Starting in January of this year, Mrs. Cups and myself were looking to get out of apartment living and find a house. Covid happened and…well…a house didn’t. We’ve decided to push it until next year and try to find a house in 2021. One (very minor) positive of Covid is that our apartment’s rent is staying the same for next year when we renew…we just don’t know how long to renew for.
Here’s the relevant info: The rent will be $1,647.00 a month and we can choose between 7 and 15 months with no penalty to rent…it’s the same money regardless. Like most apartments, to break the lease is 2 months rent, so it’s $3,294. To go month-to-month, it’s $1,897 per month.
In my mind, I’ve broken everything down by knowns and unknowns
Knowns – How much rent will be and for how long, the fact that I do have 3300 bucks in my account if I need to break the lease.
Unknowns – What 2021 has in store, when we will find a house, what rent will be in 2021 if/when we’re forced to renew.
My instinct is to get the lease for the maximum amount of months and just eat the costs of breaking the lease if and when we find a house. However, I’ve also thought it might be more efficient to do only a, say, 8 month lease and hope that we find something in 8 months. If we’re close enough to a house it’ll be less spent money in the long run to just pay month-to-month for a few months and only spend 800-1000 more, and if we aren’t close we can just re=up the lease (but we won’t know how much it’ll be).
So what do ya’ll think we should do? How much should we re-up for? How risky should we be with having a countdown to find something versus having a guaranteed rate? Anyone have this problem in the past?
(last but not least, apologies if this is a jumbled mess of a post, I tried to lay it out logically).
I don’t see any reason to choose the 15 months at all. Even if the rent goes up 10% after 7 months (which would be a pretty high jump, especially post COVID), it means it goes up $165/mo, which is $1,320 after 8 more months. So even if you end up having to pay that, it’d still be only half as much as having to pay 2 months rent to break out of a longer lease. And it gives you the flexibility of leaving as soon as you find a house. You can always re-sign a longer lease then if it seems like that’s not likely for 2021.
What would the benefit of doing the 15 mo? If there was some overall lower rent it might make sense, but in this case it seems like all risk and no gain.
My experiences with buying houses are that when the right house comes up, you have to make an offer quickly, and then you have about a month to close.
It’s certainly possible that the right house will come up right around 8 months, but it could come up after 3 months or 11, too.
If you go month to month, you’ll end up paying an extra 3750 over 15 months. So you’d do better to just break the lease if you end up buying a house in the next 13 months.
There are probably too many unknowns to compare the 8-month to 15-month.
I’ve never heard of this, so it might be a regional standard. Make sure you’re familiar with tenants’ rights laws in your jurisdiction. In some places the only extra charge to break a lease is the rent that the owner doesn’t receive while they find a new tenant. Which can effectively make it pretty cheap to break a lease. Just find a new tenant before you move out (possibly subsidizing their rent a bit).
To answer both:
The benefit of the 15 month would be knowing I’m secure in that rent for a long time just in case Covid 2 electric boogaloo happens or I lose my job or something. My rent has jumped 200+ before and I’d hate for that to happen if it doesn’t have to. Although your argument is very intriguing.
2 months to break isn’t standard? It’s been that for a good two or three apartment of mine over rthe last few years.
Can you sub-lease or rent your apartment out using AirBNB instead of paying the two months fee?
Why put off the house hunting until 2021? Why not just look continually?
I find 7 months or 15 months weird. I thought the standard was a year (or perhaps multiple years).
That’s a good question about sub-leasing, I don’t actually know that…although I’d tend to doubt it.
I also might have mis-typed, the lease isn’t either 7 or 15, it’s any number between 7 and 15. We could do 7, 8, 9, etc.
I recommend getting the lease for 2-3 months longer than when you plan to start looking for a house. So if you think you’ll start looking in 6 months, get the lease for 9. Then you have 1-2 months to look, 1 month for closing, and hopefully a bit of extra time for moving.
That avoids the big penalty for breaking the lease early, and if the timing is a bit off maybe you do 1-2 months at month-to-month, or maybe you just pay for an extra month of the lease you don’t actually need.
The difficult part is predicting when you’ll be comfortable looking for a house, and how long that will actually take. Can you only look on the weekends, and maybe it will take you a long time to find a house, or are you flexible enough to spend time during the week? Is the housing market in your area crazy?
So, breaking news. We payed more attention to our lease and basically if we move out early, we are on the hook for the remaining months unless they lease out our apartment; which we aren’t holding out hope for since we’re in the middle of the theme park district and there’s a million apartment complexes.
That doesn’t completely solve our issue, but it says that we’re going to sign up for less months rather than more. The really annoying thing too is that houses are put up for sale and practically INSTANTLY sell.
@echoreply 2 posts up gives some superb advice.
It’s also worth talking to the complex manager to see what they can do for you. The more corporate the complex, the less flex the manager has on enforcing this stuff. But you may learn that although the lease says you owe until re-rented, the “going rate” at that complex is “until re-rented or 2 months, whichever is shorter.” You may or may not already know how assholic (or not) the management is. If you don’t know, now’s the time to start learning.
Depending on your state there may also be various classes of hardship terminations where they are prohibited from enforcing that clause.
We went around that bush in FL when my aged MIL had to break a lease mid-year to move into the old farts’ home. The law gave her/us a 100% exoneration on any obligation towards the unfilled lease. You may have to stretch the point a bit to prove your “hardship”, but again the landlord may not care enough to investigate too deeply. If you have an upstairs apartment and are buying a 1-story house you can use the excuse of weak arthritic knees, etc.
If you guys are pre approved or pre qualified for a mortgage and have at least 3-5% of your target purchase price set aside as a down payment I wouldn’t worry too much about trying to time the end of your lease with a future closing date time frame.
If you’re ready to buy now and just have to find your perfect house go for a shorter lease, where you can rent month to month if you have too. Coming from a rental you have no house to sell first and that makes you a better prospect to sellers imo. Good luck on the hunt!
The pre-approval/pre-qualifying is our next step and, frankly, we don’t really know how to do that or what the best way to tackle that, but one thing at a time. I think we’ve decided on 9 months. That gives us 7 months to look before we need to make a renewal agreement and another two to find something/go month to month. Now, like I said, we have to do the banking stuff