MONEY Rentals

Thinking About Renting a Room to Travelers? Here’s What You Need to Know

San Francisco apartment with window views of the bay
Alamy

Take a cautious approach.

Of all the categories shaken up by the sharing economy, few are as transformed as lodging. For travelers, ditching the hotel for Airbnb can be a more affordable way to go. And on the flip side, offering your own home or apartment to vacationers can earn you cash—$100 to $150 a night on average, according to Airbnb, much more in some popular destinations.

That can be fairly easy money. Unless something goes wrong, in which case it can be a disaster. You need to protect yourself from legal and financial risks. Here’s what home sharers should know.

Assess Your Earning Power

If you want to rent out a room in your home while you are living there, you can post an ad for free at Airbnb, which takes a 3% cut of your rental fees, plus an additional 12% to 15% “service fee” from your guest. You set your own price; the site verifies users’ identities and provides guest and host reviews.

You can also rent your place while you’re away through Airbnb, or through vacation rental sites like VRBO and HomeAway, which charge a flat annual fee of $350 if you’re a regular user, or 10% of each rental if you’re just dabbling.

Understand Your Risk

Depending on where you live, short-term rentals could violate municipal laws or homeowners association regulations. You might be required to pay an occupancy tax or get a special hotelier’s license. (Consult a lawyer or visit town hall to check local rules.) If you rent for more than 14 days a year, you’ll also need to report the income on your taxes.

But those aren’t the big dangers. The worst-case scenario is that a guest burns down your home or gets injured there, in which case your standard homeowners policy may not cover the claim. “So that $2,000 rental fee could turn into losing everything you’ve got,” says San Francisco attorney Tad Devlin, himself an Airbnb host.

Play It Safe

Don’t just rely on the home-sharing site’s standard insurance plan, because the coverage is generally too ambiguous, says David Reiss, research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School. Your existing homeowners policy may cover you for a single rental of less than two weeks, but call to ask.

More than that and you’ll need to switch to a commercial policy, which covers paying guests and typically costs an additional $500 per year, says Scott Wolf of CBIZ Property & Casualty.

Or try home swapping. For a small annual fee, sites such as HomeLink and HomeExchange connect people who want to visit each other’s location; because no money changes hands, you may avoid tax and liability issues. Still, check with your insurer—and of course, you need to be extremely cautious about who you let into your house. As a rule, none of these sites conducts background checks, so do your own by Googling guests and searching their social media accounts.

“Five years from now, the laws and the insurance policies will have caught up with the sharing economy,” Reiss predicts. “For now, though, it boils down to how risk averse you are.”

TIME Ford

Ford Thinks You’ll Rent Your Car to Help Pay Your Monthly Payment

Better hope no one spills anything

Do you have your eye on a certain Ford vehicle, but you’re not sure you’ll be able to afford the monthly payments? Well, the company has a solution for you: rent out your car for short periods, offsetting the cost.

The new program is called Peer-2-Peer Car Sharing, and it’s available now as a pilot program in Berkeley, Oakland, San Francisco, Portland, Chicago, Washington, D.C., and London. Ford cited research showing that one-third of millennials were interested in renting out their car as a way to supplement their income.

Right now, only customers invited by Ford can participate. To rent your car, it has to be financed through Ford Credit, the financing arm of Ford. Combined with Ford’s recently announced car sharing service in London, it’s clear the Detroit company wants to keep up with younger transportation leaders such as Uber and Car2Go.

MONEY renting

Renters In These Cities Pay the Most for Washer/Dryers

in-unit-laundry
Flickr RM/Getty Images

In some markets, a washer and dryer in your apartment can cost an extra $325 per month.

In-unit laundry: it’s the ultimate rental luxury. Most of us are forced to trudge to the basement if we’re lucky, or drag our clothes to the nearest laundromat. It’s enough of an annoyance to make even the most frugal renter wonder just how much would it cost for the ability to wash and dry clothes in the comfort of their own apartment.

