is impacting your credit by getting your free credit report summary on Credit.com). But, as this list, shows, it’s wise to do your research first. What might seem like a great opportunity can end up costing you big time. So, do your homework before your foray into renting your space and make sure your home can actually work for you.

Image: kupicoo

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