Updated: May 22, 2024
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Renting an apartment is one of the best housing options available for millions of Americans. But before you finalize a rental agreement, there are certain factors you need to consider.
Aside from the cost, you have to know what documents to prepare, what questions to ask the landlord, when to sign a lease and whether or not you need to purchase renters insurance. Understanding these can help you have a problem-free, positive rental experience.
The Rental Industry in the United States
Millions of Americans rent a home. MoneyGeek gathered some key facts and statistics about the current state of the rental industry in the U.S.
The apartment rental market size in the U.S. in terms of revenue is $229.1 billion. It’s the second largest real estate and rental and leasing industry based on market size.
Renters in the U.S. made up about 34.5% of households in 2020. That’s approximately 42.9 million households.
The average asking rent in the country is $2,016 monthly for apartment listings in 2022. This is 77.1% higher than the median gross rent nationwide in 2022 and represents a 14.09% increase year-over-year as of June 2022.
Rent is one of the largest expenses in American households. Approximately 41% of renters use 35% of their income to pay rent.
About 15% of renters reported falling behind on rent in early 2022. Lower-income families are more likely to have arrears because of lost income. Approximately 21% of those earning less than $25,000 said they were behind on rent, while only 5% of households with an income of $75,000 or more said they were behind on rent.
For many people, owning a home is one of their biggest financial goals and investments. However, depending on your needs and circumstances, being a renter may be the better option.
While the process of renting an apartment may seem simple, there are various concepts and aspects you need to know. Whether you’re a first-time renter or not, it’s important to understand what a lease agreement is, when signing one makes sense and what to prepare and expect during the process.
A lease agreement is a document that outlines the rules, terms and conditions that both the landlord and tenant must agree to follow. It's a legal contract similar to a rental agreement. But unlike a rental agreement that often expires monthly, a lease agreement is a contract for longer periods, usually at least one year
Generally, the lease signing process starts with the landlord creating the contract and sending it to the tenant. The tenant will then review the lease. If they agree with the terms, they'll sign and send the contract back. The landlord will conduct the final review and provide their signature. The document becomes valid once it contains all necessary signatures.
There are no general requirements as to what a lease agreement should include. A landlord may choose to create a one-page contract or a more comprehensive document. It may be typed or handwritten.
That said, renters should ensure the contract covers the following basic items:
All adult tenants in the rental unit should be named. This ensures legal responsibility for the contract's terms, like paying rent and property use.
The agreement should specify that the unit will serve as the residence of the tenants who signed along with their minor children.
Your lease agreement should describe the property in detail. Make sure the document has the rental unit's complete address. It should also mention specific storage areas or assigned parking spots.
The contract should specify that it's a lease agreement and include the duration of the tenancy. Lease terms may vary but typically last a year.
The lease agreement should specify the rental amount, when it's due and the acceptable payment channels or methods.
Clarifying how much the security deposit is, how it might be used, when the landlord will return it and what deductions are possible can help avoid future disputes. The agreement should also include non-refundable charges, like cleaning or pet fees.
The lease agreement should set out the landlord's and tenants' responsibilities when it comes to maintaining the rental unit. For instance, the tenant should ensure the property is kept clean and inform the landlord of any defective or dangerous conditions.
The contract should clarify the terms in which the landlord can enter the rental property. For instance, the landlord must provide an advanced notice before entering the unit to help prevent violation of privacy rights.
The lease agreement should outline all rules and policies for the rental unit. For instance, there should be an explicit clause on prohibited behaviors and activities. The document should also clarify rules or restrictions on pets.
A lease agreement is legally binding. You must ensure you understand what you're committing to before signing.
If you choose a rental unit with monthly expiration and renewal, you'll sign a rental agreement, and a lease agreement isn't necessary. But if you're renting for a long period — like a year-long term — you'll have to sign a lease.
Typically, the spring and summer months are the busiest for apartment leasing. Aside from the pleasant weather, these months coincide with the end of school and graduation season. That said, finding apartment listings during fall and winter is still possible.
Once you decide on a rental unit, determine if you need to sign a lease agreement. You'll want to make sure that you sign at the right time. Generally, the best time to sign is about a month before the move-in date. This way, you have enough time to plan and prepare.
Before proceeding with the signing process, make sure you have all the necessary documents ready. Bringing all required documentation with you will ensure a smoother transaction and prevent unnecessary delays. Clarify specific requirements with the landlord of your chosen unit, as these may vary.
Identification
You may need to present a government-issued ID, such as a driver's license or valid passport. In some cases, landlords may accept a photo ID from your place of employment or school.
Proof of employment
You'll have to prove your ability to pay rent. Some landlords ask for proof of employment, like pay stubs or income tax returns.
