Am I paying too much for rent?

[00:00:00] Ralph Estep, Jr.: I've got two questions for you today. Are you feeling the pinch of rising rent costs? Maybe you're wondering if there might be a way to reduce your monthly housing expenses without sacrificing your quality of life. Imagine walking into your landlord's office with confidence, armed with the knowledge and negotiation tactics to secure a better deal on your rent. Or picture yourself turning your living space into a source of income, all while maintaining a harmonious living arrangement. Well, stay tuned as we explore smart strategies to optimize your rental situation and potentially save you hundreds of dollars each month. Today, we're going to unlock these possibilities and more.

[00:00:44] Ralph Estep, Jr.: Before we dive in, I want to remind you about yesterday's enlightening episode on how I can see the scriptures with fresh eyes. If you missed it, or if you missed any of our previous episodes, remember, you can find them all at askralph.com. Yesterday's show really opened my eyes to some ideas I should try right away. So I hope you'll check it out if you missed it.

[00:01:08] Ralph Estep, Jr.: Now let's get to today's topic. This comes to us from a message we received from Jordan. She writes this.

[00:01:13] Ralph Estep, Jr.: "Dear Ralph, I'm a recent college graduate working my first full-time job in the big city. I'm grateful for the opportunity, but I'm shocked at how much of my paycheck goes towards rent each month." Trust me. I get it. "I'm starting to wonder if I'm paying too much. How can I tell if my rent is fair, and are there any ways I can reduce this expense without moving back in with my parents?" Probably not what you want to do, Jordan. "I'm also considering getting a roommate, but I'm not sure how to go about that process. Any advice would be greatly appreciated. Ralph, thank you for your show. It's been a lifeline as I navigate these new financial waters."

[00:01:51] Ralph Estep, Jr.: Well, Jordan, thank you so much for your message and for tuning into the show. Your situation is one that many young professionals face and I'm excited to dive into this topic with you today. Your dedication to improving your financial situation while growing in your faith is truly inspiring.

[00:02:06] Ralph Estep, Jr.: Now look, I remember my first rental after college, and I felt the same as you Jordan. I can still recall the anxiety I felt leaving my parents' home and venturing out on my own. And yes. It certainly felt like most of those early paychecks went to rent, utilities, and all the other stuff I needed to set up my place. Well today, I'm going to share some ways I dealt with it and hopefully ease your mind a bit.

[00:02:30] Ralph Estep, Jr.: As we explore today's topic, I'm reminded of Proverbs 21:5, which tells us, "The plans of the diligent lead to profit as surely as haste leads to poverty." This verse reminds us of the importance of careful planning and wise decision-making in our financial lives, which is exactly what we're going to be focusing on today.

[00:02:49] Ralph Estep, Jr.: So Jordan, my goal today is to help you better plan and make some wise decisions and that's going to be my focus. This stuff excites me, and I'm truly honored you asked for my help.

[00:03:02] Ralph Estep, Jr.: Jordan, let's start by addressing your first question. Am I paying too much for rent? This is a common concern, Jordan, and rightfully so. Did you know that housing often represents the largest expense in most people's budgets? I know when I was first starting out, it seemed like I was spending about 70% of my take-home pay on my place. So let's start by answering your question about paying too much rent. How do you do that?

[00:03:25] Ralph Estep, Jr.: How do you determine that will determine if you're paying a fair price? The best thing to do is start by researching the average rent for similar properties in your area. There are websites like Zillow.com, apartments.com or look at those local real estate listings that can give you a good idea of the going rates. I'm going to put some links for those sites in the show notes. But you got to keep in mind factors like location, factors like amenities, and the overall condition of the property when making comparisons. I've heard it said a million times. It's all about location, right?

[00:03:55] Ralph Estep, Jr.: But a general rule of thumb is that your rent should not exceed 30% of your gross monthly income. Now that sounds great. But in high-cost areas, it might stretch to 35% or even 40%. But if you're significantly above these percentages, it might be time to consider some changes.

[00:04:11] Ralph Estep, Jr.: Well, let's take a look at a simple example. Let's say your salary is $40,000 a year, and you want to keep that rent at 30%. That means your rent can be no more than $1000 a month. I don't know about you, but it's hard to find a place around me for $1000 a month.

[00:04:26] Ralph Estep, Jr.: So let's explore some ways to potentially reduce those rental expenses. The first way is to negotiate with your landlord. Many people don't realize that rent is often negotiable. If you've been a good tenant paying on time and taking care of the property, you've got some leverage. It's time to research local rent prices and present your case respectfully. You might be surprised at how willing landlords can be to keep reliable tenants. And of course, it's going to be more difficult when you're renting in some huge apartment complex.

