Millennials, Get Ready for High Costs of Your First Apartment
Many millennials who are finally moving out of their parents' homes aren't prepared for the costs of snagging their first apartment. While the Internet has made the search process a lot easier, there are several costs associated with just finding the right apartment.
Some buildings charge a fee -- usually $25 to $200 -- just to apply for a rental unit. Once you're accepted, administrative fees can add another $100 to $300. Some landlords also place an extra fee on pet owners. In some cities, you may also need to pay a real estate agent another fee or a commission.
Dave Lin, who graduated from Northwestern University last year, said he found plenty of options in his web search for a studio apartment. Still, he had to make a one-time $250 move-in fee to an older building in the Rogers Park section of Chicago. He went with one of the cheapest units he found, just $635 a month, which includes some utilities. He says he enjoys the feeling of being fully independent, "but I'm already planning to move out when my lease expires. I want a roommate, and I'm already looking for where we're going to live."
And when you sign the lease, you're likely to have to pay a security deposit, often equal to one month's rent, in addition to the first month's rent. Rebecca Rego recently moved to Washington, D.C., to take her first full-time job after college. She paid a security deposit of just $500 and felt lucky. "I have friends, especially in New York, that had to put up three months of down payments. That's thousands of dollars. And what 23-year-old has that kind of money?"
The security deposit is usually refundable when you move out, if the apartment is in good condition. And to make sure you don't run into a hassle at the end of the lease, "take pictures of what the place looks like when you move in," said Doug Culkin, president and CEO of the National Apartment Association. He says you should do a thorough inspection before you move in and take pictures of any damage to the carpets, paint job or anything else.
"Millennials are looking for urban locations," said Culkin. "They want to be where they work, where they play, where they eat." That means demand in many urban areas is outstripping the supply. There is demand for up to 400,000 new apartment units this year, while only about 250,000 newly built units will become available. As a result, rental prices are expected to increase by 3.5 percent to 4 percent this year, and in some hot markets, prices could spike by 8 percent or more.
Insurance and Other Expenses
Other potential costs include rental insurance -- which covers everything from your clothes, furniture and electronic against theft or fire -- as well as liability claims, in case someone is injured in your new home. The cost of the average policy is $184 a year, according to the National Association of Insurance Commissioners.
You will also need to plan for other expenses when you move in, including parking, cleaning supplies, filling the refrigerator (no, it does not come preloaded with beer, soda and chicken wings) and of course furniture.
When you add it all up, it can mean thousands of dollars above and beyond the rent, just to settle in your first place out of the nest.
Correction: A previous version of this story misspelled the name of Doug Culkin.