Frich Money Diary: I'm moving into my very first apartment!!!

Welcome to another weekly deep dive where we ask our brilliant money experts to answer your most burning money questions with the detail and expertise that you all deserve.

Submit your question here! (It's anonymous 🤫 )

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Hi Frich! I finally got a job after graduating and I'm now looking for my first ever apartment! Can you please give me any and all tips to avoid making common mistakes? I obviously don't have a bunch of savings since I graduated this May so any money saving hacks would be really appreciated! Thank you :)

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Congratulations! Getting your first apartment is such a big deal. I remember buying flowers for my first apartment and realizing I was finally on my own - it was such an exhilarating moment. But of course there were a bunch of mistakes I made, and today my job is to make sure that you don't make those same mistakes!

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📦 Common Mistakes to Avoid

Here's a few common mistakes I've found people make when first going out to get an apartment:

1️⃣ Don't get an apartment that's out of budget. I will dive into how to calculate what you can afford after this.

2️⃣ Don't decide whether you want to have roommates or not until you know what you can afford.

3️⃣ Don't stress yourself out by constraining your timeline (unless you absolutely have to). Lots of people take 30+ days to find the perfect spot.

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📦 Calculating What You Can Afford

One of the things I used to have to know in a past life was what banks would call the maximum DTI (Debt to Income) for any borrower of the bank when taking out a mortgage. It's a helpful way of understanding how much a bank would consider you for, which in my opinion is the absolute maximum you should consider for your apartment.

First, what I'd do is figure out how much you pay on all credit lines per month: student loans, credit cards, cars, any piece of debt you are not paying in cash, you should include in a list and a total.

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Here's an example of the monthly cost of your debt:

$350 for student loans

$500 credit card payments

$250 car payment

That means your total debt is $1,100 on a monthly basis.

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Now let's calculate what the ideal price of your monthly rent should be (if we were to treat ourselves in the eyes of the bank).

First, we'll start by calculating what your current DTI is, so we can see how much you have left (rent technically counts as monthly "debt").

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Your annual pre-tax income is: $60,000/12 = $5,000

Your current DTI (not considering the apartment) is: $1,100/$5,000 = 22%

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Now that you know your current DTI is 22%, let's see what's the max you should pay in rent.

At a bank, the maximum amount a lender can offer is about 48% DTI. That means if you approached this as a financial institution, then:

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Your remaining DTI is: 48% - 22% = 26%

Based on your monthly pre-tax income, that means your rent can cost at most: 26% * $5,000 = $1,300

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Of course, this is not a hard and fast rule, it's just been my guideline.

I personally find banks are very good at determining what a person can afford since it's how they make money, so their guideline is typically the absolute maximum available for any person (while still being able to afford the rest of their living expenses).

That being said, most apartments and landlords generally are aware that they share the responsibility in knowing if you can afford it, and will list some guidelines in their listing to outline whether you need "2X Rent" or "3X Rent," etc. You can also ask while viewing or when messaging with the property management company what the underwriting guidelines are.

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📦 Recommended Checklist for Your Moving Day

Here are a few things I would consider when you're looking into your first apartment:

1️⃣ Renter's Insurance: Don't forget about renter’s insurance! It's a very small monthly amount & can really save you if something does go wrong.

Frich Recommendation: Lemonade

2️⃣ Internet: Don't avoid the work to compare the cost of different internet providers. These monthly charges will add up in the long-term.

Frich Recommendation: Rocket Money helps you automatically find savings on your monthly bills

3️⃣ Amenities: Does the apartment have a gym, laundry or parking?

4️⃣ Apartment condition: Make sure you note any damage in your apartment. Test the lights, turn on any appliances, check for mold or damage in bathrooms and under sinks, turn on any air conditioning or heating.

5️⃣ Ask the property manager what happens if you have an emergency after hours.

6️⃣ Ask for the security deposit and any other fees you may need to pay.

7️⃣ Ask about the utilities and how much they are on average.

8️⃣ Get thrift about the interior! There's no need to buy all new things all at once, but if you plan on staying in this apartment for longer, it's worth making it look good too.

Frich Recommendation: Minted has plenty of affordable art options to level-

up your budget-friendly home.

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BTW - here's how others are doing 👀

Where do you buy your furniture from?

🛋️ 45% Cheapest option I can find, but I buy new

🧑‍💻 23% Facebook marketplace or similar!

💎 14% I save up for special pieces

📦 18% I try to buy as little furniture as possible

Saira Rahman

VP, New Investor Initiatives - Fundrise

Submit your own question here!

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Was that not good enough? Here's a hot tip from the Frich team🔥

Moving day can get intense. So we went out there to find you the best partner to help make the day a lot more bearable.

Storage Scholars will move, store and ship your items, taking care of them as if they were their own.

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We make our recommendations independently, but Frich may receive compensation in the form of referral fees from featured products or services.

Disclaimer: While I am VP of New Investor Initiatives at Fundrise, this publication reflects solely my own opinions and does not reflect the views of Fundrise. Fundrise has not independently certified any of the information contained herein.

Not a client. In exchange for giving an endorsement of Herring RIA Sub, LLC ("Playbook Adviser"), Frich Inc was paid a one-time flat fee. There is no guarantee that clients will have similar experiences or success.