[00:04:54] Ralph Estep, Jr.: But I remember my wife and I were just married. I found a rental home and we really loved it. We were able to negotiate with the landlord to reduce the rent because we were willing to do some overall fix-ups and clean-ups, which saved him a ton of time. And we used our own sweat equity. It reduced the rent for the first year.

[00:05:11] Ralph Estep, Jr.: Another option is to offer to sign a longer lease. Some landlords might be willing to lower the monthly rent in exchange for the security of a longer-term lease. If you're planning to stay put for a while, this could be a true win-win situation. I actually did this myself on the last rental that I had for my accounting practice. I was in the middle of negotiating with the landlord for a five-year deal. And I simply asked, “Hey, would you make me an even better deal if I signed a 10-year lease?” They took it because they knew it would save them from the hassles of finding a new tenant after 5 years. It turned into a truly win-win situation.

[00:05:45] Ralph Estep, Jr.: As I said before, another option is to take on some maintenance responsibilities. If you're handy, which I am not, you could offer to handle some minor repairs or maintenance tasks in exchange for a rent reduction. You just have to make sure you get this agreement in writing. As I said, that's what I did, and saved us about $200 a month for the first year. And like I said, I'm not very handy, but I was able to figure it out back then and save myself some money. As I've gotten older as my good friend, Craig says, I may not be handy, but I can write a check. Well, I certainly second that motion, but when you're first starting out, sweat equity may be your best commodity.

[00:06:18] Ralph Estep, Jr.: Here's one that I've used myself at times. Look for any efficiencies in your current living situation. Are you paying for more space than you need? Could you downsize to a smaller apartment or move to a slightly less trendy neighborhood to save some money? I'll tell you, when I first started my accounting practice, I felt like I needed to be out front and in that retail class A spot. But as my practice grew, I was able to move a little more off the beaten path and that saved me some real money. Jordan, maybe you can find a place that's not in the ideal location, but you can make it work with a little more commute and that could save you some serious money. It's certainly worth looking into.

[00:06:54] Ralph Estep, Jr.: And finally don't forget about utilities. Sometimes, a slightly higher rent that includes utilities can actually save you money overall. You have got to do the math and see what makes the most sense for your situation. If you find yourself in a really energy-efficient place, you might be able to find a better spot. And while your rent may increase a little bit, overall, you might save some money. I've heard many of my clients over the years talk about getting an interior unit in an apartment building and how that saved them money on heating and air conditioning. So that could be a plan as well.

[00:07:24] Ralph Estep, Jr.: Jordan, let's address your question about getting a roommate or subletting. This one can be dangerous. It can be an excellent way to reduce your housing costs, but it does require careful consideration and planning. This is something you really want to plan out and consider before jumping right into it. So if you're considering getting a roommate, here are some things to consider.

[00:07:42] Ralph Estep, Jr.: Number 1. Check your lease. Make sure your lease allows for additional occupants. This certainly is something you want to consider when negotiating a lease if you have plans to find roommates in the future. You also need to check with local ordinances and things like that because there could be rules as it relates to in that regard as well. I know when I was at the University of Delaware here in Newark, they've got some really strict things about the number of roommates.

[00:08:04] Ralph Estep, Jr.: Number 2. This one is critically important. Screen potential roommates carefully. Don't just consider their financial reliability, but also their lifestyle compatibility. A roommate agreement can help set up expectations from the start. This is not the time for that blind date roommate selection. Reminds me of a story. I had a friend in college, who was looking for a roommate and tried this approach and found out the hard way that you need to meet the person. Do some basic background checking and fully understand just what you're going to be sharing your space before you do it. You don't want to end up with one of those true crime shows about a roommate from hell or something.

[00:08:40] Ralph Estep, Jr.: Number 3. This one is majorly important. Be clear about shared expenses. You've got to decide upfront how you'll split the rent, how you split the utilities and other shared costs. One of the things I recommend here is to take a look at what you're actually spending each month to make sure you've covered all the bases. You also want to talk about furniture.

[00:08:58] Ralph Estep, Jr.: Let me tell another funny story. I had a friend who was going through a divorce. That's a tough thing to go through and he rented an apartment with a colleague from work. When it was moving time, he was amazed to find out that his colleague actually only had a camping hammock and some lawn chairs for furniture. It certainly was an eye-opener for my friend who I guess we could say was a little more established in his life with more traditional furniture.

[00:09:21] Ralph Estep, Jr.: And last but not least, number 4. Protect yourself legally. Consider having your roommate sign a sublease agreement to protect your interests. You can find these legal agreements online, or maybe you want to consider hiring an attorney to assist you. It might cost you a few bucks, but it could save you down the road if you find your new roommate's idea of cleaning is not the same as yours.

