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.
Having Mom and Dad cosign on an apartment (if they're willing) could give prospective landlords peace of mind about renting to someone without a long credit or employment history. However, if you don't have a cosigner, Grosz suggests guaranteeing extra money upfront to show landlords that you're financially responsible. Carrying a letter from your employer as proof of employment is another option. Prospective landlords may also want to run a credit check, so try to clear up any issues on your credit report before starting your search.
• Scope out the neighborhood. Real estate agents have a saying: "location, location, location." This rings true for apartments as well as houses. Choose an apartment based solely on the interior, and you may wind up in a less-than-desirable neighborhood, far from friends or work. If you're relocating for a job, Culkin suggests asking your employer for recommendations on neighborhoods. Walkscore.com can give you a sense of how walkable an area is based on proximity to public transportation, restaurants, grocery stores, and other places.
Also look at how the building or area is maintained. "If it's a high-rise, are there lights out in the hallways? Is the lighting in the parking lot adequate?" asks Deegan. If not, it could be a sign that management will be slow to respond to tenants' concerns.
• Conduct a thorough walk-through. Some people will rent off of Craigslist without seeing an apartment in person, which can lead to problems later, according to Deegan. "Any prospective tenant should make sure everything works: the stove, the refrigerator, any appliances, and make sure the water runs hot for half an hour if you take long showers," he says. Also document any preexisting issues like scratches on the floor or holes in the wall so they won't get deducted from your security deposit when you move out.
• Get everything in writing. Large apartment communities typically have you sign a lease, but individual property owners or landlords may be more lax about paperwork. Whatever the scenario, don't rely on a handshake to seal the deal. According to Grosz, your lease should answer questions like, "how much notification do you need to give to move out? Is your security deposit refundable? Are you responsible for fixing up the apartment when you leave?" If you're uncertain about anything in your lease, have someone else review it. In fact, your college may offer lease-review services to students and recent grads.