Skyrocketing Rent Prices and 3 Things You Can Do About It Right Now.
Remember after the Great Recession in the last decades, when the whole "boomerang child" and "emerging adulthood", for lack of a better word, emerged as catchy phrases to describe college graduates who moved back in with their parents? Well, I've never been prouder to be one of them. Yes, I admit it. I currently live rent-free with my lovely parents because they have a big house and my job is remote. Now, I'm not trying to start a band in the garage while working as a hipster barista during the day, so I guess I'm not truly a boomerang child in the traditional sense. (At least I hope to think so!)
No, I'm happy to be labeled as one because the housing market is insane, brutal, scalding hot, or any other "unprecedented" adjective I've heard describing the current situation. I'm watched news clip after news clip of people saying their rent has shot up by 30% or more, or $600 per month for others. That is insane! I don't remember rent prices going up that sharply.
If you guys read Financial Fives, there is a chapter in there about how to negotiate on rent and with property management companies. I'll talk about some of that here, however, some of those points are no longer relevant in the current situation. For example, sign-on bonus prizes and two months free is pretty much unheard of now, versus just a few years ago when landlords were desperate to fill vacant units.
So, all jokes aside, if you are fortunate enough to have parents, family, or close friends with an extra room, this would be a good time to just buckle down and save money for that next apartment or down payment for a home. It's hard enough to save up for a down payment, especially today, and the rent price increases don't help.
Meh, let's go see this house next week when we feel like it
Speaking of buying a house, let me speak from experience. My perspective was skewed because I helped my parents buy a home in 2010. If anyone of you reading were coming of age in the 10's, that was a PRIME home buying environment. We got a tax credit, pick of the litter of inventory, time to tour multiple properties privately and ask the seller (usually the banks) for credits on closing costs. Prices were "fair" in my eyes. Bidding wars? Ha!
Fast forward to 2016 when I was looking to buy in Denver, and homes that were less than 1/4 the size of my parent's home and much older were selling at the same price! Report after report came out saying the rise in home prices was outpacing income growth. My mind had connected real estate as a cyclical system, like the stock market. There is a buyers market, and there is a seller's market. Well, my realtor told me it was now a seller's market. And it's been that way ever since.
Now we are playing with a whole different animal, so here are my top 3 tips to save money on rent if you're in the arena today.
1) Roommate up: Before you roll your eyes, I'd like to speak from experience that I actually preferred living with roommates as to living alone. Look at the prices for 1 bedroom units and studios compared to two bedrooms. Most of the time, you are saving hundreds of dollars per month if you split the two-bedroom with someone. Plus, you also split the utilities, so even more money is saved.
Aside from sharing the exorbitant prices with someone else, you also have someone to share the weeknight jokes with, check the mail or packages if you're away, help you clean, or grab a few things from the store that you forgot when they go. In addition, you can do what I did and give them the larger room, more storage space, or the more coveted parking spot so that they pay more of the rent. Just make sure they don't work from home too, that can get tired fast!
2) Now is a Better Time than Ever to be a Minimalist: Minimalism is engrained into my values and the ethos of Financial Fives, you guys know that. I've been practicing values of minimalism since I came across the podcast of, well, The Minimalists.
What does minimalism have to do with dealing with rising rent prices? Well, the less you have the less space you need. And the less space you need, you can likely pay less for a smaller unit, pay no storage fees, and pay less in moving fees. If you have tons of recreational gear with you and have a storage unit, or have one bedroom of your apartment designated as an "office" you're paying for that one way or another.
Get creative here. Can you double a walk-in closet as a "phone booth" for when you need space from your partner who's on a Zoom call? Can you ditch the patio furniture and take a unit without a balcony or view? Can you sell your entertainment center so that the living room can turn into an office during the day?
Every piece that you have in your unit should serve a purpose. Don't say "they all serve a purpose, they make me happy!". Choose carefully. Having 15 dinner plates, 12 wine glasses, a mobile bar, lamps when you have overhead lighting, or anything else that's not necessary, think about what you need and how good it would feel to fit everything easily into your car after you sell your furniture and jet off to a new city.
3) Longer leases: I know what you're thinking. "Why would I sign a lease at HIGHER prices? Isn't that just locking in a ripoff?" Not quite. If you are living somewhere that you don't see yourself moving from for years, or where you've already been a good tenant for several years, you're in a fortuitous position to ask for a rent reduction instead of a rent increase.
Let's say you are living in the town where you grew up, plan to buy a home, or have a circle of family and friends and don't want to be anywhere else. Or your job is location-dependent, and you see yourself in a stable enough position to sign on for longer. Not everyone who rents an apartment is there just to check out the city. Most people sign 1-year leases because they don't know where they will be in a year, or maybe they want to move to another unit.
I was able to get 2 months of free rent, free parking, and gift cards by signing on for an 18-month lease rather than a 15-month lease. 3 months is a piece of cake! If your property management still increases your rent, then at least now you know you're cutting your losses and can move somewhere else that going to gouge you less. Traditionally, mom-and-pop landlords have more leeway to reduce the rent or work with their tenants because they often directly own and oversee the property. If all else fails, move in with family, or rent a furnished room without being tied to a lease!
Got any other ideas to deal with these crazy rent prices and inflation?