Thanks to real estate website Trulia, we finally know the answer to that question—at least for some major cities. After analyzing large multi-family buildings listed for rent on its site, Trulia’s researchers found apartments with in-unit washers and dryers command a 10% per month premium on average across 13 top metro areas.

But while that might be the average cost for in-unit laundry, the actual price varies widely. Philadelphia pay an average premium of 20% on their rent bill—or $211—for their own washer/dryer, while Dallas-Fort Worth renters pay a paltry an average of 3% of their rent ($33) for the privilege.

And which city hosts the cheapest (and most expensive) in-unit laundry in dollar terms? Los Angeles has the dubious honor of being the priciest out of the 13 metros Trulia surveyed, with washing and drying machines costing renters an average of $325 per month. Meanwhile, Seattle is practically handing out washer/dryers to renters. Trulia found in-unit laundry in the Emerald City cost renters only $23 extra per month.

in-unit-laundry

If the laundry premium in your city sounds fair, you’re in luck. Trulia has even mapped out the neighborhoods where in-unit laundry is most common.

MONEY Investing

The Low-Risk, High-Reward Way to Buy Your First Investment Property

150306_REA_INVESTPROPERTY
Fuse—Getty Images

These four questions will help you be a more successful real estate investor.

When I first read Brandon Turner’s article, “How to ‘Hack’ Your Housing and Get Paid to Live for Free,” it was like a light switch flipped in my head. That was the first article that truly made sense to me as a wannabe investor. It seemed so clear, so right, so obvious that everyone’s first real estate investment should be in a small multi-family property.

I immediately set out to implement this strategy — to buy a property, to move into it, rent out the accompanying units, and to start living for free. Unfortunately, I quickly ran into a little problem: I had set myself up to attempt to meet four seemingly impossible criteria:

  1. The property needed to be affordable with conventional financing.
  2. The property needed to be in a location that I wanted to live in.
  3. The property needed to generate positive cash-flow.
  4. The property needed to offer a reasonable chance at appreciation.

After spending six months looking for an investment property to acquire house-hacking style, I’m not convinced that the truly difficult thing for a first time investor is in getting financing, or even in finding properties that cash-flow sufficiently. The truly difficult problem for me was deciding on where I wanted to make that commitment. Buying a rental property that you intend to live in and actively manage is more than just a financial commitment. You are likely going to live, work, and invest in that area for at least the next few years.

I actually feel that I had plenty of opportunities to purchase duplexes and fourplexes that would have been decent from a cash-flow and appreciation standpoint within 20-50 miles of Denver. Those opportunities seemed almost too easy. The real trick in my opinion is buying those types of properties right downtown. I’m talking inside the city limits.

I’ll admit it, I’m a spoiled, immature 24-year-old, and I refuse to live in an area that isn’t near the heart of my city (Denver, CO). I want to be close to where my 20-something friends live — by Coor’s Field, downtown restaurants and nightlife, convenient to I-70 (the highway that grants easy access to the awesome Rocky Mountains), and, of course, right by my workplace.

In this article, I want to walk through why I believe that all four of those previously mentioned criteria are so important to first time investors and explain some of the basic things that I did to buy a property that I believe meets each of them. I think that this approach is possible for many people who live in urban environments and are willing to be patient and methodical.

Here are four questions that I believe every first time house-hacker should ask themselves, and how I personally answered them.

Question #1: Can I afford the property with conventional financing?

There are two obvious followup questions to the “can I afford this?” question:

  • How much money do I have?
  • How much money does property in the area I want to buy in cost?

If you want to house-hack and still live in a reasonable place in an urban area, you need some cash. Even with great owner-occupier financing terms, you’ll need a substantial amount for the downpayment if you want to live in a somewhat desirable spot near a happening city. I’m not interested in living in Detroit and putting down $500 for that $10,000 home. I want to live and invest in Denver, CO, where a comparable structure might cost 10, 20, or even 50 times more than that.

