On Your Own

Applied Business Practices

Warm-Up

• When do you expect to move to home of your own?

• Why do you want to live independently?

• What costs do you expect to pay?

Types of Housing

• Four housing options after high school– Live with parents– Live in a dorm– Rent an apartment– Buy a mobile home, condominium, or single

family home

Roommates

• What should you discuss before you share an apartment or dorm?– Responsibilities and living habits

• Who cleans what, groceries, expenses• Neatness, house guests, entertainment rules

– Make agreements in writing– Look for the apartment together

• No one to blame for poor choice

First Month’s Budget• First and last month’s rent• Security deposit

– Amount the landlord holds to cover damages to the rental property

• Utility service (deposit)• Phone service (maybe)• Water/garbage

Sources for Apartments

• Family and friends

• Classified section of the newspaper

• Real estate agencies

• Internet

Warm-Up

• What types of information do you think are in a lease agreement? Tell of at least four things you think are in a lease. Please use complete sentences.

Types of Housing

• Lease– Legal contract you sign that gives you the

right to live in the apartment for a specified period of time

• Tenant– Person renting the apartment

• Landlord– Owner of the rented property

Good-Tenant Criteria?

• Landlord will be screening:– Credit check & bankruptcies– Employment & Income– Rental history & evictions– References

• Must put in Application fee to pay for screening

• Applies to each tenant• Non-refundable

Legal & Illegal Discrimination

• Legal– Poor credit history– Insufficient income– Bad references– Past behavior i.e.

destruction of property– Tenants would exceed

valid occupancy policy

• Illegal– Race– Religion– Ethnic background or

national origin– Sex– Age– Tenant has children

(except in senior housing)

– Mental or physical disability.

Apartments

• Tips to Renting– Rent should be no more than 1/3 of monthly

take home pay– Make a checklist to evaluate the apartments

• Ensures you inspect the most important features of each apartment

• Purpose of a Lease– Protect the landlord and the tenant

• Be sure you can live by the conditions of the lease

What to Expect in Agreements

• The length of the tenancy• The amount of rent and deposits the tenant must

pay• The number of people who can live on the rental

property• Who pays for utilities• Whether the tenant may have pets• Whether the tenant may sublet the property• The landlord's access to the rental property, and• Who pays attorney fees if there is a lawsuit.

Illegal Contract Provisions

– Giving up your right to defend yourself in court

– Limiting the landlord’s liability for things they’re normally responsible for

Warm-Up

• What do you think are some of the responsibilities of a landlord? What do you think are some of the responsibilities of a tenant?

Landlord’s Responsibilities

• Making repairs in a reasonable

amount of time

• Keeping premises safe and clean

• Entering premises only at agreed-

upon time unless there is an

emergency

• Paying interest on deposit money

• Collecting rent

• Maintaining exterior grounds of

building

Tenant’s Responsibilities• Pay rent and utilities on time

• Using the rental for the purpose stated in lease

• Taking reasonable care of premises

• Notify landlord of major repairs needed

• Giving notice if leaving at end of lease

• Giving notice if leaving before lease is up AND

paying rent for balance of lease unless a new tenant

is found

• Paying for any damage to walls, floors, and furniture

• No alterations to property the landlord must fix later

• Giving landlord new set of keys if locks are changed

• Paying all rent if roommates move out and you stay

Renter’s Insurance

• Insurance covers loss to belongings:– From fire & theft– Depends on value of

policy: $25K – 50K– Deductibles start at

$250

Landlord’s Legal Right to Enter

• May need to:– Make repairs– Show property

• Must give notice– Varies by state from 24

hours to “reasonable notice

• No notice needed:– Emergency

• Fire• Serious water leak

– Abandonment

• You can’t refuse access

Repairs

• Put your request in writing

• Give landlord time to respond. Required response time varies by state but generally:

– 24 hours for no hot or cold water, heat, electricity or for other hazardous or life-threatening conditions

