What To Look For When Renting A Property - Deposits And Recurring Costs

Renting a property for office space, as a student, bachelor or for family needs will require budgeting and recurring costs. Learn about Earnest Deposits, Tenancy Agreement fees and utility bills in this guide.
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Whether you are a business owner just starting up and looking for your own office space or an expatriate, student from another location or simply a bachelor moving to another state for work, renting a property will be at the top of your list of priorities.

While renting a property may seem to be an easy task, you will first need a list of priorities that your chosen property adheres to.

 

When Looking For A Property To Live In

The first thing a renter will need to look at when looking for a property for rent is their own budget. This does not include just the monthly rental, but also the additional costs.

Upfront Costs

1. Earnest Deposit

An earnest deposit is required upon confirmation of booking. The earnest deposit is a show of faith that the tenant is serious about renting the unit.

2. Security Deposit

The security deposit usually also has terms and conditions bound to them. When the tenant vacates the unit, the unit owner will usually check for damage to the unit.

In the case that damage has been done, the unit owner has the right to deduct the repair charges from the security deposit.

Most units also come with a grace period for notifying the unit owner of the tenant’s decision to move out. This is to ensure that the unit owner will have sufficient time to look for a new tenant.

Most of the time, the notification period is 1 month.

In the event that the tenant moves out unexpectedly without notification, depending on the contract, the unit owner will also have a right to deduct the tenant’s security deposit.

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3. Utility Deposit

Collecting a deposit on the utility deposit is also common in units where the tenant has to pay for the utility bills themselves.

The 1 month utility deposit will give the unit owner a safety net in case their tenant fails to make payment on their utility bills.

4. Purchase Of Furniture

Unfurnished units are usually cheaper than fully furnished units.

If a tenant is planning to stay long term, they may just decide that purchasing their own furniture will be more cost efficient than paying higher monthly rentals.

In these cases, the tenants will need to take into account the cost of purchasing furniture when they move into a new place.

 

Recurring Costs

After taking into account the upfront costs that they may have to bear, renters should also take into account their monthly recurring costs.

1. Monthly Rental Payments

This will be the most clean cut of recurring costs - although tenants will need to be careful of the terms and conditions of their rental.

Depending on whether the tenant signs a contract for a period of time or not, the landlord may increase the rental price periodically.

2. Utility Bills

Many unit owners cover the costs of utility bills from the unit’s rental, especially if they rent out rooms to different individuals.

However if renting out the entire unit, many unit owners often require their tenants to bear the utility bills. These include the water, gas, electricity, internet and phone bills.

3. Parking Fee

If living in a high rise, renters may also need to take into account parking fee if their unit does not come with a parking lot. This will be an additional monthly cost for them.

 

When Searching For A Business Premise

Searching for a business premise calls for slightly different requirements. The common costs that a residential unit renter and a business premise renter share are:

1. Upfront Cost

  • Earnest deposit
  • Security deposit
  • Utility deposit
  • Purchase of furniture

This is however where the similarities end.

2. Tenancy Agreement Fees

Business premises require more formal rental documents, drafted by the landlord’s lawyers. These documents are called the Tenancy Agreement, where all the terms and conditions of the rental are stated.

The common items that are usually included in the Tenancy Agreement are as below:

  • Who pays for the utility bills
  • What can the premises be used for
  • What are the penalties for damage to the property
  • How long will the contract last for
  • Landlord’s rights to inspecting the property

The cost of the Tenancy Agreement is usually approximately 20% to 25% of the rental fees.

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3. Stamp Duty

Once the documents are drafted, they will need to be submitted to the government office. The cost of this is the Stamp Duty, which can either be borne by the landlord or the renter, as per their agreement.

4. Guarantor Fee

A landlord may sometimes require a guarantor, especially if the monthly rentals are on the steep side.

This is however usually only applicable if the renter cannot provide appropriate references - such as a history of renting properties before.

The recurring costs required by renting a business premise is also quite similar to renting a residential unit. The common factors are:

  • Monthly rental payments
  • Utility bills including gas, broadband, water, electricity, phone bills, line rental and etc

 

Business premise owners will however need to take into account the Assessment Fee and Land Tax.

While these fees are usually borne by the landlord, they may occasionally be pushed to the renter. To avoid misunderstandings, these terms should be stated clearly in the Tenancy Agreement.

 

Read on to find out the next step to take if you wish to find a suitable rental property. But if you already have a property in mind, learn about paying rental deposits and signing the Tenancy Agreement.

Last but not least, you should also understand the responsibilities of a tenant and landlord.

 

Source: http://myhome.freddiemac.com/rent/costs.html

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