I spent a full year working hard and living frugally to save up an amount that would comfortably cover a 5% down payment on properties in the area that I wanted to live in. If you don’t like this strategy for gathering funds for your first downpayment (the “save more money” strategy), then I’d suggest that you seriously question whether you want to get into real estate investing in the first place.

Another critical thing to keep in mind is that if you are purchasing a property that needs repairs, minor or major, you will need cash to pay for them. Among other expenses, I’ve shelled out thousands in plumbing and electrical work, appliances, and DIY tools and materials. If you are transitioning from renting to an owning property, then there might be a chance that, like me, you don’t own a robust set of tools and don’t have familiarity with the materials needed to work on even relatively simple projects like painting and drywall repair. By ensuring that I bought the property with a good $10,000 cash cushion, I was able to easily cover all the little repairs and contractor costs that came up, and I now have a pretty solid little toolset that has proved to be much more enjoyable to work with than I previously would have thought.

Related: A New Way to Look at the Concept of “House Hacking”

Question #2: Will I be happy living there?

I think that many of us as investors, new and experienced alike, have to acknowledge that we are investing to improve our financial position and in doing so, to improve our lives. I believe that house-hacking does not work if it means that you have to live in an area that you don’t want to be in! For me to be happy with my living situation, I needed to live in the city. It was not acceptable to purchase property in the boonies and move far away from the places I enjoy going to on a regular basis just to get a good return on my first investment. For me, that meant I had to limit my purchasing area to properties close to the heart of downtown Denver, CO.

Buying property actually downtown (less than 5-10 blocks away from Coor’s Field in my mind) was simply not a reasonable option — the only properties that most newbies can reasonably purchase might be condos, which are not a traditional type of investment from which one can generally expect great rental cash-flow. It’s just too expensive in the true heart of the city, and the only properties that are being purchased there are multi-million dollar homes and swanky apartment complexes. There’s a reason why buildings go straight up in big cities.

Fortunately, Denver has several surrounding neighborhoods with properties at price points affordable to folks making less than $50K per year. These neighborhoods are convenient to downtown with good bike routes and cab/Uber rides that are less than $10 a pop. I ended up picking two areas to search for property. Both areas were roughly equidistant from downtown Denver and my workplace (BiggerPockets HQ happens to be about 5 miles directly Southeast of Lower Downtown Denver).

Question #3: Will the property cash-flow?

Here in Denver, CO, we’ve got a little bit of a tough housing situation. Houses and investment properties are being listed for less than one day and then selling for ten, fifteen, or even $20,000 more than asking price. I’ve heard from some readers that cities with similar characteristics, like Austin, TX, have similarly tough markets for investors.

Luckily, as an owner-occupier looking to buy multifamily property, I had a couple of serious advantages over the competition. First, I was looking at properties that most other would-be homeowners weren’t interested in; first-time buyers usually aren’t looking to purchase a duplex, triplex, or fourplex. Second, I had the opportunity to bid on properties before investors that did not intend to inhabit the property because of a special government program — the First Look program from Fannie Mae.

In my opinion, these two advantages that I had as an owner-occupier house-hacker are the trump cards that gave me an edge in looking for great multi-family deals in an urban environment. After months of searching, my agent suggested a duplex to me. This property was listed on the MLS and was like a lot of other opportunities out there that I had looked at, but with one small difference: this property was part of that “First Look” program.

Because investors couldn’t make offers on the property for several weeks, and because the demand for duplexes, triplexes, and fourplexes among first-time homeowners is very small, I had little competition. I was able to run the deal by my friends, family, mastermind group, and by investor friends I’d met through BiggerPockets. That window gave me the confidence I needed to pull the trigger and make the largest financial commitment of my life to that point — while competing investors never even had a chance to offer.

Question #4: Is there a reasonable chance at appreciation?

If you read around on BiggerPockets, you are going to learn that experienced investors refer to appreciation as the “icing on the cake” — it’s usually not even considered in the purchase of investment property. While it’s still a good idea to look at cash-flow first as an owner-occupier, putting in the extra time to look for investment properties that offer a good chance at appreciation as well can reward you handsomely in the long run.

