Ready to rent? Money matters every future tenant should know

Leasing an apartment is one of the most popular housing options, offering comfort, convenience, and flexibility—especially when owning a home isn’t a priority or an option. But renting is not without its own considerations and commitments. It’s important to know where you stand financially and what you can actually afford. 

Don’t search, sublet, or sign until you’ve read the following. 

Before getting your heart set on the perfect place, you’ll want to do a little math. 

First, know how much you can spend per month without spreading yourself too thin. Housing will likely be your largest monthly expense, but it’s best not to let it exceed more than 30% of your gross monthly income, depending on how much (or how little) debt you have. Renters in the U.S. spend a median 20% their monthly incomes on housing—a number that can easily skyrocket to 60% in metropolises like New York and San Francisco. The key is calculating what you can comfortably spend in your area without cutting into your quality of life—or your budget for things like food, transportation, and savings. 

To do this, average out your monthly gross income before taxes and assess what of that you can allocate toward rent. Getting the ratio right will help you keep the rest of your budget on track. 

What you’ll be paying each month doesn’t stop at your rent. That 30% mentioned above should include utilities, too. 

Identify which services you’ll be responsible for at your new apartment—electricity, water, gas, and trash, for example—and call the utility companies to get averages for bills in your area. Factor in non-utility monthly bills like cable and Internet, too. This should help you more accurately estimate your monthly housing costs. 

Note: Many apartments will include some utilities in the rent. Be sure you’re comparing property prices fairly. 

Many landlords cover their bases by charging first and last months’ rent—something that can quickly add up to thousands of dollars in upfront costs. Depending on your cash flow, this could take you out of the running for your dream apartment, so be sure to do your research.

Most rentals also require a one-time security deposit when you sign the lease. This is often equal to one month’s rent and is meant to cover damages that occur during your tenancy. Move out without any damages, and you’re likely to get it back. Read the fine print here—you don’t want to count on that deposit and not get it back for minor discrepancies like nail holes or scuffs. 

Expect future landlords to do their homework before approving your application for a lease. They may run a credit check, call your employer to verify your income or perform a background check. Pricier pads may require better credit scores for approval, so make sure you know where you stand by checking your score first for free with CreditWise from Capital One. This way, you can prepare to have a cosigner if you need one. 

Leases are legally binding agreements. Read yours word-for-word before you sign the dotted line. The last thing you want is to land in a legal dispute over a clause you didn’t catch. Verify all the terms of the agreement such as when payments are due each month, any utilities that are included, how repairs are handled, and subletting terms if you need to leave before your lease is up. It’s also a good idea to review the Tenant-Landlord Rights and Responsibilities in your state so you know what’s required of you and what you’re entitled to as a tenant. 

Renter’s insurance is something every renter should strongly consider. It’s relatively inexpensive, given the thousands it can save you in property damages or liabilities (say, if someone gets hurt when they’re in your apartment). Once you’ve signed your lease, get a few free quotes for renter’s insurance and find a policy with the coverage you need.