Owning a home is the most economical housing strategy for the long run. Homeowners are liberated from the responsibility of paying an amount every month that is not accumulated for the future, which renters have to forego. While homeowners do have to cover the monthly cost of the mortgage, the payment is considered as an investment in the future and the payment plan can be decided in accordance with their income or spending budget.
Unfortunately, in the current economic situation, owning a property is a luxury that many people cannot afford. Renting and lodging are considered to be financially feasible options for individuals earning a low wage or anyone who cannot get a mortgage. Despite that, paying rent can drain the bank account every month, especially if the wrong property is selected for renting.
Taking this into consideration, it is essential to meticulously inspect the rental properties, before you decide to rent the place. The following guide discusses the initiativehs you can take, while renting, to save money.
Protect your Deposit To Save Money
Renters could lose more than a month’s rent if they are not informed about the regulations. Some landlords often trick their tenants into paying building insurance, which is ultimately the responsibility of the landlord.
Building insurance covers the entire building. That being the case, the responsibility of making payments lie in the landlord’s hands, unless it is stated otherwise in your contract. Keeping this in mind, it is essential to find a rental property that liberates you from the responsibility of making insurance payments for the building. If you are unsure about this, communicate with your landlord on this upfront.
Similarly, you also need to make sure that your landlord has protected the deposit if you have an assured shorthold tenancy. The type of tenancy is usually listed in the renting agreement. The legal requirements in England and Wales require the landlords to place your deposit in any of the deposit protection schemes within 30 days of receiving it. With that said, a vast majority of the renters are unaware of the tenancy deposit protection scheme (TDP), and therefore, suffer the consequences.
Placing your deposit in any of the protection schemes is essential, as it can safeguard and somewhat guarantee the return of the deposit at the end of your tenancy agreement. If the deposit is transferred to these schemes in due time, you are provided with the guarantee of getting the full deposit back at the end of the tenancy. However, this amount would only be returned if all requirements of the tenancy agreement are met.
Additionally, under this scheme, you can also decide the amount of deposit you are due, with your landlord. Once the amount is mutually agreed upon, it would be returned within 10 days of the tenancy ending. Conversely, if you and your landlord fail to agree on the amount, there is an option for a free dispute resolution service. This facility would carry out an investigation to decide the percentage of your deposit that you should receive.
Although, if you discover that your landlord failed to protect the deposit, you can go to court and ask for their assistance. The court (usually county court) can get involved with the case and impose the order for your deposit to be repaid. It can also make the decision that obligates your landlord to send the amount to the official tenancy deposit protection scheme. Moreover, depending on the case, the country court may also ask the landlord to compensate you with an amount that is three times the original deposit value.
If you rent in England and Wales, you can make your claims for up to a period of six years following the end of your tenancy, on the condition that you paid the deposit before 6 April 2007, which is the date when this regulation was enforced.
Arrange an Inspection
An inspection can be arranged before your tenancy starts, as well as towards its end. The purpose of the former is to identify all areas of the flat or house that are damaged or a threat to your safety. If the home inspection discovers some red flags, you can negotiate with the landlord to reduce the rent amount or get it fixed. Additionally, if there are safety risks in the building, it can be brought to the landlord’s attention. Subsequently, the issue can be fixed before you move into the home. When you carry out a home inspection, there are a few things that you need to look out for.
- Pests: Pest or rodent infestations can compromise your safety, as well as the structural safety of the home. Considering this, it is essential to hire a licenced professional, who can identify an active termite infestation, as well as the presence of wood-destroying organisms. If you move in a pest-infested home, you can end up hiking up the cost, due to the medical or furniture repair bills.
- Mould and Asbestos: A home infection can also be useful to discover the presence of mould or water damage in the home. Along with leaving a foul smell in the home, mould and asbestos are also severe health hazards. Therefore, before you move in, make sure to get this issue resolved.
- Electrical Issues: For renters, home inspections must include a comprehensive assessment of the building’s electricals. If the building has outdated wirings, the fluctuations in the voltage can end up wiping out your appliances. Additionally, if the wiring is faulty, a short circuit can result in a fire. This would not only place your life at risk, but it would also damage all your belongings. Without an electrical inspection, you can end up spending more money and more importantly putting the lives of your loved ones at risk.
Although home inspection seems like another area to throw away your hard-earned money, they can save you a lot in the long run. With that said, you must also carry out an inspection towards the end of your tenancy period. For this, professional assistance would not be required, rather you can carry this out yourself.