As a house-hacker, appreciation can produce a more powerful financial impact for you than it can for a traditional investor, because of a special tax-law that benefits owner-occupiers:

Assuming that you live in the property for more than two years, when you sell property, much of the capital gains are tax-free.

This tax break is incredibly powerful for those looking to house-hack with small multifamily properties because we have the opportunity to take advantage of appreciation as it relates to both income properties AND smaller residential properties:

As multi-family properties, increasing the income of the property can force appreciation.

As hybrid properties, duplexes – fourplexes can also benefit from appreciation caused by an improving local market.

I carefully selected properties that I felt offered me the opportunity to get both types of appreciation:

  • Forced Income Appreciation: I chose a property that needed what I considered to be a reasonable amount of cosmetic work and that had multiple opportunities for improvement. Since moving in, I’ve had the entire plumbing system overhauled, I’ve added appliances like washer/dryer units and refrigerators, and I’ve put in substantial cosmetic work, Do-It-Yourself style. These improvements should reduce the operating expenses of the property over the long run and give me an advantage in attracting and retaining tenants, hopefully improving the property’s long-term income potential.
  • Market Appreciation: One of the benefits to purchasing properties in an area that you yourself want to live in is that, generally speaking, other folks want to live there, too. This presents a decent opportunity for appreciation in itself if you have personal reasons for desiring to live in a certain area that are applicable to large demographics. However, I didn’t stop there, as I looked for properties within these neighborhoods that were also in the path of government sponsored infrastructure projects.

In my case, a light-rail project is currently under construction and will offer convenient and low-cost transportation options to my neighborhood. It is my hope that infrastructure projects like this one, coupled with the overall tremendous growth of the Denver local economy, will allow me to benefit from market appreciation, though I understand that having purchased the property, this is now out of my control.

The hope here is that I can leverage both types of appreciation to create substantial value from this property over the next few years. I then hope to cash out on that increase in equity, tax-free, and reinvest it in a larger income producing real estate asset.

Related: BP Podcast 086 – House Hacking Your Way to 97 Units (While Holding a Full Time Job!) with Cory Binsfield

Conclusion

This is my first investment property. There is every possibility that I’ve made a huge mistake somewhere along the line. I could be way off in my estimation of expenses, long-term rents, desirability of the neighborhood, or I might have simply gotten ripped off on the purchase in general. I hope that none of those things are true, and I certainly feel that I did my due diligence at each stage of this investment — but only time will tell if I correctly analyzed each critical input.

Maybe I’m slower than other investors, and maybe I suffered from a great deal of “analysis paralysis.” It took me a long time to pull the trigger and finally make a serious offer on my first investment property. I had been researching my market and defining my criteria for at least 6 months — not to mention the full year that I had been saving up for such a purchase!

That said, I believe that my first investment is by far my most important. A bad choice could cripple me financially, discourage me from investing again, or at the very least, significantly slow me down in accumulating the funds to make a second investment. But, in spite of all the potential negative outcomes, because I did just one thing right, I can sleep well at night:

That one thing was buying in an area that I am happy to live in.

At the end of the day, it doesn’t truly matter whether I’m able to keep my unit rented out, or if the market tanks. Worst case scenario, I get an expensive education in real estate investing and live in a place that is slightly smaller than I could have otherwise afforded.

I’ve got the ultimate exit strategy.

This article originally appeared on BiggerPockets, the real estate investing social network. © 2015 BiggerPockets Inc.

More from BiggerPockets:
I Quit My Day Job, Retired Early & Started a New Venture Using Real Estate: Here’s How
3 Smart Ways to Make an Extra $1,000 a Month Through Real Estate Investing
5 Habits of Highly Miserable Real Estate Investors (and How to Kick Them)

MONEY renting

How to Be a Dream Tenant and Snag Any Rental You Choose

Hand holding gold key, close-up
David Muir—Getty Images

Keep pets, friends, and bad credit from ruining your shot at a nice rental

If you are a renter, you have many obstacles ahead of you. Landlords are full of horror stories, and you are just another potential horror story. You want and need to be the best renter the new landlord has ever seen.

