If you rent you can try to reduce your housing costs as follows.
- Get roommates to share the rent. A friend of mine had the best roommate as she was never there and always at her boyfriend’s place yet still paid for half the rent.
- Shop around when renting an apartment and know the market well. You may be able to get rent concessions if you do.
- When asked to renew the lease you can try to negotiate to reduce or eliminate the increase if you have a good payment history and are a good tenant they want to keep. I’ve succeeded at this about half the time. It’s easier in the suburbs than downtown.
- Make sure to document everything and take lots of pictures when moving in. This way you are likely to receive back more of your security deposit when you leave.
- In a hot rental market you may not have much wiggle room but new apartment complexes will give you leverage as the landlord knows you might bolt for a newer, nicer one.
- Ask if the apartment complex offers a corporate discount. Some of them do to the big employers in town. I’ve gotten a $100/month off in the Midwest when they found out who I worked for. They liked people from that company employees as they were good payers, didn’t cause trouble and the company did their corporate housing short-term stays there.
- Shop around on rental insurance as prices vary but most places require it. Your auto insurer may give you a good deal.
- Keep utilities and costs low. Don’t get a landline or a fancy cable package.
While you are renting however I want you to be saving aggressively for your down payment so that you can move from renting to owning. You will need 5 to 10% down. 20% down is ideal. So target saving 20% of your take home income if you can to build that down payment. Put all bonuses and tax refunds toward it. The faster you get out of renting the richer you will be.
When shopping for a house, condo or townhouse
- Get your pre-approval letter and financing ready before you shop
- Remember that the realtor is getting paid a lot. Make them work for it. Don’t feel guilty. Usually it’s on the order of 6% split with the selling broker.
- Consider using a discount realtor like Redfin to pay lower fees meaning a lower price for you. They are less full service both fees are about half.
- You can buy a house without a realtor and save on the price. I realized this when I was buying my house. A guy selling one of his rental houses pulled me aside and said “Dump your realtor. I can give you a $10K discount on the price if I am not paying a sales commission”. The guy was right! You don’t need a realtor to do the deal. Once you have agreed on a price the escrow company does all the paperwork. I will use this approach next time if I find the property on my own and write my own offer.
- Be wary of HOA fees and property taxes. They will be much higher on condos, townhouses and in certain developments. The lower the better. Keep in mind these are basically another form of rent.
Closing and Moving
Closing time: Get a licensed inspector to go over the property with a fine tooth comb. The if there are issues you can use that list to get a better price or walk away if the place is a money pit. That issue list will come in very handy once you own the place as you will know what needs to be fixed. Once you are in learn to do the minor home projects by yourself to save more cash.
Movers: I am cheap with movers. I only hire them to move the big stuff like furniture to minimize hourly cost and move all the non-furniture items myself. This saves a few hundred dollars even if you have to make many trips.
Property taxes: These may be negotiable if you feel your assessment is too high. A relative of mine did this and when the assessor realized how much work the house needed on a visit. The assessment got knocked down by around $40K so big tax savings of $4K in the pocket.
Finally if you can, try to pay off your mortgage faster. The sooner you do that the sooner you can own it outright and stop paying interest.
Refinancing: You can consider this to save on your payments due to lower rates but ideally you want to keep making the same higher payments to pay the house off faster. Don’t spend the difference.