16 Cities Where it’s Cheaper to Buy than it is to Rent

chicago

January is a natural time to take stock of your financial life, and to dream big dreams about 2018. Could this be the year you make the leap to homeownership? Or will you make a big change and trade in your mortgage payment for a landlord? While the housing market has slowly recovered from its dip in the 2000s, blind faith in housing gains has not. Home ownership rates hit a 50-year low in 2015, and first-time home buyers are now waiting a record six years to move from renting to buying. In fact, young adults looking to upgrade out of their one-bedroom apartments are increasingly renting single-family homes rather than buying. Single-family rentals — either detached homes or townhomes — make up the fastest-growing segment of the housing market, according to the Urban Institute.

In the complex calculus that’s required for the renting vs. buying decision, one variable stands out: Which is cheaper? If that seems like a tough question to answer, there’s a good reason: crunch the data from America’s largest cities, and you’ll learn it’s a perfectly split decision. Home buying is a better option for those who plan to stay in one place for 3-5 years or more. It’s also a good investment in many housing markets. According to an Urban Institute analysis, among 33 top metropolitan areas in the U.S., there are 16 where buying is cheaper.

  1. Miami

    While it’s cheaper to buy than rent there, it would be a stretch to call the Miami housing market a bargain. A median-priced home still consumes 32 percent of a median earner income, above the recommended 30 percent.

  2. Detroit

    Not long ago, it was possible to buy a home in Detroit for well below the median home price in the U.S. The Detroit area has seen some revitalization in recent years, however, and while housing prices have gone up, it’s still a better value to buy a home there than it is to rent one.

  3. Chicago

    Rent in Chicago is on the rise faster than home prices. While they may level out in the near future, it’s a good time to buy while you still can.

  4. Philadelphia

    Renting is significantly more expensive than buying in the City of Brotherly Love. In fact, the average wage-earner would need a 36 percent raise to afford the average rent there. Buying, however, is more affordable.

  5. Tampa, Florida

    For roughly 90 percent of Tampa communities, renting is more expensive than buying.

  6. Pittsburgh

    The average rent in Pittsburgh is $1250 per month, whereas the average home price is just over $145,000. Broken down, it’s cheaper to buy in Pittsburgh, as your monthly mortgage will be much less expensive than the average rent.

  7. Cleveland

    In this popular college town, a homebuyer will save an average of $200 a month if they pay a mortgage instead of rent.

  8. Cincinnati

    Historically speaking, it’s been cheaper to rent than buy in Cincinnati based on the percentage of a person’s income that went to housing costs. That number is now lower for buyers and higher for renters.

  9. Orlando

    In the home of Disneyworld, the average monthly rent will will cost you roughly double what the average comparable monthly mortgage payment will.

  10. Houston

    Even though median rents are falling in Houston, it’s still cheaper to buy, especially if you plan on staying in your home for three years or more.

  11. San Antonio

    Average monthly rent for an apartment in San Antonio will run you $1,226 (estimated as recently as December 2017). The price of a home in the area is $232,000. While the housing market is trending upward, it’s still more advantageous to buy a home, especially if you plan to stay in the area for a long period of time.

  12. New York

    It’s no secret that home prices in the New York City area (including Newark and Jersey City) are well above the national average. However, rental prices are even higher, so if you can afford to buy property here, you’d be better off doing so rather than renting.

  13. Minneapolis/St. Paul

    The Twin Cities are becoming an increasingly popular to destination for young families to move, so it’s a good time to invest in property here instead of renting it.

  14. Kansas City, MO/KS

    Both rents and housing prices are low in the Kansas City area (average rent will cost just under a thousand dollars, while the average home price is $126,100), but buying is better long-term, as it offers more benefits, including potential tax write-offs.

  15. Columbus, Ohio

    Many market experts consider Columbus a “no-brainer” metro area as far as buying over renting. With affordable housing on both sides, the advantage goes to buying.

  16. Boston

    While a buyer may need a large income (or two above-average incomes) to buy here, they’ll need a slightly larger one to rent long-term.

If you’re looking to rent or by and are concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

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Cities to Consider When Renting and Buying

low-housing-inventory

January is a natural time to take stock of your financial life, and to dream big dreams about 2018. Could this be the year you make the leap to homeownership? Or, will you make a big change and trade in your mortgage payment for a landlord?

In the complex calculus that’s required for the renting vs. buying decision, one variable stands out: Which is cheaper? If that seems like a hard question to answer, there’s a good reason: crunch the data from America’s largest cities, and you’ll learn it’s a perfectly split decision. According to an Urban Institute analysis, among 33 top metropolitan areas in the U.S., there are 17 places where buying is cheaper, and 16 where renting is cheaper. We’ll get to that list in a moment, but here’s a hint: renters in high-flying West coast cities might want to sit tight for a bit longer.

Renting vs Buying

Fewer life decisions carry more weight than the renting vs. buying dilemma. And that choice is getting harder. A generation ago, buying a home was seen as a rite of passage, a natural (and necessary) step towards adulthood. It was also a solid path to wealth. A $25,000 home purchased in 1970 was worth almost $100,000 by 1990, and about $200,000 today, using national average appreciation. Plenty of baby boomers who bought average-priced homes as young adults find themselves living in a nice nest egg now.

All that changed when the housing bubble burst. Millions lost their homes to foreclosure. Millions more found themselves “under water,” meaning their homes worth less than their mortgage balance. At the height of the housing recession, 23 percent of mortgage holders — nearly 1 in 4 — were under water. They’d lost money on their investment. The myth that housing prices can only go up has been busted. Many of those bubble-era buyers wished they were renting.