No landlord really wants you, but they need you. They need you to help them pay their rental mortgage; they need you to help them pay their personal mortgage, they need you to help them retire early. But they do not need you to come around and damage the premise or cause them a lot of extra work. Here is how to be the best renter you can possibly be.

Prepare for the Apartment Viewing Process

When you set up a showing for a rental property, it is really an interview. You are interviewing the landlord or property management company, and they are interviewing you. Make a critical mistake in this process, and you will have to move on to the next property. You do not have to be dressed for church, but do not come looking like you are homeless.

Get A Solid Credit Score

Anyone can have a decent credit score at 18 years old. Apply for a secured pre-paid Visa card, use it for a small charge once a month, and pay the bill when it comes due. Just like that, you will have a 700+ credit score. If you already have bad credit, you are starting behind the 8-ball and may have more difficulties. Clean up your credit report as soon as possible to increase your credit score.

Related: The Top 14 Tips Landlords Wish Their Tenants Knew

Knowing approximately what your credit score is will help immensely, in case there are credit score requirements for the rental. There is no sense in applying for a place you will not get. Bring in your proof of a credit score to help, but know that any decent landlord will also run your application through a credit check process and verify that your version closely matches theirs.

Come Prepared to Rent

You should be ready to rent any place you are looking at; otherwise, why waste your time or the landlord’s? Bring along proof of employment and income, along with your W2, tax forms, or a pay stub. Bring a pen to fill out an application and a checkbook to write out a check for the application fees. If you like the rental, you should also put down a holding fee to hold the rental. If you do not like the place or the landlord, keep the information in your pocket for the next place.

Control Your Viewing Group

Bring everyone along who will be renting — and no one else. A landlord will assume that your friend who arrives with you and is “living somewhere else” will be moving in as soon as you sign a lease. If your fiance who has just gotten out of prison stays in the car, I will also assume he looks so rough no one will rent to him, and I will also assume he will be moving in. Do not be offended if the landlord wants to keep criminals out of their multifamily rental.

If you have kids, do not let them run wild in the rental. It is not your place yet. If you are viewing an occupied unit, remember that it is someone else’s house. The current tenants do not even want you there, but they know the landlord needs to show it. If your kid steals a toy from the current renter and you have to come back from your car to return it, please do not be offended when you are politely declined for the rental.

Clean Up Your Pet Situation

Get rid of your “lab mix” dog that looks and acts like a purebred pit bull. Landlords do not like pit bulls, insurance companies do not like pit bulls, and many cities do not like pit bulls. If you have a 200 lb. bull mastiff, expect to be declined as a renter in any places that do not also allow horses. If you have six cats, get rid of at least four of them. Do not even apply if you have an intact male cat.

If you have a fish tank, keep it under 55 gallons. I have had renters with 200+ gallon saltwater fish tanks, and while they are impressive, they are way too big. Do not think for a minute that large or poisonous snakes are a great pet in an apartment, even though they are quiet. If your dog barks, get a bark collar for it.

If you have more than two pets, in any combination of dogs and cats, you are going to have a problem, especially if you can barely afford the rent.

Learn Move-In Etiquette

Once you have been approved, plan on moving in during the day. You can start as early as 7 a.m. during the week — or even 8 a.m. on the weekends — but do not start moving in after 8 p.m. Wait until the next day. Do not block the other tenants’ cars with all of your mover’s cars. If you have to temporarily block driveways and garages, be prepared to quickly move out of the way in short notice. Other tenants need to go about their day and do not want to be inconvenienced by you.