Proof of renters insurance
Many rental agencies and landlords require tenants to have renters insurance. In such cases, a renter must show evidence that they have coverage.
Rental history
Some landlords and rental agencies ask about rental history to check the reliability of the renter. For instance, they may contact previous landlords and inquire about your past behavior as a tenant.
List of references
Interested renters usually require that you provide references before signing a lease. Depending on the landlord, you may need both professional and personal references. Be sure to provide their names, contact details and your relationship with them.
Form of payment
Bring your checkbook, money order or cash because you may need to cover the first month's rent or give a deposit. Nowadays, some landlords may allow you to pay these expenses electronically.
A lease is a commitment that comes with responsibilities. It's crucial to ensure that you understand all the details of the agreement. Familiarizing yourself with certain aspects of your lease, such as the following, can help ensure you have a good renting experience.
Lease term
Take note of the length of the lease since it determines when your rental expires and the renewal conditions. Clarify if you need to give the landlord notice of renewal or termination plans. For instance, some landlords may require a 30-day notice.
Cost
Check the price of rent, if there are late fees and if you need to pay a security deposit. Ask if there are additional charges, like application or pet fees. Knowing all costs can help you calculate your expenses and manage your finances.
Property
Inspect the property and check its condition. Consider the location as well. Is it far from your workplace? Are there a lot of nearby establishments and service providers? These are considerations to prioritize before moving to a new place.
Landlord
Research the landlord. You can check for reviews from previous tenants. If occupants are in the unit, try to ask them about their experience with the landlord. If possible, talk to the landlord in person or by phone to get an idea of how they are.
Zoning laws
Understanding zoning laws in the area you plan to move can help you a lot as a renter. Zoning laws establish regulations on noise, waste management, parking and building appearance or features. If you plan on having a home-based business, zoning laws will also help you determine areas that allow such activities and those that prohibit them.
Landlords may have different rules and regulations. It's best to ask them important questions before signing a lease to prevent misunderstandings and issues. Knowing the answers will also help you prepare and prevent common mistakes that may lead to fees or even eviction.
Some vital questions include the cost of rent and payment, renters insurance, utility and maintenance.
One of the most important questions renters need to ask is what the rental cost is. You should also clarify acceptable payment methods. Understanding these pieces of information will help you find the right property suitable for your financial situation.
You need to know the cost of rent. This will help determine if the property is within your budget. Additionally, it allows you to see if the price is reasonable for the type of property, condition of the unit, included features and location.
Typically, landlords ask tenants to pay a security deposit before moving in. Depending on the state, this may be refundable. Ask how much the security deposit is and what may warrant the landlord to keep the deposit.
As a renter, you're responsible for making payments on time. Ask when rent is due. This information will help you when budgeting your finances. If possible, consider setting up an automated schedule for rent payments.
Ask the landlord if there's a grace period for late rent payments. Check if there are penalties for missed or late payments. Many landlords let tenants off with a simple warning the first time, but policies can vary widely from landlord to landlord.
Some landlords may require check payments. Others may receive money orders, while some accept cash or electronic payments.
Before making payment for a rental unit, do your due diligence. Make sure you understand what you’re agreeing to ahead of time.
The terms and conditions of each lease are often unique. That's why it's necessary to clarify any questions you may have after carefully reading over your specific lease. Asking the right questions can also help you make an informed decision about whether or not you want to sign a particular lease.
The lease term determines how long the agreement will be in effect. It lets you know when your contract expires and when you'll have to apply for renewal. It also tells you what type of agreement you'll have. If the contract expires monthly, you'll have to sign a rental agreement. Longer terms come with a lease agreement.
Landlords may have rules about contract renewal. For instance, tenants may need to inform the landlord of a renewal plan before the lease ends. This may vary per landlord. Some landlords also only rent out properties for one lease term.
In some cases, landlords may ask for a co-signer, or a third party who'll co-sign the agreement with you and share the responsibility for the rent. Typically, a co-signer is necessary for individuals with bad credit scores.
If you plan on having roommates, check with the landlord about their conditions regarding such circumstances. It's up to the landlord to require separate lease agreements or create a joint lease.
Ask the landlord about their expected occupancy date. See if it aligns with your plan move-in date. If the unit is undergoing repair or renovation, ask when it'll be ready for occupancy. Knowing this information will help you prepare.
Renters insurance provides financial protection against possible expenses from damages or loss of property. Depending on the landlord, you may have to get a policy even before signing a lease. Ask about the required renters insurance coverages so you can purchase an appropriate amount of insurance.
Generally, renters insurance isn't a legal requirement. However, landlords and property managers can choose to require tenants to have a policy.