While the housing market has slowly recovered, blind faith in housing gains has not. Homeownership rates hit a 50-year low in 2015, and first-time home buyers are now waiting a record 6 years to move from renting to buying. In fact, young adults looking to upgrade out of their 1-bedroom apartments are increasingly renting single-family homes rather than buying. Single-family rentals – either detached homes or townhomes – make up the fastest-growing segment of the housing market, according to the Urban Institute.

But renting is no picnic either. With all these new renters, markets are reacting accordingly, and costs are now skyrocketing at about four times the rate of inflation. In some places, rents are up much higher. Seattle saw an average of 6.3 percent rent increases last year.

Such volatility in housing and rental prices isn’t the only reason the renting vs. buying equation bas become more complicated. Thanks to structural changes in employment — led by the various form of the gig economy and the contingent workforce — flexibility is key for workers. Gone are the days where a worker could buy a house with a 30-year mortgage and count on a consistent commute for the next three decades. People change jobs much more frequently now. Millennials experience four job changes by age 32, according to a LinkedIn study; they’ll move 6 times by age 30, according to 538.com

While it’s possible to sell a condo or house and move, it’s much easier for a renter to relocate for that great opportunity on the other coast.

Income Driven Decisions 

For most people, however, it comes down to money. You might think renting is always cheaper than buying, but that’s incorrect. A long list of variables must be considered when running the numbers, like these: How long will you stay in the place? How much are property taxes? How much investment opportunity cost will you pay when putting a large down payment into a home? How much will you spend on house repairs or condo fees? How much might your landlord raise the rent?

The Urban Institute provides an interesting answer to these questions by comparing the percent of monthly income a buyer or renter would have to spend to own or rent an average home in cities around the country. To ease the comparison, the constants are pretty simple. The report assumes median income, then calculates how of that monthly paycheck would be eaten up by owning – including mortgage payments, interest, taxes, and insurance payments on a median-priced home – or by renting a median-priced 3-bedroom home.

Ordinarily, these costs have to move relatively in sync. When rents get too high, consumers are pushed into buying. The opposite is true, too — when homes/monthly mortgage payments are too high, people are nudged to rent. So these costs tend to move together, or at least like two balloons tied together by a string, floating up into the sky: One pulls ahead for a short while, then the other, and so on. After all, people have to live somewhere.

Cities Good for Renting

But in some cities, these rules don’t seem to apply at the moment, and either renting or buying has sprinted ahead. In those places, you might say the market is broken. The Urban Institute calls this the “rent gap.” In eight large cities in the US — all on the West Coast — the rent gap is higher than 4 percent, meaning it’s considerably cheaper to rent than buy. But on the other hand, there are six major cities spread throughout the East and the Midwest where buying is cheaper, using this monthly costs test. In between are 19 cities where rental and buying costs are basically running neck-and-neck.

The rent gap is most pronounced in places where housing prices have soared. San Francisco is the clear “winner” in the places where renting is cheaper than buying; there, the gap is more than 42 percent. San Jose comes in second at 19%. Seattle, San Diego, Sacramento, Los Angeles, and Portland round out the list of places where the gap is higher than 5 percent.

Cities Good for Home Buying

On the other side of the list — places where buying is cheaper than renting — begins with the winner, Miami.

It would be a stretch to call Miami a bargain, however. A median-priced home still consumes 32 percent of a median earner’s income, above the recommended 30 percent. Still, renting devours even more.

“Because Miami is the second-most-expensive city for rental housing, however, the median rent consumes 42 percent of the median income. So even at this high cost, homeownership is still the better bet,” the report says.

Detroit, Chicago, Philadelphia, Tampa, and Pittsburgh round out the list of places where the rent gap is 5% or more towards buying.

There are buying “bargains” in other cities, too. Cleveland, Cincinnati, Orlando, Houston, and San Antonio all enjoy rent gaps that are more than two percent.

What to Consider

This list comes loaded with caveats, however. The biggest one: Purchasing a home brings the potential of appreciation, and renting does not. That means buyers can “profit” over time and see the value of their investment rise. The longer the time living in the purchased home, the higher the odds that significant appreciation will occur. But don’t forget, transaction costs are significant. Not all those gains are “profit.” Closing costs when buying, and then later when selling, can easily eat up 10% of those gains. Then, there’s always the chance the value of the home will go down, re-creating the situation from the early part of this decade, when buyers lose money. And of course, there’s the variable every homeowner loves to hate, surprise repair costs. Renters generally don’t face that risk.

In the end, the renting vs. buying choice is intensely personal, and always depends on your family’s very specific situation. It’s unwise to ignore macro trends, however. Even if you live in a city where housing costs seem high, it’s worth considering a purchase if rental costs are soaring, too. On the other hand, don’t simply assuming that buying is better. That’s 20th Century logic which no longer applies to the U.S. housing market.

 

If you’re wondering if your credit it good enough to buy or rent, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

 

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7 Steps to Help You Get Out of Your Rental Lease

security deposit

Whether you’re renting an apartment, house, or duplex, your home ought to feel like a safe place—one that’s comfortable and secure. But what happens if something alters that safe space? Can you break your lease? And what happens if you do—is your credit doomed?

To help you navigate these troubling waters, we’ll cover common reasons tenants want to break their lease and what you should do if you’re ready to break yours.

Common Reasons Tenants Break a Lease

There are a variety of reasons people want to terminate their lease early—but here are just a few that could apply to you.

  1. The rental unit is uninhabitable. A landlord is obligated to perform general property maintenance and ensure the property adheres to health and safety codes. Circumstances that could make a property uninhabitable include the presence of black mold, a lack of running water, or a lack of proper waste disposal.
  2. The landlord illegally entered your rental space. Landlords must provide legitimate reasoning as to why they are entering your home.
  3. You are on active military duty.
  4. You are a victim of domestic violence.
  5. The rental space falls into foreclosure or is illegally rented to you.

What to Do If You Need to Break Your Lease

If you need to get out of your lease, here are seven essential steps.

