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An emergency fund is a financial safety net that everybody should have for life's unforeseen challenges.
Picking the right house or apartment in a tight rental market can be like finding a needle in a haystack.
While renting requires less immediate cash and fewer obligations than owning a home, that doesn't mean that it's cheap or easy, or that it comes without strings attached. In fact, finding—and keeping—a good rental can be pretty difficult, especially if it's your first time. But if you know what you're getting into beforehand, you have a better chance of finding a good place at a good price.
Before you start looking at places to rent, it helps to get a sense of the money you'll have to lay out. The real estate section of a local paper or websites like craigslist.org are good places to find the going rental rates. Try entering "available apartments" for a particular geographical area in your favorite search engine.
You'll probably find a wide range of prices in most areas, so it's natural to wonder how much you should be paying. After all, while rent will probably be your biggest single expense, you don't want to get locked into paying more than you can afford. In an ideal world, you wouldn't want to spend more than 25% of your take-home pay on housing, but in a lot of high-demand urban areas, you may find yourself having to give up closer to 35% to 40%.
Looking for a place to rent can be trying, especially when you've got limited time and money. In many places, opportunities come and go quickly. So you'll want to take advantage of ways to streamline the process. But do so wisely—some ways of finding housing are more expensive than others.
Asking around among family, friends, and other people can't hurt. You can never tell who might know of something opening up that you can slide into easily without having to pay heavy fees. If you're working, see if your company has a bulletin board where coworkers might post sublets or leases you might be able to take over. College alumni clubs and websites are another great place to find these kinds of leads.
Searching the rental listings websites that exist for most larger areas can be a convenient way to locate properties. The problem is that lots of other people use these resources too, so in most high-demand areas the listed properties will be gone before you find out about them. But these resources are a great way to find brokers in the areas you're interested in and get a sense of what's available.
Using a broker can help you find a good place, especially if you're not familiar with the area. Brokers can provide great access to properties, and many even take you around from place to place. Just remember that they can be aggressive—and costly—salespeople. In some cities, landlords pay brokers' commissions, but elsewhere the cost is on the renters' shoulders.
Using listings services, which exist in many large urban areas, can be hit-or-miss. These companies sell listings of apartments being rented without brokers, so you can contact owners directly. Listings usually cost a few hundred dollars for a series of ongoing reports, which makes them like a low-cost broker. The only difference is that other people are getting the same listings as you are, so you can end up running into the same problems you do with websites. If you decide to go with a listings service, make sure you have the time and the patience to get something out of it.
Once you've got a good sense of what a month's rent will cost you, you can use that amount to start budgeting for how much you'll have to pay up front when you sign a lease. Exactly what you'll have to pay for depends on where you live, but most places will require at least the first and last months' rent. Often you'll have to pay an additional month as a security deposit. And if you use a broker, you could end up shelling out from 8% to 18% of a full year's rent.