How to find the right apartment??
<div class="user-question">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 :) </div>
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 you don't make those same mistakes!
📦 Common mistakes to avoid
Here’s are 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.
📦 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 total.
Now let's calculate what the ideal price of your monthly rent should be (if we were to treat ourselves in the eyes of a 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").
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:
Of course, this is not a hard and fast rule, it’s just been my guideline.
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 some 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.
<div class="frich-tip">Frich tip: Take a look at your monthly bills. Are you paying for services that you don’t use? If so, take just a few minutes to switch to Metro by T-Mobile online and decrease your monthly phone bill to only $20/month when you prepay 6 months upfront. This one action will add up to serious savings you can put in your emergency fund instead.</div>
📦 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.
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.
3️⃣ Amenities: Does the apartment have a gym, laundry or parking?
4️⃣Apartment 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 thrifty 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.
Found this valuable? Here are some more deep dives from the Frich team 🤝
✅ What should my weekly budget be?
✅ Is your car payment too high?
✅ Here's how to save money on rent
Saira Rahman
VP, New Investor Initiatives - Fundrise