1. Read Your Lease and Document Everything

Before you take action, be sure to look over your lease. “Read it three times!” says Joel S. Winston, a litigation lawyer at Winston Law Firm, LLC. Your lease should spell out the procedures and penalties for canceling early.

“The lease that you signed and that no one reads—that’s going to control how difficult and expensive it will be to break a lease,” Winston says.

Just don’t make up problems with the property that don’t exist to get out of your current lease. “Try to be open and honest and approach your landlord in a nice and friendly manner,” Winston recommends.

However, if there are problems and you feel the landlord isn’t adequately fixing them, put the complaints and problems in writing. Just make sure you keep a copy of the document for your records. And if push comes to shove, carefully look over your lease for details that cover what happens if you terminate the lease early, including whether you will be held responsible for the entire remaining term of the lease or a lesser amount.

In many states, landlords can’t use the fact that you left early as a windfall. However, if they can only rent the unit at a lower rate than you were paying for the remainder of your lease, you may be required to make up the cost difference. You may also have to pay for the advertising costs to find a replacement tenant.

2. Communicate Thoroughly

Let your landlord know what you want to do and why you want to terminate the lease. Some may be more flexible than others. A large property management company might be unsympathetic to your financial woes, but an individual owner might be more compassionate.

Also, as difficult as it may be, try to think of the circumstances from a landlord’s perspective.

Terminating a lease early may put an owner-landlord into a financial bind, especially if they have to spend time and money securing a new tenant. It’s not out of the question to assist your landlord in finding an adequate replacement, but it’s ultimately their decision.

3. Get Confirmations in Writing

Make sure you get written confirmation of any changes to the lease. If your landlord says you can move out early with a small penalty or no penalty, get that in writing. Never rely on a verbal agreement—otherwise it will be your word against theirs. You may be tempted to keep things cordial and light, but a handshake isn’t going to help you pay off a creditor or debt collector.

Store these written confirmations in a safe place you’ll remember. It won’t do you any good if you can’t find that information when a collection agency contacts you.  And should you end up in collections or in court, the written terms in the lease will likely prevail.

If the landlord won’t budge, won’t put anything in writing, or won’t compromise, you can still create your own paper trail by communicating in writing and keeping a record of the letters you sent.

4. Don’t Forget the Walk-Through

No matter how anxious or excited you are to move out, protect yourself from unexpected charges by doing a walk-through with your landlord and getting a written record of the results. We wouldn’t recommend leaving your rental until you’re able to do this. Should your landlord refuse to do a walk-through, take detailed pictures—or better yet, video—of the property’s status the day you leave.

5. Don’t Make Assumptions

When it comes to breaking your lease, avoid assumptions. Specifically, don’t assume your security deposit will take care of any remaining balance or fees you owe.

“When you are breaching the contract, it doesn’t always entitle the landlord to scoop up your security deposit. For example, in New York, the landlord has to go to the housing court to file a complaint in order to take that.” Winston says.

Similarly, if you live with a roommate and you pay your portion of the rent but your roommate does not, this missing payment has financial repercussions. If you both signed the lease, you are both fully responsible for the entire rent check, regardless of what the two of you have worked out between yourselves. But if your name is the only one on the lease, you may be the one stuck holding the bag.

6. Know That There Are Exceptions to the Rules

You may have legitimate reasons for breaking a lease that aren’t spelled out in the actual lease, like a safety or health reason directly connected to the property.

“Essentially, the ‘warranty of habitability’ is a landlord-tenant legal doctrine requiring landlords to maintain rental real estate in reasonable conditions that are fit for tenants to live safely,” explains Winston.

Winston goes on to say, “The warranty of habitability is accepted law in most every jurisdiction in America. In some states, the warranty has been established by decades of case law (i.e., Implied Warranty). But in other states, the warranty has been expressly established by legislation.”

There may be state-specific laws that allow you to break a lease early. For example, in Washington, one legitimate reason for terminating a lease is the landlord failing to make certain types of repairs within a specific period of time—as long as mold isn’t part of the problem.

7. Get Help

Landlord-tenant laws are state-specific. So it’s a good idea to research your rights as a tenant before signing your name on the dotted line. If you believe a landlord’s actions are illegal, you may be able to get help from legal aid programs, a local housing agency, or a consumer protection attorney in your state.

Understand that even if you do everything right, problems can come up. For example, an unknown balance can wind up in collections and you may not hear about it until the damage to your credit score is done. Or if you terminated your lease early, the leftover balance may be reported to specialty credit reporting agencies used by landlords—and these reports could catch you by surprise the next time you try to rent.

Whatever the reason, keep detailed and legible records of what transpired long after you think you’ll need them—seven years is usually safe. Also, frequently review your credit report and credit scores to make sure you’re aware of any significant changes. You can get two free credit scores updated monthly at Credit.com.
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Renting Is Overtaking the Housing Market—Here’s Why

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Single-family rentals—either detached homes or townhomes—are developing faster than any other portion of the housing market. These rentals outpace both single-family home purchases and apartment-style living, according to the Urban Institute.

“Almost all the housing demand in recent years has been filled by rental units,” says Sara Strochak, a research assistant with the Urban Institute. She also states that single-family rentals have gone up 30% within the last three years.

This change is unique to newer generations. But when did rentals become so popular? And why are people more inclined to rent than to buy? Below, we’ll further discuss the rise in rentals and how it affects the housing market.

When Did the Rise in Single-Family Rentals Start?

The housing bubble collapse and the recession that followed shattered the decades-old tenet of American wisdom that you can’t go wrong buying a home. Most of the housing market fallout from the Great Recession has finally receded—foreclosures and underwater mortgages are back to traditional levels and housing values have recovered in most places. But one thing hasn’t recovered: Americans’ unquestioned desire to own a home.