The objective of this inspection is to gather an idea of all the additional damage the property has undergone in the years of your occupancy. This way, you can make the repairs yourself and acquire your initial deposit back, after your tenancy period expires. To carry out this inspection, you can take the ensuing steps:
- Re-read your contract: The initial contract or the renting agreement includes the criteria – if you meet that then you can get 100% of your deposit back. Therefore, you must read the contract, fix all the minor damages and leave the place as spotless as when you moved in.
- Fix any damage to the walls: If you hung up any pictures or painted the walls to your liking, you must repair the damage or re-paint the walls to make sure that your deposit does not get deducted.
- Deep clean the carpets: In case the flat or home is carpeted, it is recommended to get the carpet deep-cleaned.
- Take pictures to gather evidence: After you have tidied up the property, make sure to collect evidence. You can take proper photos, which can be used in the case your landlord decides to deduct deposit payment.
Check Meter readings before moving in
Taking meter readings is essential, as it ensures that you do not receive a high and unexpected reading that you have to pay for. It is imperative to carry out a meter reading at the start, during, and towards the end of your tenancy for gas, electricity and water (if applicable).
Prior to signing Tenancy Agreement
Carrying out a meter reading at the start of your tenancy ensures that you are only paying for the amount that you have consumed. For instance, if you begin your tenancy without informing the service provider, you might get charged an unexpected bill. This factor, alone, can land you in debt.
Keeping this in mind, it is crucial to check the meter readings before you move in and to inform the energy company about the period of your occupancy. While this is the job of your landlord, it is essential for you to remain on-site and take every preventive measure from your side.
Just to stay on the safe side, you may also keep records of the meeting in the form of a signed inventory. If the meter reading seems out of place, you can take a picture of the values with the timestamp. This way, if any dispute arises, the credible evidence can be used to settle it.
In the Middle of the Tenancy Agreement
During your tenancy, it is essential to take regular meter readings in order to make sure that your energy service provider has accurate data. Often times, the energy company does not take an updated reading and subsequently, bills the home on the basis of its previous/average consumption. Taking this into consideration, you are required to make sure that the energy company charges you accurately.
If you feel like you are overpaying, you can take your own meter readings for comparison with the upcoming bill. If there is an incongruence between the two readings, contact the energy company to get the issue resolved.
You must regularly check the readings, because if the estimated reading is relatively less than the actual reading, you may be charged after you leave the property.
Towards the end of the Tenancy Agreement
After your tenancy is over, it is essential to take meter readings at the end of the tenancy. If you are not aware of the exact reading and you failed to inform the service provider about moving, you may still get charged for months, even after you have moved out.
Considering this, you can check the final reading on the signed inventory before returning the keys back to the landlord. You must also inform the energy company about your move and provide them with the new address to receive the bill that you owe. Similar to the pre-move meter reading, you can collect evidence for the final reading to settle any potential disputes.
Make Timely Rent Payments
Private renters, along with social housing tenants, have the opportunity to improve their credit scores. If you fall into this category, you can sign in for a Rental Exchange Initiative, which is a scheme that keeps track of your rental payments. Essentially, if you pay your rent-on time, the records maintained by the scheme can be used to improve your credit score. With that said, if you are unable to make rent punctually, your credit score can suffer, as a consequence.
Having a high credit score makes you a viable candidate for procuring loans and mortgages, in the long run. Paying your rent on time establishes your credibility as an individual who would be able to return the payments on time. Therefore, if you sign up for this scheme, make sure to make timely payments. You can schedule an automated payment on the bank’s application to ensure the punctuality with every payment.
Having an improved credit score can be advantageous for numerous reasons. An improved credit score comes with the following benefits:
- You can easily open a new bank account
- You can apply for a new credit card
- You would have an increased likelihood of getting your loan application approved
- You can benefit from a better mobile phone contract
- You can apply for a mortgage application and increases your chances of getting it approved
- You can benefit from a low-interest rate when you apply for a loan
How to join the Rental Exchange Initiative?
You can join the Rental Exchange Initiative if your landlord is already part of the scheme. However, if they are not part of the scheme, you can still benefit from this facility.
