Personal Finance 
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Total Cost of Renting

Victorian MansionOne of the main reasons why I bought my home was because I was tired of moving every year. I hated packing up my things, renting a truck (Ugh, U-Haul sucks), moving my things, then unpacking my things. It felt like such wasted effort. However, in my numerous moves, I did establish a great way to come up with a total cost of housing metric that helped me compare various housing options.

When I first started comparing apartments, I got the basics right. I compared the total rent, I accounted for utilities, and I accounted for any insurances I would need. I failed to recognize commute time and cost though, which played a significant factor in my first apartment (25 miles one way). That’s just one of the considerations I missed, there are several more

The total cost of renting should include the following factors (in the order of most likely to be overlooked):

  • Parking
  • Commute mileage and time
  • Automobile insurance
  • Renters insurance
  • Deposit
  • Utilities & Rent

Parking

Parking is one of those factors that you’re either keenly aware of or entirely oblivious to. I’ve been fortunate enough to have lived in apartment complexes where there was ample parking and the farthest I’d ever have to park was a few hundred feet from my building’s front door. In more populated cities, parking can be a huge pain. My friends in Baltimore tell me that if they get back into the city from work past 8 PM, there’s almost no chance they’ll find any street parking nearby. Having some place safe to park is crucial when evaluating places to live and some apartment complexes, especially in cities, charge you extra for a parking spot.

Commute Mileage & Time

Many people fail to seriously consider commute mileage and time when comparing rental properties because they don’t see it as being significant. With the recent fall in gas prices, it’s becoming less and less financially significant and so people are more easily overlooking it. I think that’s a mistake.

A long commute can have a draining effect on a person. Having to drive an hour home after a long ten hour day of work absolutely sucks. Having to drive an hour to work, so you can stay there for ten hours, then drive home… that’s brutal. However I’ve seen people do that drive just so they can save a hundred dollars on rent and that seems a bit foolish. If there are other reasons for that trade, then by all means do it, but to do it for just money seems foolish.

Automobile Insurance

Many of my friends love living in Baltimore City but many of them also complain about how their automobile insurance rates are so high. That’s because a car in Baltimore is more expensive to insure than in the suburbs. While I’m not an actuary, I believe it’s a combination of the higher population density, both in people and in cars, and the higher incidence of crime. That and people aren’t that great at parallel parking. :)

Renters Insurance

This is another, though less important, insurance number that is likely higher in the city than in the suburbs. Before you select a place, call your insurer and see how much renters insurance would be in your new place. It’s not likely to be significantly different, since renter’s insurance is often very cheap, but it could be big enough to change your decision.

Deposit

Some places require one month’s rent as deposit, others require only a few hundred dollars. I personally prefer the apartments that require only a few hundred dollars because I don’t want to have to fight with the landlord to get my deposit back when I move out. I’ve heard of so many horror stories of people getting screwed on cleaning deposits because they forgot to vacuum or were blamed for regular wear and tear, I just prefer to avoid it entirely. My first apartment had a $300 deposit ($1200 monthly rent for my roommate and myself) and no cleaning requirement. We were allowed to leave the place as filthy we wanted to and we wouldn’t lose a penny of our deposit and it was perfect.

The laws on deposits varies from state to state. Some states require a landlord pay you interest on your deposit and others limit the deposit to one or two months rent. Check your state’s website for additional details, plenty of unscrupulous landlords, especially individuals, try to skirt by the law when it comes to deposits. Know the laws and your recourse. (If I were you and I learned a landlord was trying to break the law with regard to deposits, I’d rent somewhere else).

Utilities & Rent

I listed these two together and last because very few people overlook utilities and rent when comparing places to live. :) I always prefer a place that offers utilities included over one where you have to pay the bill yourself because it gives you a bit of protection against any bad months. As for rent, I recommend you take a look at Rentometer to get a better idea of how your rent compares to those in your area.

Are there any other financial factors I’m missing?

(Photo: johncarleton)


 Insurance 
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What Happens If My Insurance Company Fails?

AIG Insurance BuildingEveryone’s been focused on brokerage failures and bank failures lately, wondering what happens and who backs them in the event of a failure… that is until we learned that AIG (American International Group) was in serious trouble. This begs the question very few have asked before, what happens if my insurance company fails? The quick answer is that most states have a guaranty that will back the fund up to a certain dollar amount.

(Click to continue reading…)


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