Watch for the walls and ceilings when you move. Do not scrape the walls and break ceiling light fixtures. If you drop trash in the hallways or common areas, pick it up. If you see a neighbor, introduce yourself if they do not do so first. Your neighbor is your ally. They are the ones who will tolerate your noise — or call the cops on you. It’s your choice: be a neighborly neighbor or be the “strange person across the hall.” A simple handshake is all it takes.

Requirements of a Great Renter

Pay Rent. It is impossible to be a great renter if you do not pay rent. You could be a personal friend of Gandhi or a guest of the Pope on a regular basis, but if you do not pay rent, you are a terrible renter by definition. Pay your rent on time; it is due on midnight the evening BEFORE the first of the month. Not on the first, not on the fifth. Set up an auto-pay system so you do not forget; it will save your renter reputation. If you need to pay rent in two installments, pay half in advance, and the rest when it is due.

Do Not Force Other Tenants to Leave. If you have weirdo habits that creep other tenants out, it is a bad deal. Do not deal drugs in the apartment area, or even look like you might be a drug dealer. If you want to be a drug dealer, go do it at work, not at home. If you have a habit of hanging laundry on the deck or using a sheet for a curtain, think twice about it. You do not want to bring down the appearance of the complex because you are too cheap to live like a normal human being.

Do Not Bring in Pests. Stay away from the free furniture on the curbs. It is there for a reason; no one wants it. It is likely to be full of bedbugs. Stay away from bringing home boxes from stores and restaurants that are full of cockroaches. If you bring in cockroaches or bed bugs, do not be surprised if you are eventually asked to leave. It is easier to rid an apartment of pests when it is empty. Pests are non-discriminatory in terms of income level, but low income habits seem to attract them.

Do Not Invite Your Criminal Friends Over. Many criminals who have been to jail or prison have a different mentality when it comes to resolving issues. It typically becomes a fight waiting to happen. Combine criminals, alcohol, and a card game, and it is only a matter of time before someone gets offended and a fight breaks out. When someone gets into a fight and they are hit with a 1.5L brandy bottle, they can fall against the stairway railing and lose half of their ear. I have seen it happen. If you have criminal friends, go play at their house, not yours.

Do Not Just Hang Around. Do not loiter around the outside of the building or allow your friends to do so. When you come home or your friends come over, go into your apartment. Hanging around looks bad — it looks like you are looking for trouble to get into. And especially do not hang around the building or parking lot around after dark. Hanging around and drinking is even worse; do not drink outside your apartment. If you are grilling alone, a beer to pass the time might be OK. Never drink outside when you have friends over.

Disclose Your Extra Guests. Do not expect that because you have paid the rent, you can have extra people living there. There is a reason why tenants get screened; one reason is to make sure you will likely pay the rent. The other reason is to screen out potential troublemakers. If you want a guest, get them approved by the landlord. Maybe there will be slight increase in rent, maybe not. And extra guests also include extra pets.

Do Not Be Crazy. If you think it is a great idea to come home drunk at 2 a.m. and start a fight with your roommates, think again. The other neighbors do not want to hear you wrestling around like a bunch of wild bears upstairs. If you then think you are invincible and want to go out and find another party but decide to punch the ceiling light on your way out, it will not wind up good. The light fixture is cheap to replace, but I will be charging a much greater amount against your damage deposit for my time and trouble.

Be Quiet After 9 p.m. Most tenants work a typical day job. They expect it to be quiet when they go to bed or start to get ready for bed. If you like parties, loud TVs, shoot-em-up video games, or even loud card games, you need to think twice about whether a multifamily rental is for you. You share walls, ceilings and floors. Your music and sound effects become their noise. If you already met the neighbors, they might come over and help you realize you are making too much noise. If not, they may just call the cops.

Related: How to Find a Tenant in Any Market: A Comprehensive Guide

Do Not Attract Police Calls. Call the cops as often as you need to, but never get them called on you. One call and you could be evicted. If you committed a cardinal sin, like domestic abuse or drugs, expect to be shown the door. If your live in roommate gets arrested for having a vehicle chop-shop in the garage, do not expect you will have until your lease ends to move out; you will be lucky to get until the weekend to move. When bad behaviors are noticed and one gets kicked out, everyone gets kicked out.