The necessary coverage will depend on the property and the tenant. There's no universal minimum requirement, so check with the landlord about their regulations on insurance.
Ask the landlord or property manager what type of insurance they have. For instance, some landlords insure the contents already in the property before the tenant moves in. Those with rental units in buildings may also have coverage for the building.
If the landlord requires renters insurance, chances are they'll ask you to provide proof of coverage. This may be one of the required documents during the signing process. Don't forget to ask whether you need to submit the same document if you decide to renew the agreement.
Utilities are essential aspects of homes. Before signing a lease, ensure you understand the landlord's utility policies. Ask them what they've already installed and what you may add. Clarifying this information will help you understand your responsibilities as a tenant.
Typically, certain utilities are already provided for by the landlord. These include electricity and water. Check if you need to set these up in your name. In some cases, landlords don't require you to do this.
There are also utilities that landlords don't often provide. For instance, you may want to add air conditioning, internet or cable TV. Ask about the process for installing these services. Check with the landlord if they have a rule on getting additional utilities. Do you need to apply for them yourself?
While landlords often provide basic utilities, they aren't required to pay for them. The lease agreement will determine who's responsible for paying utility bills. Ask the landlord or property manager if there's no written provision about this included in your lease.
Some landlords have metered utilities, such as electric and gas. In such cases, the landlord may impose penalties for late payments.
Ask if there's a need to submit account information for utilities under your name. Landlords may request this to check if the tenant has changed the utility account to their name.
Tenants are responsible for keeping their rental units clean. However, you may not be responsible for all maintenance in your unit. Clarify this with the landlord. Ask them about the process of reporting issues and how to handle repairs. Some common, important questions to ask can be found below.
Landlords may offer emergency maintenance services. Ask them about this before finalizing your lease. Check if you'll be given access to a 24/7 maintenance service provider for emergencies.
There may be a procedure you'll have to follow for non-emergency maintenance requests. Clarify this with the landlord. You should also confirm how long it usually takes them to resolve maintenance issues.
You may need to handle some repairs. Typically, landlords leave minor issues to tenants. For instance, clogged toilets are the responsibility of the renter. However, you may have to report bigger problems that require professional intervention to the landlord, who will handle things from there.
Some landlords charge fees for maintenance requests. Ensure you check the maintenance policy before signing the lease to be aware of possible additional expenses.
Different renters value different things in a living situation. The best apartment for you is the one that best fits your needs, situation and financial circumstances. Here are some additional questions you may want to ask before signing a lease.
If you have a pet or are planning on adopting one, you may want to ask the landlord about their pet policy. Some landlords allow any kind of pet, while others may have restrictions on the type of animals renters can have in the unit. Others charge pet fees.
If you have a car, ask about parking for the unit. Some rental properties include a parking space. However, others may charge extra for this amenity.
Subletting is when a tenant rents out a room in the unit to another person. Rules on subletting vary from landlord to landlord. While some may allow it, there may be restrictions on the length of subletting and the number of people who can sublet.
In some cases, a renter may decide to terminate the contract in the middle of the lease term. Some landlords charge early-termination fees. Check this first to prevent unexpected expenses.
To ensure your rights to privacy, make sure you ask for the policy on home inspections and visits. Typically, lease agreements include a provision on this. For instance, the landlord must provide the tenant with notice before entering the property. The time may vary, but it’s usually at least 24 hours.
Once you're sure about a lease, it’s time to sign it and schedule your move-in date. You want enough time to handle current responsibilities and prepare for your move. A month after the agreement signing is ideal, especially if you've already made the payment for your last month in your current residence. If you're a first-time renter, you can use this time to shop around for furniture and other home appliances you may need.
Below are some steps you need to take for a hassle-free move-in.
Before your move-in date, ensure you know what utilities you'll be responsible for. You may need time to set up internet and cable TV services. Depending on the agreement, you may also have to transfer utilities to your name.
If you have subscriptions, update your mailing address. You may also need to update the address associated with your driver's license, voter registration and bank.
Before packing your stuff, take inventory. Account for everything you own since it will help you track any lost items. An inventory list is also vital if you hire a moving company. Additionally, it may be necessary for your insurance.
Determine what items you'll need on your first night. Make sure you have all essentials, including valuables and a change of clothes for a few days. This is especially important if you hire a moving company, as there may be unexpected delays.
Whether or not you're a first-time renter, navigating the leasing process can be a bit overwhelming. MoneyGeek asked some industry experts to share insights to help you understand important considerations and learn tips you can use when searching for the right apartment.
Finding the best apartment for your needs and circumstances can be challenging. Fortunately, there are tools and resources specifically for renters. Here are some of them.
About Nathan Paulus
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.
Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