– 72 hours for refrigerator, range, oven, or major plumbing problems

– 10 days for all other repairs

Tenant’s Rights for Repairs

• Options when landlord won’t repair:– Pay less rent– Withhold rent– Make repairs– Hire professional &

deduct cost from rent– Call building inspector– Mediate or go to court– Move out (give notice)

• Varies by state

When You Can Be Evicted

• Not paying rent– Even if one day late with rent

– Three-day notice to pay or move out required

• Not complying with terms of rental agreement– Ten-day notice to comply or

move out required

• For creating a waste or nuisance– Three-day notice to move out

required

– No option to stay to correct problem

Illegal Landlord Actions

• Even if you’re behind in rent– Lockouts– Utility shutoffs– Taking your property

(unless you abandon it)– Retaliatory actions

When the Tenant Breaks the Lease

• Tenant can legally break the lease if:– Landlord fails to make

repairs– Fails to comply with

health & safety

• Tenant responsible for remainder of rent under lease term– Landlord has duty to

find a new tenant

Warm-Up

• Besides rent and security deposits, what are some other costs you should be prepared for when moving out on your own?

Warm-Up

• Why is it important to create a budget before you move out on your own?

When You Move Out

• Provide written notice according to your rental or lease agreement.– Rental: Usually 30-day

notice– Lease: You’re responsible

for rent for remaining leasing term unless landlord can rent unit

More When You Move Out

• Clean apartment and leave in same condition as when you moved in (except normal wear and tear)

• Leave forwarding address for deposit return

How to Protect Yourself

• Ask parents to walk through rental with you

• Take pictures of everything (include date on photo)

• Go through rental check list

Warm-Up

• Read Article “”Roommate: How to Get Along with Them”

• Write a two paragraph summary

Budgeting for the Move

• When preparing for the move keep in mind– Your personal and financial goals– Your income– Your lifestyle– Your fixed expenses– Your flexible expenses– Moving costs– Moving-in costs– The cost of setting up house

Budgeting

• Fixed Expense– Items you have committed to spend

• Example: utilities, rent

• Variable/Flexible Expense– Items you can choose to spend or not

• Going to movies or eating out

Furnishing Your Home

• Used Furniture– Thrift Stores– Salvation Army– Good Will– Garage Sales

Furnishing Your Home

• Consumer Reports– #1 magazine that reports the strengths and

weaknesses of many different brands of products

Furnishing Your Home

• Energy Labels– Predict the cost of

running the appliance

• Floor Models– New items reduced in

price because they have been on display in the store

Buy or Rent

• Advantages of Renting– Lower cost– Less responsibility– Mobility

• Advantages of Buying– Ownership– Value– Your own space– Fewer Restrictions– Tax deductible– http://www.jumpstart.org/madmoney/asproot/

pgv_money_reality.cfm

Buying a Home• Down Payment

– Specific % of purchase price you pay up front

• Mortgage– A loan to buy real estate– Property serves as collateral for the loan

• Principal– Amount you borrow

Buying a Home

• Mortgage Redemption Insurance– A form of life insurance where the balance is

paid if borrower dies before loan is repaid

Housing Expenses

• Things to consider that might be “unexpected”– Repair and upkeep– Initial utility costs such as installations– appliances

Buying a Home

• Closing Costs– Fees you must pay after you buy a house

• Includes– Property taxes (taxes on real estate that might need refunded to seller for

a portion of the year)– Attorney’s fees (preparing and checking legal documents)– Loan origination fee or points (commission for granting the loan)– Title Search (legal right to own a property)– Recording fee (written evidence conveying title from one person to

another)– Appraisal fee – charge for examining and determining the value of the

property)– Liens (claims against the property by others)

Buying a Home• How much can you afford?

– The rule of thumb is that you can generally afford a house 2.5 times your gross annual income.

• Example– Gross annual income = $50,000– $50,000 X 2.5 = $125,000

Warm-Up

• Calculate the down payment and amount left for the loan for the following:

10% down payment on a house $125,000

20% down payment on a house $88,900

25% down payment on a house $115,500