Amy Hoak's Home Economics
Hidden fees of renting an apartment7/2/12 12:01 AM ET (MarketWatch)Print
CHICAGO (MarketWatch)--The cost of renting an apartment has risen in recent years and as demand has gone up for rentals, shopping for the perfect home has gotten more competitive in many markets.
But while shoppers tend to compare rent prices when looking at properties, they shouldn't lose sight of what the rental will cost them in total--including any "hidden costs" not included in the base rent.
They add up.
Plus, in a competitive market, some landlords may be able to increase some of these fees. A new apartment building in Chicago, for example, has higher application fees, administrative fees and pet fees than other similar buildings, said Bryan Pritchard, managing broker for Tricap Preferred, a free apartment locator service in downtown Chicago.
To be fair, these aren't really hidden fees, said Paul Bergeron, director of communications at the National Apartment Association. Fees are required to be included in the lease, and in many apartment buildings incoming residents will often have a "sit-down" review of a lease before they sign it, he said.
Of course, in a tough housing market, more condo and single-family homeowners are also renting out their properties. And they don't always have the experience of a professional company, which may have a process for explaining charges and fees before you sign on the dotted line.
So as a renter--no matter who your future landlord may be--your best bet is to ask questions about fees that could pop up. Below are several.
Often, renters will be asked to come up with a security deposit, a fee that is refundable at the end of the lease term. But in some apartment buildings, security deposits are being dropped in favor of nonrefundable move-in fees, at amounts between $350 and $500 Pritchard said. Both typically cover damages to a rental once the tenant leaves.
That's separate from the application fee, which typically covers the cost of running the renter's application and credit check, he points out.
If you're renting a condo unit, don't be surprised if you're charged an additional $100 to $150 move-in fee when you move your belongings in, due to condo association rules.
Utilities and parking
You may find a rental that will include all of your utilities, but there are plenty out there that expect you to pay for some or all of the cost for heat, air conditioning, water, sewer, trash, electricity, Internet service and cable. And in a big city, there's a good chance you'll also pay for a parking spot.
"Understand what you're responsible for and how that bill is going to be charged," Pritchard said.
Remember, too, that there are likely to be installation costs on utilities like cable and Internet, said Diana Pittro, executive vice president of RMK Management Corp., which manages more than 10,000 apartment homes in Illinois, Minnesota and Indiana. Car insurance premiums may go up, too, if you're moving to a new area, she added.
Have a cat or dog? You'll probably have to pay an extra fee or deposit. Pet owners should inquire about how the fee will be applied. Is it tacked on to the rent each month, or a one-time fee at the start?
When you sign your lease this year, it's a good idea to anticipate the rent increase, should you want to re-up and stay for another year, Pritchard said. In a competitive rental market, you might be best to figure that rent will go up by 3% to 5% when you renew your lease, he said.
Now if you're lucky, you may not see a rent hike that second year. But at least you'll be prepared in the case rent gets more expensive.
Finally, give your budget some room for extra expenses that are sure to pop up. You'll need a moving truck, and will probably want to buy lunch for the friends who help you move your stuff, Pittro said.
Once in the apartment, you may need new window coverings, furniture or linens. And the first time you grocery shop could be expensive too, since few people move all their food from one place to another, she pointed out.