Today, single-family rental homes and townhomes make up 35% of the country’s 44 million rental units, compared to 31% in 2006.

Who Is Leading This Trend?

Millennials are leading the way to single-family rentals, and myriad factors contribute to this trend. Many young adults aren’t in a hurry to lay down roots, whether they’re prone to traveling or simply aren’t ready to commit to one area or one home. Student loans and stagnant incomes can also make it harder to save up for a down payment. And it’s inevitable that young people who came of age during the housing bubble would be reluctant to take a leap of faith and commit to a 30-year mortgage.

“While the age distribution of the US population suggests most millennials are reaching the age of household formation and demand for single-family homes, much of this demand is likely to be channeled into the rental market,” says Strochak.

Are Only Millennials Affected?

However, it’s not just young people. Americans over 55 have also grown more interested in renting. According to RENTCafé, the number of renters aged over 55 has grown by a whopping 28% between 2009 and 2015. Many of them want to rent homes instead of apartments. From 2010 to 2016, single-family rental households in the US increased by nearly 2 million—1.26 million of those renters were 34 to 65 years old, while just under a half million were 65 or older, according to a RENTCafé Census data analysis provided by Adrian Rosenberg. In places like Miami, Houston, and Minneapolis, more than two-thirds of new single-family renters were over 65.

What Led to This Trend?

When did home renting become so popular? The trend began with large firms buying up cheap homes during the recession and turning them into cash-generating rentals—often rented by families who’d lost their own homes or who could no longer qualify for mortgages. Institutional investors, which are organizations like banks, hedge funds, and mutual funds, gobbled up millions of single-family homes that fell into foreclosure. In Phoenix, for example, the total of single-family homes occupied by homeowners—instead of renters—dropped by 30,000 from 2007 to 2010. Two-thirds of those homes were bought by institutional investors, the Urban Institute says.

But as prices have recovered, that business model no longer works. Instead, small-time landlords now dominate the market, explains Strochak. Investors who have fewer than 10 units own 87% of all single-family rentals, while investors who have only one rental unit own 45%.

How Does This Change the Home-Building Market?

Bbig players continue to push the trend, some deploying a new build-to-rent model. Housing firms are actively building single-family homes intending to rent them rather than sell, says ATTOM Data Solutions, a firm that analyzes housing market data.

“I can buy lots in areas that I can’t sell homes, but I can rent,” real estate agent Adam Whitmire told ATTOM in a recent report. “The local economy may not have enough income or enough credit to buy but there is enough income to rent.”

While big-time rental firms are backing off in some larger cities, the single-family rental investment play is picking up in smaller markets around the country in places like Dayton or Chattanooga, according to ATTOM.

How Does Renting Affect Local Neighborhoods?

The movement to more single-family rentals is a mixed bag, says Daren Blomquist, senior vice president at ATTOM. On the one hand, the professionalization of the single-family rental industry is good for both families and neighborhoods, as there could be more standardized levels of maintenance and management services.

But there will likely be “unintended consequences as the nature of some neighborhoods change,” Blomquist warns. Renters might not be as invested in communities as owners.

“For example, people who want to own a home may no longer be as active in the typical suburban white picket fence neighborhood as properties in those neighborhoods become more prominently rentals,” he says. “That may push those homebuyers back into more urban, walkable environments, or it might push them further out to more rural areas.”

Should You Rent a Home Instead of Buying?

Renting a home instead of buying can be a sensible choice for those looking to break out of apartment life. It can even serve as a good halfway step toward owning, to make sure single-family home life is really for you before you commit to a mortgage.

The main attraction to renting is obvious: buyers don’t need a large down payment to move in. While plenty of mortgage programs give would-be buyers a break on the traditional 20% down mortgage model, skyrocketing prices in urban areas like Seattle or Washington DC mean that even 5% can be a prohibitive down payment requirement. So renting might make sense if you are ready to live in a house.

What Should You Know Before Renting a Single-Family Home?

While all rental transactions are similar, there are a few things you should consider before moving to a home rental. If you’re moving from an apartment, utilities will probably be considerably more expensive—after all, you’ll be heating and cooling an entire home much of the year. There’s also quite a few more maintenance requirements, particularly if there’s a yard. Ensure your lease has clear terms regarding who pays for upkeep of the property. Gardening might seem appetizing if you are sick of your apartment, but it can be a year-round job, so make certain you’re ready for the extra work. If you want to paint the walls or make other changes, know that you will need permission in writing.

Additionally, because you will inevitably have more possessions than in an apartment, it’s more important than ever to get renter’s insurance—your landlord’s policy likely won’t cover damage to or theft of your property. You should also consider liability insurance, in case you’re found responsible for any kind of accident at the property that causes personal or property damage.

If you’re moving to a single-family rental for more space or for monetary reasons, remember to adjust your budget to accommodate the new utility and rental costs. For resources on how to stay financially fit, check out Credit.com’s Personal Finance Learning Center.

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5 Lies Your Landlord May Tell You

Finding a place to rent can be so time-consuming and stressful that once you decide on a house or apartment that fits your budget, size, and location needs, you might not pay attention to the mundane lease terms or if the landlord is trustworthy.

However, if you have a shady landlord and lease agreement, you could pay more for your rental and be stuck handling repairs.

Andrea Amszynski, a speech therapist, thought she had a perfect situation when she found a room for rent in a five-bedroom, three-bath house when she was moving to Savannah, Ga. The room was advertised on Craigslist, and she made an appointment to view the house.

“I met the landlord, or who said he was the landlord at the time,” she says. “And he showed me all round the house.”

She signed a lease and put down $700, which included one month’s rent and a security deposit. A few weeks later, when she couldn’t get hold of the landlord, she discovered the man she paid wasn’t the landlord, but a past tenant scamming her. She filed a police report, but was unable to recover her deposit.

