Are you starting the apartment search? Overwhelmed with options, feature sets, and amenity lists? Looking to compare apartments? You’re not alone. Most people do not have an effective and systematic strategy for comparing apartments. There are five general considerations when comparing apartments:
- Value / Price Comparison
We have combined these five considerations into an apartment comparison tool with our three part blog series.
This first article (Part I) of our guide deals with Value, and shows you how to do a rent comparison.
Let’s get started. There are a myriad of ways that rents can be quoted. If you look at rent quotes across different apartment buildings, you will see some rents include all utilities, other quotes include only some (i.e. only electric and water), and yet still some rents do not include any utilities. So how do you compare the prices?
Here is a simple step-by-step way to compare rents.
You need to compare apples to apples. The best way to do this is to compare ‘rent per month per square foot’.
Don’t be intimidated. This is really quite easy to do. We just need to figure out the true net base rent of your apartment (i.e. the cost of your apartment less any utilities). Follow these simple steps:
STEP 1: Write down the monthly rent and square footage of the units you’d like to compare. Examples below.
STEP 2: Write down the utilities that are included in each. Let’s assume that for West Mill and The Lofts, the utilities are as follows:
- West Mill – Gas ($100), Electric ($75), Water ($25)
- The Lofts – Gas ($100), Electric (included), Water ($25)
STEP 3: Identify the approximate value for the included utilities. Tip: You can get a rough estimate simply by looking at what other apartments in the area are charging. For example, we estimated that living at The Lofts would cost about $75 per month for electric.
STEP 4: Next, subtract the sum of the included utilities from monthly rent
- West Mill – $1,000 less included utilities ($0) = $1,000
- The Lofts – $1,400 less included utilities ($75) = $1,325
STEP 5: Divide this new true base rent comparison by the total square footage of each unit to get a cost per square foot comparison.
- West Mill – $1,000 divided by 800 = $1.25 per sq. foot
- The Lofts – $1,325 divided by 1200 = $1.10 per sq. foot
When we compare apartment rents with this systematic approach, we see that The Lofts (listed at $1,400) is actually more cost effective per dollar than West Mill (listed at $1,000).
Make sure you compare apartments of the same unit type (i.e. one bedroom/one bath to one bedroom/one bath).
Pro Tip [Advanced]:
There are more sophisticated formulas and approaches to use, but this should give you a great foundation. For example, you can “add” to base rent all non-utility monthly extras that are collected by your landlord (these are things like: parking fees, management fees, and activity fees). We call these “Non-Utility Extras.” No deduction to rent should be made if these fees do not exist (i.e. are included). If you stop and think about it, this makes sense. If some landlords are collecting money for items that other landlords are including, we should add those fees to the base rent in order to compare apples to apples. The formula for this is:
(Apartment Rent – Included Utilities + Non-Utility Extras)/Square Feet = Cost Per Square Foot
In the same scenario above, if West Mill charged $50 per month for Parking and The Lofts did not charge anything, the results:
West Mill – $1,000 less included utilities ($0) plus Non-Utility Extras ($50) = $1,050
The Lofts – $1,400 less included utilities ($75) plus Non-Utility Extras ($0) = $1,325
With this approach, we see West Mill becomes increasingly expensive. Applying the final step of the formula and dividing the results by square footage:
West Mill – $1,050 divided by 800 = $1.31 per sq. foot
The Lofts – $1,325 divided by 1200 = $1.10 per sq. foot
Know someone who can benefit from this advice?
Check out our friendly visual on the basics below.