Credit 
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Experian Credit Report Includes Rent Payments

Apartment for RentYour credit report and credit score are designed to calculate how likely you are to default on your loans. It’s increasingly being used in some surprising ways, such as determining whether or not to rent you a home. The reasoning for using credit this way, for determining whether or not to rent an apartment to someone, has to do with the reality that in many areas, it’s hard to evict a non-paying renter. You’re essentially “lending” them a place to stay with the hopes they pay you.

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 The Home 
33
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How Homeowners Beat Renters in a Down Housing Market

Trendy Modern Northwest HomeI’ve been talking to a lot of people lately about home values. Many homeowners have seen their homes fall in value and they talk about how much money they’ve lost, how they can’t leave the house to seize other opportunities, how they won’t be able to sell for decades. In all the discussions, it seems there’s one thing that people focus on – purchase price. It happens when markets are good, it happens when markets are bad, and in both cases I think focusing on the purchase price is incorrect.

When markets are good, people say they bought a house for $100,000 and sold it for $400,000, implying they earned $300,000 of profit. The reality is that they didn’t – they paid interest and taxes and insurance, they paid agent commissions, they paid for repairs, etc. We forget that because it’s not the headline number. I think the same is true when markets are bad.

When the housing market is down, people focus on the purchase price without adjusting for tangible factors that improve their situation. As I thought about it some more, the more I realized that there’s a range of values, below the purchase price, where you may still come out “ahead” of renters if you were forced to sell.

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 Personal Finance 
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How to Find Your First Apartment

Why am I writing a post about how to find an apartment? It seems so easy right? Look around in the areas you like, pick a place, sign a lease, and you’re done. Unfortunately, while it seems very easy, the process is fraught with ways you can get screwed.

So in the next few paragraphs I’ll explain the steps I used when I was trying to find my first apartment after moving from Pittsburgh to Baltimore. When I moved here, I chose a place that seemed like a lot of fun but was a good 25 minute commute from work. While that doesn’t seem like a long distance, it gets longer and longer after a full day of work.

I learned that leases can be complicated, filled with lots of gotchas, and that you really need to be on top of your stuff when it comes to contracts. It’ll be boring to read but you must do it, or suffer the consequences when you leave.

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 Personal Finance 
37
comments

When Does Renting Beat Buying?

If experiences appreciate and things depreciate, is there a way for us to separate the experience of a thing away from the thing itself? Of course there is – rent it. If we’re going on vacation, it makes perfect sense for us to rent a car rather than buy it (though in places in Europe, for long “rental periods,” you actually buy the car and sell it back) and we don’t think anything of it. So why don’t we do it for things we use only infrequently? We don’t realize it’s an option.

Whenever you consider the financial trade-offs between buying something and renting something, it really comes down to a few a few factors and here’s what I think they are.

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 The Home 
46
comments

Don’t Buy A Home Within 5 Years of Graduation

Farm House with Rising SunWhenever I or my wife tells people what I do (personal finance blogger), invariably one of the next few questions they ask is if I have any stocks picks for them. After I’ve explained that I don’t do that sort of thing, the next topic usually has to do with buying a house. After graduating college, the next “big thing” on peoples’ minds is usually buying a home.

My belief is that you shouldn’t buy a home within five years of graduating college or high school. First, a little about my home buying background. I bought a house four years after I graduated, after living in a few apartments, about six months before the height of the housing boom. I’m one of the fortunate few homeowners who have seen their home prices remain the same (no increase, no decrease – chalk it up as a win in my book!) but the reason I argue you shouldn’t buy a house within five years has to do with the non-financial reasons.

Don’t get me wrong, I love owning a home. I love owning our home. But don’t do it within five years.

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 Personal Finance 
12
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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)


 Personal Finance 
1
comments

How To Find An Apartment

ApartmentsA post about apartment hunting by Amanda inspired me to write about my experiences and lessons learned with respect to finding an apartment. Amanda quotes that apartment residency rates are like 95%+ this year and so that means that finding an apartment at an attractive price is going to be harder this year than in years past.

The article begins by discussing how to conduct research on the housing options and “climate” of the area you’re planning on moving to, then it moves towards finding an apartment within the neighborhood (or neighborhoods) you’ve chosen after paring down the choices in the first step. Finally, I talk briefly about how to compare the various apartment offerings, mentioning the promotions, referral bonuses, and other bonuses you might not immediately identify.

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