For renters in social housing, the Rental Exchange Initiative can be joined in the ensuing ways:
- The first step that you need to take is to understand whether your landlord is part of the Rental Exchange Initiative
- If your landlord is part of the scheme, your payments would be automatically recorded. With that said, if you wish to withdraw from this initiative, you have the option to do that
- In case your landlords are not part of the scheme, you can provide them with relevant information and ask them to become a member
- However, if you wish to join the Rental Exchange Initiatives, as a private renter, your landlord needs to be a part of the scheme. If they are a member, you can ask them to add your payment information to it
Create a Monthly Budget
For a renter, a large chunk of your budget is attributed to making rent. However, if you fail to take charge of your spending, you can end up losing money. In addition to just paying the accommodation fee, renters are also obligated to make utility payments for the home. The amalgamation of all the expenses can create confusion, which can lead to excessive spending of money.
If you are someone who gets easily overwhelmed by the thought of making payments, creating a monthly budget can help you cut cost. Establishing a fix payment schedule and pattern can ensure that you only spent a dedicated amount each month, and save the rest. However, it is important to set a rental budget, before you pick out the living space. For this reason, consider the 30% rule.
The 30% rule
If you are renting, employing the 30% rule can be extremely advantageous. This rule states that you must only choose a flat or a house, which charges a rent that is, at most, 25 to 30% of your after-tax income.
If you apply this approach, making ends meet would not be difficult. To establish this amount, the following initiatives can be taken.
- Calculate your total monthly income
- Calculate 30% of that income. For instance, if your income is £1,500, then you need to search for an accommodation that charges £450 per month
- Inform your estate agent about your budget and refuse to settle for anything more than the established amount
Although, if you have tried budgeting in the past, and it has failed to work its magic on you, it is probable that you employed the wrong approach. There are multiple methods of budgeting, including the following.
As a renter, envelope budgeting would be the most convenient method. The idea behind envelope budgeting is to divide your income among the areas of spending and eliminate the need for a bank or any other similar institution. To create this budget, you can follow these steps:
- Buy envelopes with a seal
- Calculate your total income
- Divide your income into subcategories. These may include rent, utility payments, groceries, voluntary spending, debt repayment and savings
- Once you have allocated a portion of your income to each category, empty your bank account and collect the cash
- With cash in your hands, add the allocated income to each envelope, mark it, and seal it shut
- Once your money is organised, you can use the designated envelope for each area of spending
The advantage of using envelope budgeting is that it restricts you from making an impulsive purchase with your debit card. Additionally, as all the money is organised and sealed shut, you can easily cut cost on frivolous spending.
The Traditional Budget
A traditional budgeting approach can also help you cut cost while renting. However, this method would only be beneficial, if you stick to the created spending criteria. In order to set a traditional budget, the following steps can be carried out:
- Calculate your overall income
- Identify the areas of payment. This may include rent, utility payments, renter’s insurance, debt repayment, savings, health insurance, grocery costs, gym fee, broadband costs and more
- Once the categories are divided, allocate an amount to each category
- Create a spreadsheet, or use an expense-tracking mobile application to keep track of your spending
- Avoid going over the set budget
With a traditional budget, you would be able to track your spending and find areas where you can cut the cost. However, for this approach to work, you must keep track of the amount of money you have spent.
Become a Property Guardian
Property guardians are individuals who safeguard and look after a vacant property, by residing in a shared living space, under a non-exclusive license agreement. If you wish to become a property guardian, you can live in non-contemporary spaces such as schools, churches or fire-stations.
In exchange for the living space, you would have to pay rent to a property guardian agency. This company would provide you with a living space, and charge you an amount which is around one-third of the typical rental fee of the area. Therefore, if you choose this venture, you can save more than sixty per cent on rent.
While the common space for property guardians include churches and schools, these areas are not limited. In fact, you could be asked to live in a mansion, monasteries or even a fire station!
With that said, you may have to tackle the responsibilities of the job, which includes caring for and protecting the empty building.
Renting may not be the most convenient form of living. With that said, you can still make intelligent decisions to cut cost while initiating this venture. To start off, select a property with a rent that is around 30% of your overall monthly income. Next, you must ensure that your deposit is protected under the Tenancy Deposit Protection (TDP) scheme. Before moving in, make sure that the meter readings are accurate. Regular monitoring of these readings would certify that you only pay for the amount of energy you consume. Essentially, you can also create a budget to keep track of your spending. If you wish to cut the cost even further, become a property guardian and save sixty per cent or more on rent.