 

Though this is a fairly extreme case, there are other ways that landlords mislead tenants. At a time when half of renters spend at least 30% of their household income on rent and utilities, being on the lookout for these lies may keep you from spending more than you need on living expenses.

“You can break your lease any time you want.”

Another term buried in the lease that could cost tenants in the long run is “contract renewal terms.” In this situation, the rent agreement is renewed for another year if the tenant doesn’t inform the landlord within a certain period — typically 60 days — from the end of the first agreement.

“Then, if you want to get out of what they’ve written, you’ve got to pay so much money … like a whole month’s rent,” says Sarah Hubbuch, who manages two properties in Georgia and Florida.

“You’ll have to cover the cost of that repair.”

Repairs are inevitable, such as a clogged toilet, leaky pipe, air conditioning unit that blows out warm air, broken refrigerator, or burned-out light bulbs. However, problems can arise about who should pay for the repair and how quickly the repair needs to be done.

Hubbuch says things such as appliances, water heaters, or anything that could need repair after normal wear and tear should be a landlord’s responsibility to fix and cover financially.

“It’s part of the contract,” she says. “And me, personally, I would tell the landlord I can’t pay rent until these things are fixed.”

But that also may mean you’ll have to buy fans until the landlord decides to fix the AC or pick up a pack of new light bulbs.

“I can give you your security deposit back whenever I want.”

Joel Cohn, legislative director for D.C’s Office of the Tenant Advocate, says inappropriate deductions from security deposits are a common complaint filed by tenants.

“An appropriate deduction from the security deposit would be something beyond ordinary wear and tear,” he says. “So, if the tenant caused some damage to the property, then it would be appropriate for the landlord to make that deduction.”

As a property manager in California, David Roberson says the traditional security deposit of one month is more than enough for repairs. He is principal of Silicon Valley Property Management Group, which manages apartments for rent in San Jose, California.

“Most of the time, tenant damages are less than $1,000 to a unit when they’re leaving, so if you get a $5,000 security deposit (typically up to two months’ rent), that’s going to be fairly adequate to cover 99% of the damages,” he says.

If there is no damage, a tenant should receive their security deposit back in a timely manner. Depending on the state, that time frame can change. For example, in Washington, D.C., landlords have to provide the tenant with an itemized list of deductions to cover appropriate expenses. The list needs to be sent to the tenant within 45 days after they move out, and the price tag attached to repairs needs to be reasonable. Landlords then must return the remaining balance to the past tenant in an additional 30 days after the tenant received the list.

Check your state’s rental guidelines on security deposits to be sure you know when to expect your deposit back.

“I can come and go as I please.”

Understandably, a landlord may need to enter the rental at some point during the lease. Each state has its own rules for under what circumstance and with how much notice they would need to give tenants before entering the property.

“When a tenant signs a lease, they actually hold the rights to the leasehold,” Roberson says. “So for the term [of the lease], it’s their property.”

In California, he says, landlords need to get written permission to enter a property, or there has to be reasonable evidence that the tenant is violating terms of the lease, is doing something illegal, or there is an emergency.

Cohn says that in other states and D.C., generally landlords need to give a “reasonable” written notice 48 hours ahead of time in non-emergency situations.

“I can get you a great deal on the rent.”

While some parts of the lease can be clear, some landlords will try to bury items in the lease that could cost tenants.

One practice is known as concession pricing.  Cohn says he has seen this tactic used in rent-controlled buildings in Washington, D.C.

Here’s how it works: The amount for a one-bedroom apartment is $1,500, but that’s a high rent for the area. The landlord advertises it for $1,000 to attract potential renters, but reports the $1,500 to the rent administrator — the office in some large cities that controls rent — and then buries the $1,500 amount in the lease.

The landlord essentially is telling the tenant, “Yeah, this $1,500 amount, don’t worry, we’re going to give you a concession deal. You only have to pay $1,000. And, by the way, this is rent controlled, so you’re protected in terms of the amount of rent increase,” Cohn says. However, if the tenant decides to renew their lease, they may see their rent not just go up to $1,500, but $1,500 plus the rent control cap for the area. The landlord would legally be allowed to raise it that much since they told the rent administration that they were already charging $1,500 for rent.

Tips for protecting yourself as a renter:

Research your landlord before signing the lease.

Ask current tenants about their experience with the landlord. In some instances, you also may find landlord reviews online through sites such as Yelp and Review My Landlord. And if you want to confirm that the person is indeed the landlord, look up the property record online to find the owner’s name. “Most of the time the landlord should be paying the property tax, and that is public info,” Amszynski says.

Get everything in writing.

Read the lease thoroughly and ask about any lingo or terms that are confusing. In addition, get any verbal agreements, such as rental rates or promises to repair items before you move in, in writing. Protect your security deposit before you move in by walking through the rental with the landlord. “Make sure that you and the landlord go through the list of things that were already wrong with the house before you move in so they can’t come back and say you did it,” Hubbuch says.

Know tenant rights for your area.

A Zillow study in 2014 found that 82% of renters don’t understand laws on security deposits, credit, and background checks, 77% of renters don’t understand privacy and access rights, and 62% of renters don’t understand laws on early lease termination.You’ll be able to find resources online that outline tenant rights and landlord rights in your state. The Washington, D.C., Tenant Bill of Rights and the California Tenants guide are two examples of guides.

Get insured.

Renters insurance covers damage to your belongings inside a rental, but only 41% of renters said they had renters insurance, according to 2016 data from the Insurance Information Institute. Premiums average $15-$30 a month, depending on the size and location, and the average U.S. premium for renters insurance is $190 for 2014 — the most recent year available — according to the National Association of Insurance Commissioners. A standard renters insurance policy also covers your liability for injuries to someone else or their property while they are at your rental, but it doesn’t cover damages you might make to the property. Roberson says he requires his tenants get tenant liability insurance to cover up to $100,000 in damages from situations such as a fire or driving cars into garage doors. He offers it to them for $14.50 a month. The Insurance Information Institute notes an excess liability policy generally costs between $200 and $350 annually, which provides an additional $1 million of protection.

