Money and You: Course Notes

The biggest factor of living expenses is rent. Rent is what you pay directly to the property owner in exchange for living in/on that property. Rent costs depend on a large number of factors. Housing size, location, amenities, what utilities are included with rent, landlord greed are just some of the things that dictate monthly rent. Essentially, the more it costs a property owner to own (offer the housing to you), the higher the rent will be for that property. So, even if you don’t pay the property taxes directly, they will affect the rent on a property.

In a sense, rent is simple and somewhat predictable. Generally, you can sign a lease with a landlord for 12-month periods, which dictate what your rent will be. After your 12-months are up, you can re-sign the lease but for a potentially-different rent. Keep in mind that rents do tend to go up year to year. Generally, rent increases are to reflect the effects of inflation and housing appreciation. Of course, sometimes landlords increase rents beyond this for higher profits.

There are some great landlords, some horrible landlords, and everything in between. (The same is true about tenants.)

Keep in mind that some annual rent increases should be expected and are perfectly reasonable. If your rent increases by 3%in a year, that is essentially in line with inflation and shouldn’t be seen as some scummy business by your landlord. However, some landlords will try to raise rents way beyond what is reasonable. For example, during the COVID lockdown when the housing shortage was at its worst, it wasn’t uncommon to see rents increase by several hundred dollars year to year.

While landlords do have a right to raise rents (after a lease is up), renters do have a number of rights that they can utilize to help out.

Generally, landlords want a bit of security regarding rent payments. Two common things happen with tenants. First, the last month a tenant is in a property can often be ignored in terms of rent. That is, if a tenant is leaving, they may choose not to pay the last month in rent, knowing that it is not cost effective for the landlord to try and sue over one single rent payment. Second, tenants often cause damage beyond normal wear and teat (putting a hole in the wall, breaking a window, etc.). To somewhat protect against these, landlords often require tenants to pay three months worth of rent immediately before moving in. This three-months worth of rent represents your first month or rent, your last month of rent, and an amount to be used as security.

Under this system, when you leave your rented space, you would not have to pay the last month of rent as you already had when you first moved in. (Even if your rent payments when you leave are higher than when you first moved in.)

The security is a “deposit.” This means that it should be returned to you after you move out, if there is no damage to the property beyond wear and tear. It is recommended that you take pictures of your rented space the day you move in as well as the day you move out. If your landlord (unfairly) tries to withhold your security deposit, you can sue through housing court for it back (plus damages). Keep in mind that it’s about fairness. If you got drunk and punched a hole through the wall, you’re responsible for it.

Utilities are a big factor in rent. Some rents will include your utilities like electricity, gas, sewer, and water. Some rents include some of these. Some rents include none. When utilities are included in rents, your landlords are responsible for those utility payments, no matter how much you actually use. When utilities are not included, you are responsible for pay those utilities on top of your rent. Keep in mind that internet and cable are rarely included in rent.

It may sound like having utilities included is better. However, keep in mind that when utilities are included, that is factored into your rent payments. Your landlord will make predictions about your utility usage and factor that into what rent amount they charge. It is important to shop around. Try to predict what you may pay in utilities each month and determine what options give you the best deal. (Funny thing. Marijuana growers often rent places that include electricity in the rent. The grow lights take a huge amount of electricity, which the landlords have to pay for. I don’t recommend, since it’s illegal. But it’s funny. Unless you’re the landlord.)

In Massachusetts, landlords are legally required to provide access to hot water and heating. This does not mean that they pay for it. It means that they can never shut off those utilities for any reason. They must also work as quickly as possible to have those utilities fixed if anything needs repairs.

There may be other costs associated with renting.

Pets can be an issue. Some rented places allow most common pets, no questions asked and no fees. Some will allow small pets (cats, hamsters, small dogs). Some do not allow any pets. Some will let you have pets, but for an added fee each month. Common pet fees are $50-$100 per month per pet.

While you do not have to pay for repairs (that aren’t you fault), you do need to cover basic cleaning. You may need to clean more than you’d like to maintain the standard of cleanliness to avoid losing your security deposit. (If you don’t clean you shower and mold starts growing, you may need to pay for the remediation from your security deposit.) Generally, very minor repairs, like replacing a lightbulb, are paid for by tenants.

Laundry can be a huge expense. Rented single-family homes often have laundry machines. Most apartments do not. Some apartment complexes have coin-operated laundries in a separate building or basements, but these can be really, really expensive. Often, people choose to go to laundromats instead. Some apartment complexes will have laundry hook-ups in the spaces and will rent out machines on a per-month basis. No matter what, keep laundry prices in mind when you’re thinking about housing.

If you rent a single-family home, you will need to discuss whose responsibility it is to cover things like lawn mowing or snow shoveling. There is no law on these. Sometimes, they’re included in the rent, other times not.

There are a number of other things to consider when thinking about renting a place.

Every rented property will have occupancy rules. Some of these are mandated by a state. For example, perhaps you and ten friends want to rent a two-bedroom place for a year so that you all have cheap housing, allowing you to save up money for your own down payments on houses. This wouldn’t be allowed by state law. (Unless the bedrooms were really large.) You will have to disclose how many people will be living with you when you apply to rent a place. Lying on this application can get you evicted. It’s a common practice among some tenants, trying to get around occupancy laws.

Applications may come with a fee. Usually, these are no more than $50-$100. Never pay any more than that for an application fee.

Some landlords will allow you to make remodels or renovations to properties. This is particularly true of rented single-family homes. You must always get permission before making any changes, but some landlords are flexible with how you set up your living space. Tenants often want to install gardens or laundry hookups. Keep in mind that you would be responsible for the full costs of such changes.