The Key Rental Costs New Tenants Must Budget For

Renting property is a daunting prospect for those new to it. It is a formal contract with stipulations and responsibilities, and also represents a large amount of money in contract value and monthly costs. These costs can seem opaque to those unfamiliar, so what are some of the key costs for which a new tenant should be budgeting?

Monthly Rent

A perhaps glib entry, but one that is nonetheless necessary to include: your monthly rent will constitute the largest portion of your monthly outgoings in general. As touched upon above, property rent prices have been on the increase in recent months.

First, the increase reflected stark increases in the market value of properties, particularly outside of London. But a recent inflationary blip, that precipitated a rise in interest rates, caused mortgage rates for buy-to-let lenders to skyrocket. This, in turn, saw many landlords seek to raise their rent in efforts to protect their profit margin from additional economic shock. Rent was already a considerable expense for the average tenant, but today the average household is spending as much as 44% of its post-tax income on rent.

Utilities

Utilities, together, constitute another large chunk of your outgoings. Previously, gas and electricity were not majorly impactful monthly costs, but consumer energy prices have been one of the driving forces behind rising inflation. As such, budgeting for your central heating should command a proportional amount of your time. Utilities, though, also comprise other independent costs – including water, internet, and council tax.

Renter’s Insurance

This is by no means a necessity or legal requirement but remains an extremely useful expense as a form of breakwater against potential future costs. As a tenant, you will be responsible for fielding the cost any damages you cause to the property – i.e., damages that are not covered under ‘wear and tear’. Renter’s insurance helps swallow the cost of this liability, protecting your savings and income from unexpected costs. The right policy will also cover your possessions for theft, fire, and flood.

Deposit

This is the cost most likely to trip up new tenants, and something that continues to catch older tenants out. Whenever you sign a tenancy agreement with a landlord, they will expect a holding deposit from you. This is typically valued at one month or six weeks’ rent.

The landlord is legally required keep this deposit in a third-party tenancy deposit scheme. It is returned at the end of your tenancy, minus costs associated with tenant-caused property damage, post-tenancy cleaning work and item disposal.

Furniture and Appliances

Furnishings and kitchen appliances are a final consideration for any tenants moving home. Many rental opportunities are ‘furnished’, meaning all furnishings and appliances are provided by the landlord. However, semi, and un-furnished opportunities are also common, and would require you to create a budget for buying your own items – from sofas and chairs to your oven and washing machine.

*This is a collaborative post.