The post 5 Lies Your Landlord May Tell You appeared first on MagnifyMoney.

More Rich People Are Choosing to Rent Than Ever Before — Here’s Why

Renting a home or condo has become a status symbol for some wealthy Americans.

Karen Rodriguez, an Atlanta, Ga., real estate agent, says people frequently contact her who are interested in condos renting for $10,000 to $15,000 a month in properties such as the Ritz-Carlton Residences, which have floors of condos above upscale hotel rooms.

“I do see a lot of high-net-worth renters,” says Rodriguez, with Berkshire Hathaway HomeServices Georgia Properties. “They have the disposable income to pay top dollar.”

Renter households increased by 9 million during 2005-2015, reaching nearly 43 million in 2015, according to the State of the Nation’s Housing report, an annual study by Harvard University’s Joint Center for Housing Studies that analyzes U.S. Census Bureau data. Of those, 1.6 million renter households earn $100,000 or more, representing 11% of all renters.

“Indeed, renter households earning $100,000 or more have been the fastest-growing segment over the past three years,” the report stated.

Here are four reasons why high earners are choosing to rent.

They’re frustrated with market trends.

stock market numbers and graph

Rob Austin, a biotech account manager in the Los Angeles area with a household income of over $350,000, rents a 1,700-square-foot townhome with his wife and two children.

In the last 10 years, 1.2 million households that earn $150,000 became renters, up from 551,000 in 2005. Using data from the U.S. Census Bureau’s 2015 American Community Survey, RentCafe.com reported in late 2016 that “wealthy households” that earn more than $150,000 annually increased by 217%, compared to an 82% rise in homeowners in the same income bracket.

The $150,000-and-up dollar amount served as the benchmark for “wealthy” renters because that’s the top of the bracket used in the American Community Survey to identify renters and homeowners.

Even when they had their second child in 2016, Austin says they were more steadfast to keep renting the two-bedroom, two-and-a-half bath townhome instead of buying. Prices are increasing so much that they’re “priced beyond perfection,” he says.

“It’s gotten worse,” he says. “Everything is mispriced at this point.”z

They want the next best thing.

Some buyers’ mindset is, “I don’t love it, so I’m just going to go rent a house,” says Atlanta, Ga., real estate agent Ben Hirsh.

Some may be bored with what’s on the market and are holding out for a home or condo with even more extravagant features or amenities. “They’re not happy with what’s out there,” says Rodriguez, also founder of Group Kora Real Estate Group, which sells new and luxury condos.

If they’re in a location or price range that’s hot, they could get more for their home if they sell now. Some wealthy homeowners take advantage of the resale market by going ahead and selling a home or condo and biding their time while renting. For example, if they’re sold on news about ultraluxe condos that have been announced, but are not under construction, they don’t mind renting in the interim.

“People think there’s more coming,” Rodriguez says.

Some clients have so much wealth that they’re willing to pay for the entire year up front for an unfurnished condo, she adds. Investors also have noticed the market trends and are buying condos for $1 million to $2 million with the intention to rent them out.

They don’t want a long-term commitment.

retirement retire millionaire happy couple on the beach

Some wealthy homeowners are ready to sell their million-dollar estates for a lock-it-and-leave-it lifestyle, but aren’t sold on townhome or condo living.

Instead, they’re willing to spend what can amount to the down payment on a starter home for monthly rent to experience the luxury condo lifestyle with privacy and ritzy amenities, like 24/7 room service and spa access.

“They want to test out a high-rise,” Rodriguez says. “They are people who definitely can afford to buy.”

A 2016 report by the National Association of Realtors identified the top 10 markets in the U.S. with the highest share of renters qualified to buy. The study analyzed household income, areas with job growth above the national average, and qualifying income levels (a 3% down payment in each metro area’s median home price in 2015) in about 100 of the largest U.S. metro areas. The markets that are above the national level (28%) were:

  • Toledo, Ohio (46%)
  • Little Rock, Ark. (46%)
  • Dayton, Ohio (44%)
  • Lakeland, Fla. (41%)
  • St. Louis, Mo. (41%)
  • Columbia, S.C. (41%)
  • Atlanta, Ga. (40%)
  • Columbus, Ohio (38%)
  • Tampa, Fla. (38%)
  • Ogden, Utah (38%)

The short-term mentality also may be the nature of the industry that brings people to a city. Some prospective renters whom Rodriguez meets are planning to live in Georgia for a couple of years because of work, such as jobs in the growing entertainment sector. Films such as the “Avengers” and TV shows such as “The Walking Dead” shoot in metro Atlanta.

They don’t want to live out of a suitcase in a hotel and have the income to afford high-priced rentals, joining political figures and international executives who also are among those making the same choice, Rodriguez says.

They want cash in the bank.

Townhomes sell for about $800,000 in Austin’s neighborhood in California. To make a 20% down payment, he’d have to shell out $160,000 up front.

“Why would I want to tie up $160,000 in cash in an asset that most likely is not going to go up a lot more — and more than likely has topped and has nowhere to go but down in the next cycle?” Austin asks.

Austin says he’s not wavering from his decision, although he’s “taking heat” from friends since he has the income to purchase a home.

“We’re bucking the trend by saying, ‘No thanks, we don’t want to play (the real estate market),’” he says. “We’ll just wait.”

The post More Rich People Are Choosing to Rent Than Ever Before — Here’s Why appeared first on MagnifyMoney.