[00:09:41] Ralph Estep, Jr.: Let's discuss subletting. Subletting, also known as subleasing, is a rental arrangement where a tenant, who is already renting a property from a landlord, rents out all or part of that property to another person that's known as the subtenant. Now Jordan, you didn't mention it. But if you're thinking about subletting, here are some additional things to consider. Again,

[00:09:59] Ralph Estep, Jr.: number 1. Check your lease and local laws. Some leases and jurisdictions prohibit or restrict subletting. Number 2. Get the landlord's approval. Even if your lease allows it, it's best to inform your landlord and get their okay. Now I've found that most lease agreements require you to get this approval. Number 3. Screen potential subletters thoroughly. Remember, you're still responsible for the property and those rent payments for your landlord. Number 4. Use a formal sublease agreement. We talked about this when we talked about working with an attorney because this is going to protect both you and your subtenant. And number 5. You might want to consider short-term rentals. If allowed, platforms like Airbnb could potentially help you earn extra income to offset your rent, especially if you travel frequently. You have got to be careful on this one too, because I mentioned on a prior show, that some states and many local jurisdictions have some strict rules about short-term rentals, and you don't want to get yourself in hot water all while trying to save a few bucks.

[00:10:57] Ralph Estep, Jr.: Remember Jordan, while these strategies can help you reduce your rental expenses, it's also important to look at the bigger picture of your financial health. Are there areas where you could cut back to make your rent more manageable? Could you increase your income through a side hustle or asking for a raise at work?

[00:11:12] Ralph Estep, Jr.: And also, don't forget to factor in the hidden cost of moving. People forget about this. Sometimes staying put and finding other ways to reduce expenses or increase income can be more cost-effective than moving to a cheaper place, especially when you consider moving costs. I'm amazed at how much we spend on that. You might need to do a new security deposit, and the time and stress involved in relocating. My wife told me one time that they said there was a study that moving or relocating is one of the most stressful things you'll ever go through.

[00:11:41] Ralph Estep, Jr.: So Jordan, to recap, here are some key points to remember. Number 1. Research local rent prices to ensure you're paying a fair amount. Number 2. Consider negotiating with your landlord for better terms. Number 3. Look for ways to optimize your current living situation. Number 4. Carefully weigh the pros and cons of getting a roommate or subletting it. We talked about those things to watch out for. Number 5. Always prioritize clear communication and written agreements in any shared living arrangements.

[00:12:09] Ralph Estep, Jr.: Remember, your housing situation is a crucial part of your financial picture, but it's just one piece of the puzzle. Keep striving for overall financial health and don't forget that your faith can be a source of strength and guidance in all of these decisions. Well, I hope you found today's episode helpful. Tomorrow, we're going to be exploring a fantastic and fascinating topic. And that's this question. What's the future of artificial intelligence and how does it impact my Christian faith? It's going to be a cutting-edge issue that intersects technology. We're going to talk about ethics and spirituality, so be sure to tune in. And if you've enjoyed today's episode, I want you to visit our website. That's at askralph.com right now and join our community to receive more valuable insights and tips on mastering your finances from a Christian perspective. As a special thank you, when you join our email list, you'll receive a free copy of my book. This is it right here, Mastering Your Finances. Now this book normally sells for 10 bucks on Amazon, but it's yours absolutely free when you join our community. So do it now, before you forget, and you'll be a part of our growing community and every day I'll share another listener's question, just like Jordans' that I did with you today.

[00:13:13] Ralph Estep, Jr.: And don't forget. If you need some personalized guidance on your financial journey, you can schedule an appointment with me, just head over to askralphpodcast.com/store. And you can book a session. If you have some financial issues, you need help with, don't hesitate to schedule today and let me help you.

[00:13:29] Ralph Estep, Jr.: And lastly, if you know someone who is struggling with rent or looking for that first place, do me a huge favor and share today's episode with them. It's as simple as clicking on that shareable link right from our show episode page, or right in the podcast app that you're using to listen. Your support helps us reach more people and spread the message of financial wisdom grounded in faith.

[00:13:49] Ralph Estep, Jr.: Now, before we wrap up, I want to remind you to keep sending those questions. After all, answering your questions is what the Ask Ralph show is all about. You can email me at ralph@askralph.com or visit our website. Like I said, that's askralph.com and click on that microphone icon at the bottom left to record your message. It's also a great place where you can share feedback on the show and talk about what I could do better for you. Remember this. My passion is to help you achieve financial success. I want you to live out your dreams and grow in your faith. Every single question you ask brings us one step closer to that goal.

[00:14:23] Ralph Estep, Jr.: Thank you for tuning in today. Until next time, as I always say, stay financially savvy and God bless you.