When searching for a rental property, the weekly rent amount is what most people rightly focus on, but there are lots of other costs to consider.
Securing a rental involves moving costs, paying a bond and rent in advance and then there’s the ongoing bills and expenses.
Here are some tips and tricks for setting a budget for renting.
The accepted wisdom is not to spend more than 30% of your monthly gross income on rent, although everyone’s circumstances are different.
Rebecca Maher, director at Proforce Wealth, which works with Australian companies to improve their employees’ financial wellness, said the 30% figure allows renters enough flexibility to fund other living costs, such as groceries, bills and insurances, lifestyle expenses and savings or investment goals.
“However, depending on where you live, the rental market could dictate that you spend more of your income on rent as a percentage of your income, which may mean some sacrifices in other areas of your personal budget,” she said.
“In addition, depending on your personal savings and investment goals, it might be more appropriate to spend less on rent. If you’re saving for a house and need to increase your savings rate, for example,” Ms Maher said.
Once a lease is signed there are certain costs that come as part of that responsibility. Some, like moving costs, can be minimised by not hiring professionals. Others, like the bond, you need to pay before you can collect the keys.
A rental bond is typically four weeks’ rent, but can be more, and the amount of rent in advance that’s payable varies, Ms Maher said.
“(How much rent in advance is required) is based on the state or territory you live in, but typically the law states the landlord or their agent can’t ask for more than two to four weeks’ rent in advance. How much depends on the state or territory and sometimes the type of agreement, whether it’s a periodic or fixed term tenancy agreement,” she said.
In Western Australia, a specific “pet bond” can be charged too. It’s legally limited to a one-off payment of $260 and is paid at the same time as the regular bond. This is to cover any costs of repairing the damage your pet may do and will be repaid at the end of the lease.
While on the surface, packing some things in a van and moving may seem inexpensive, in reality, it can be the opposite.
Elley Hudson, director of Queensland-based Excellence Property, said Removalist or truck hire can cost anywhere from $200 to $3000 depending on how much help you need. If you’re on a budget try doing it yourself or asking a friend to help.
If you’re moving out of one house and into another there are costs associated with ending a lease which covers cleaning, Ms Hudson explained.
Professional cleaning of previous property can be hundreds of dollars depending on the size of the property and it’s best to seek the advice of the property manager if you’re thinking of doing it yourself to keep costs down. More and more property managers will ask that it be professionally done by a company who guarantees the bond, which means they’ll keep coming back until its up to the standard of the landlord.
You’ll also need to have carpets, and potentially curtains, professionally steam cleaned
“This definitely makes a $10 or $20 per week rent increase on your current property sound cheap,” Ms Hudson, herself a renter, said.
There’s also a number of ongoing expenses and bills you have to pay when renting, Ms Hudson said.
It can be tricky to work out how much to budget for power and water, which can sometimes be included in your rent, Ms Maher said.
“If you’re someone who likes a temperature-controlled environment 12 months of the year, your electricity bill is going to be bigger than someone who doesn’t use heating or cooling,” she said.
“However, making a budgeting allowance of around $300 per quarter for expenses like power and water if you’re an ‘average’ user is a good place to start.”
According to Ms Maher, one great way to budget for internet/NBN is to find a great deal on an unlimited download plan.
“Nowadays, there’s not much difference between an unlimited and limited download plan, so to avoid the ‘bill shock’ that can come from streaming too much Netflix, and the confidence of budgeting for a fixed expense, unlimited plans can assist from a budgeting perspective,” she said.
Every living arrangement is different and obviously bills can be split if you have housemates, but according to Canstar, the average Australian household pays $71 per month for their NBN plan.
Setting a monthly allowance for travel expenses, which can include paid parking if you work in a city centre, registration, insurance and servicing and fuel, is also wise.
According to Ms Hudson, depending on the location, inner-city parking can cost around $200 a month, those other vehicle expenses at about $300 and fuel, which will depend on how much and how far you drive.
Ms Hudson also added public transport costs to this list, “depending on where you live and how far you need to travel for work and whether public transport is an option for you,” she said.
All renters should consider taking out contents insurance, also sometimes called renters’ insurance, Ms Hudson says. It’s an insurance to cover a renters’ belonging in case something goes wrong.
“I was very lucky in 2019 when my rental flooded that I had contents insurance. It covers your personal belongings, so if you experience a break in or a natural disaster, your contents can be replaced,” she said.
The cost depends on the value of the contents, the excess you’re prepared to pay if something needs to be replaced, risk factors such as age, location, crime rates and steps you’ve taken to protect the possessions.
It pays to shop around, but contents insurance for renters can start from $10 a week for basic cover for up to $50,000 cover.
CLICK HERE for more information.