The Big Cities With the Most Affordable Rent Prices Are…

You'll be amazed at which fun-filled city is one of the best for renters right now.

Image: EXTREME-PHOTOGRAPHER

The post The Big Cities With the Most Affordable Rent Prices Are… appeared first on Credit.com.

Minimum Wage Can’t Cover Rent for a 2-Bedroom Apartment in Any State

housing-wage

You probably won’t be surprised to hear that there isn’t a single state in the U.S. where a worker earning minimum wage can afford the rent for a two-bedroom apartment — or, for that matter, a one-bedroom apartment. You might be surprised to learn that there isn’t a state where renters earning average pay can afford a two-bedroom apartment, either.

The National Low Income Housing Coalition crunched the numbers recently and found that a toxic mix of stagnant wages and rising rents has made things really difficult on a wide swath of U.S. wage-earners. It calculated a “housing wage” by determining how much workers would have to earn hourly to afford a “fair market rent” apartment for 30% of their income. By that measure, the national housing wage is $20.30 for a two-bedroom unit and $16.35 for a one bedroom — both far above even recently increased minimum wages.

But in many parts of the country, the numbers are even bleaker. Near Washington, D.C., the two-bedroom rental wage is about $31 an hour. In New York, it’s $27. In Maryland, it’s $26. In fact, in six staes and D.C., the housing wage is north of $25 an hour, the report says.

Another way of expressing the same problem: Using the national rates, a worker earning the federal minimum wage of $7.25 per hour would need to work 2.8 full time jobs, or approximately 112 hours per week, to afford a two-bedroom apartment. That renter would need to work 90 hours to afford a one-bedroom, according to the report.

“In only twelve counties and one metropolitan area is the prevailing minimum wage sufficient to afford a modest one-bedroom apartment,” the report says. Those regions are all in West Virginia and Washington state.

Meanwhile, the average hourly wage of renters in the U.S. is $15.42, which is $4.88 less than the two-bedroom housing wage.

“In no state is the mean renter wage sufficient to afford a two-bedroom apartment at the fair market rate,” the report points out.

Here’s one example of the troubling numbers at work:

In Washington state, fair market rent on a two-bedroom apartment is $1,203. That means a worker needs annual earnings of about $48,000 to afford that unit, or $23.13 per hour. Based on the state minimum wage, a worker would need 2.4 jobs full-time jobs to afford that. The real average renter wage in Washington is just $16.69, meaning a worker with an average-pay job needs 1.4 jobs to afford a two-bedroom place. In King and Snohomish counties, the region’s most expensive areas, the housing wage is much higher: $29.29.

Part of the problem is skyrocketing rents due to high demand and low supply. Vacancy rates are at their lowest levels since 1985, and rents have risen at an annual rate of 3.5%, the fastest pace in three decades, according to the housing group.

Another part of the problem I’ve written about before: Builders are less interested in constructing medium-prices housing at the moment for numerous economic reasons, preferring mostly high-end construction. This impacts availability of starter homes and rental units.

The National Low Income Housing Coalition says it is using a trust fund to help communities build and rehabilitate affordable rental homes.

“It is also critical to preserve and improve the nation’s public housing stock, expand the number of housing vouchers, and increase funding for other programs providing affordable housing to truly end this crisis,” the report says.

What is the housing wage for your state? You can find out on the map on this page. Remember that your earnings are only one of many things that determine your ability to find housing. Your potential landlord will probably look at a version of your credit report as part of your rental application, and bad credit rating or a history of payment problems could make it harder to find a place to live. A past eviction could be really problematic, as well, though it may not be a deal breaker.

It’s a good idea to review your credit before looking for housing, so you can check it for errors as well as be upfront about anything a landlord may find during a credit review. To keep track of where you stand, you can get a free credit report summary, updated monthly, on Credit.com.

More Money-Saving Reads:

Image: Steve Debenport

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What to Do When Your Parents Kick You Out

moving-out

Moving out of your parents’ house, no matter what the circumstances are, is a step toward independence. However, once you’re out in the real world, you have a lot of responsibilities to consider that you may not have thought of while living under their roof.

Here are five financial goals to focus on as you make the transition. 

1. Set a Budget

Until now, Mom and Dad probably covered the expenses for the house you were living in, but now it’s your turn. When creating your budget, think about how much you can afford to pay for rent and cover the other things that come along with a home, which you may not have thought of. You’ll likely be renting, so you will need to factor in expenses like a security deposit, utilities and possibly renters’ insurance.

2. Consider All Your Expenses

Your budget won’t just include rent. Think about the other things you’ll need to pay for on a weekly or monthly basis, like health insurance, groceries, transportation (including car insurance), clothes and entertainment. If you’re on a tight budget, consider reducing your spending on fast food or entertainment, including in-home perks such as cable.

3. Put Money Aside

If your parents gave you any notice about moving out, saving up a bit of money before the actual date is a good idea. But even if you haven’t done that, you can hit the ground running on the job search and start putting money aside until you have a steady paycheck. Consider setting up one bank account for regular expenses and a separate account for unexpected financial strains, like a medical emergency or car repairs.

4. Pay Any Debts

If you have student loans, car loans, credit card debt or any other debt, think about how you can budget to get these paid off. Doing so can help you lower what you ultimately pay in interest over time and improve your credit score. Be careful about charging more to credit cards than you can afford to pay back — you don’t want to rack up additional debt, which can lower your score.

5. Build Your Credit

You may be renting a place for the next few years, but one day you may want to buy a home of your own. The habits you have now may play a role, as your credit score is a part of getting a mortgage. The five factors that make up your credit score are your payment history, debt usage, age of credit, different types of accounts, and new credit inquiries. To see how the choices you’re making impact your credit, you can view your free credit report card, updated monthly, on Credit.com.

