This year's graduates may be entering a slightly better job market than their 2010 or 2011 counterparts, but many will face a tighter rental market. As buying property loses its allure for some, increased demand and lower vacancy in rental units is driving up prices throughout the country. According to the Census Bureau, the median asking rent for rental units nationwide was $721 in the first quarter of this year, up from $683 first quarter last year.
"Occupancy rates are the highest they've been in 10 years," says Doug Culkin, president and CEO of the National Apartment Association. "Nationally, they're at about 96 percent, which is incredibly high. It'll be harder for kids coming out of college [to afford an apartment] unless Mom and Dad are paying for it."
Of course, that's not to say apartment-hunting has been easy for other recession-era grads. In 2010, when Rebecca Odell moved to Columbus, Ohio, for an internship, she had the dual challenges of a limited budget and a long-distance apartment search. "Taking a post-grad internship narrowed my apartment choices because I needed to find a place that I could afford, especially working on an intern's budget, and where I would feel safe," she says.
After an extensive online search, Odell narrowed the field to four apartments and drove the two hours to view all four on the same day. The apartment she chose was a short-term sublease within a multi-family house, but she's since moved in with a roommate to save money, as many recent grads do.
Here's how to rent your first apartment in a challenging market, whether you're flying solo or searching with roommates.
• Set a realistic budget based on the area. The conventional wisdom is to spend no more than 30 percent of your annual income on housing costs. But given low entry-level salaries and high housing costs, you may need to budget a little more if you're living in expensive urban markets like New York City or San Francisco. "It totally depends on where you live," says Ornella Grosz, a speaker and author of Moneylicious: A Financial Clue for Generation Y. "You want to have a benchmark, but you don't want to spend your entire paycheck on rent." Websites like Rentometer.com and RentJungle.com/comparerent can give you an idea of rents in your target neighborhood so you can budget accordingly.
Splitting the rent with roommates can help cut costs, but you'll want to screen roommates carefully and "make sure they're people you'd actually want to live with," as Grosz puts it. You may like hanging out with friends from college, but that doesn't mean you'll enjoy cleaning up their messes or sharing a bathroom. Before signing a lease together, ask prospective roommates how they want to handle chores, guests, bills, and other issues.
Once you find a potential apartment, ask about possible rent increases to gauge how quickly you could be priced out of that apartment. "Do they anticipate rental prices going up?" asks Grosz. "How do they justify increases in prices?"
• Budget for the extras. In addition to paying rent, you may also be responsible for paying bills like electricity, heat, and cable. Odell adjusted her price range once she discovered that some higher-priced apartments included utilities, which made her overall costs lower than paying rent and utilities separately.
If you're on the hook for utilities, factor those expenses into your budget. Often, you can find out what the previous tenants paid by calling the utility provider and giving them the address. "Of course, your use might be different," points out Bill Deegan, CEO of Renter Nation (formerly the American Tenants Association).
• Position yourself as a desirable tenant. Rentals move quickly in competitive markets, so have your references and checkbook ready when you start searching. In some markets, you'll be expected to pay a security deposit, first and last month's rent, a nonrefundable application fee, and possibly a broker or finder's fee before moving in, all of which can amount to several times the monthly rent.