More Money-Saving Reads:

Image: XiXinXing

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11 Ways I Saved Money By Leaving New York City

moving_out_of_city

It was a tough choice when I decided to leave New York City last year, just six years after I moved there. But, like a lot of people my age, I was seeing my future in New York as plagued with constant money frustrations.

The cost of the city isn’t easy to ignore. Every New Yorker (unless you make a seven-figure salary) talks about how expensive it is. It’s a conversation people have at every party, it’s a topic we’re constantly complaining about on Twitter, it’s a daily annoyance that permeates almost every decision you make. After all, you either have a monthly unlimited Metro card, stay in your neighborhood or pay $2.75 to go anywhere (that’s $5.50 for a roundtrip).

The tough part of leaving NYC wasn’t realizing it was outlandishly, unforgivably, unrelentingly expensive. The tough part was leaving the good friends — the family, really — I had in New York. But I knew certain dreams I had, like buying a home, were just not possible in a city where rent on a one-bedroom apartment within an hour’s commute of my office was continually edging closer to $2,000 a month. So I made the leap (or the drive, to be specific) and relocated to Richmond, Va.

Here are the big differences in cost I’ve discovered since leaving the big city for the South.

1. Housing Costs

I tell everyone this fact — my mortgage for a four-bedroom house (including taxes and insurance) is less than my rent for a one-bedroom apartment in NYC ever was. It may be the New Yorker in me (I wasn’t lying, everyone compares their rent price at parties in NYC), but I am still blown away at how much more I can afford outside of the city.

2. I Ended My Reliance on Seamless

Everything in NYC is just a little bit harder than everywhere else. It’s the same for other big cities, I’m sure, but every time I’d look at an elderly woman walking with her cart down the block to get groceries, I was reminded that there are conveniences other Americans are privy to that New Yorkers aren’t. One of those things is making food at home. I found it so hard to plan meals in advance and instead ended up relying on Seamless. I lived in Queens — one of the most diverse counties in America — and that diversity is reflected in the endless delivery options. Want a burger? There were at least four dozen places to get one. Sushi? Same thing.

The Seamless delivery options for my first apartment when I moved to Richmond? 11 total, mostly pizza places. And a few of them had a $9 delivery fee, making it an easy choice to stop ordering.

3. My Crock Pot Is My Best Friend

It’s hard to have a lot of appliances in your kitchen as a New Yorker. You’re lucky if you have enough counter space for a toaster oven, let alone a crock pot or a stand mixer or a juicer. Don’t get me wrong — people make it work, but it wasn’t until I moved to Richmond that I got appliances that have made spending less money on food easier.

My crock pot is a saving grace. I spend about $120 on groceries for a week and that provides every meal. I work from home, so I now wake up in the morning and, in the time I would have spent commuting in NYC, my husband or I get everything into a crock pot and turn it on. Dinner is ready hours later, and I don’t have to rely on high-cost but high-convenience options like fast food.

4. Drink Costs

Going out in a city where you drive everywhere naturally limits how much you drink while out. Also, instead of the average cocktail being $12, I’m paying $8 a drink. For a 20-something like myself, it adds up quickly.

5. Ubers/Lyfts/Taxis

A taxi ride home after a night out was my “splurge” in NYC. And by splurge, I mean all my discretionary income would end up going toward taxi rides. It was a vice. I have my own car now, so I drive everywhere. You might be saying, “but your car costs more than a monthly Metro card!” and you’re right. But when you add up what I spent on subway fares, cab rides and Ubers, I spend less every month on my car loan payment, gas and car insurance.

6. I Broke My Starbucks Addiction

I used to buy a venti skinny vanilla latte from Starbucks most days. Another vice. It was on the way to the office every day (in fact, there were two on my walk from the subway exit to my office door). Add it up — $5 a day (roughly) x 5 days a week x four weeks a month = $100 month. I make my own coffee now (Blanchard’s Dark As Dark, for any Richmondites). It’s $9 a bag and a bag lasts me and my husband a week. Total cost a month = $36. That’s a nice little savings.

7. Commuting

I work from home, I don’t commute. Monthly savings: $116.50 (price of an unlimited 30-day Metro card)

8. The ‘Walk From the Subway’ Splurge

Every now and then I’d walk home from my subway stop and see a really delicious-looking napoleon in a bakery window, or a sale sign on artisanal soaps or a new hair product that looked like it would make my hair longer, better, stronger, less frizzy. I’d stop and swipe my card. The daily temptation was hard to avoid, and it added up pretty quickly. When you walk by a store at least 10 times a week, it’s easy to stop in once in a while and justify it as a one-off expense.

9. Movie Tickets

A movie ticket in NYC was close to, if not more than, $15 per person. That means a night out with my husband was $30 minimum. In Richmond? Under $10 per person. A small savings, but we’re movie buffs and go to the movies often enough that it makes a small difference.

10. Buying In Bulk

Costco! I can’t tell you how much I love Costco. Granted, I’m a new devotee so the shine may have worn off for others, but I have really started to crunch the numbers and am figuring out how much buying in bulk can save me, especially for things I know won’t expire, like cleaning supplies. In New York City, I could’ve shopped at Costco, but I couldn’t store a massive pack of paper towels in my tiny apartment, so bulk buying wasn’t really an option.

11. Trips Home for the Holidays

I used to spend $600 a year getting a flight home to Ohio for the holidays. My husband would spend about the same to join me. Now, we can drive home. It takes a little longer, but with gas prices about $1.50 a gallon in our area, we drove home this year and back for less than $75 in gas costs. $75 in gas vs. $1,200 in plane tickets. It’s a big savings, especially around the holidays when everyone’s credit card balances are up (potentially hurting their credit scores — you can see if your credit scores are taking a hit for free on Credit.com).

Should everyone leave NYC? No! But leaving the city has its appeal.

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