After the Move-In

Remember that the hurdle you had to overcome to move in, your neighbors also have experienced. The reason why your rental is nice is directly related to that tenant screening hurdle. You should want to keep it nice and get a great landlord reference.

Your home is your castle, but it is not going to be yours forever. Give proper notice to move out. Keep it clean and mostly presentable. Clean up after your pets and control your guests. Enjoy the time you are there.

This article originally appeared on BiggerPockets, the real estate investing social network. © 2015 BiggerPockets Inc.

More from BiggerPockets:
I Quit My Day Job, Retired Early & Started a New Venture Using Real Estate: Here’s How
3 Smart Ways to Make an Extra $1,000 a Month Through Real Estate Investing
5 Habits of Highly Miserable Real Estate Investors (and How to Kick Them)

MONEY Rentals

US Renters Spent $441 Billion on Rent Last Year

According to Zillow, college kids, newlyweds and all other renters around the country paid a grand total of $441 billion for rent in 2014, up 4.9% from the year before.

MONEY Rentals

The Money Mistake That 48% of Renters Make

List of bills to pay, with "paid" written in red on top
David Gould—Getty Images

They assume their on-time payments will help boost their credit score, according to a new TransUnion survey.

Most Americans know that a good credit score can open the door to lower cost loans for big adult milestones, such as buying a home or car.

Yet it turns out that many renters are misinformed about what goes into that somewhat mysterious three-digit number: Nearly half of renters ages 18 to 64 think rental payments to their landlords are automatically reported to the credit bureaus, according to survey results released last week by TransUnion, one of the nation’s three major credit reporting agencies. The survey also revealed that more than half of renters believe payments for cable and internet, utility and cellphone bills are regularly reported to the bureaus.

Credit agency firms TransUnion and Experian did recently start allowing rental payments to be collected and factored into credit reports. But in practice, most landlords do not yet share with the data collectors that you’re paying on time each month, says Ken Chaplin, senior vice president of TransUnion’s consumer division. Cable, internet, utility and cell providers also typically do not, he says.

Even if your landlord or service firm is one of the few that does report, the payments may not be included in the most common credit score lenders use, called the FICO score. So if you were counting on your on-time monthly rent checks to help you build your credit score, you’re out of luck.

Keep in mind that although being conscientious on paying your rent and utilities won’t help you, your failure to make a payment can hurt you. Some landlords and utility companies do report delinquent customers—not to mention the fact that your accounts could end up in collections. So this isn’t an excuse to stop paying these bills.

Instead it should serve as a wake up call that you may need to work in other ways to improve your credit score, such as paying car loans, student loans and credit card bills on time each month.

Related:

What is a credit report and when is it used?
How is my credit score calculated and how can I improve it?

MONEY Budgeting

Guess Which U.S. City Is the Most Expensive

141014_REA_EXPENSIVELIVING
Nikreates—Alamy

Hint: It's not NYC.

On average, American households spend the largest share of their annual expenditures on housing. The average family spends $16,887 on housing per year, equating to 33% of the average household’s annual expenditures. But how much do those expenses vary from city to city, and which places are the most expensive?

Well, the Bureau of Labor Statistics recently released a report (link opens PDF) detailing Americans’ average annual expenditures on housing and related items. And contrary to popular belief, New York City is not the most expensive city to live in. Two U.S. cities have overtaken it.

A breakdown of housing costs

The BLS took a deep dive into all the costs of housing, rather than simply comparing the cost of rent or average mortgage payments. Their analysis also took into account utilities (electric, water, and natural gas), household furnishings and equipment (textiles, furniture, floor coverings, appliances, and the like), housekeeping supplies, and other household expenses. What they found was that average annual expenditures on housing were far higher in both Washington, D.C., and San Francisco than in New York.

most-expensive-city-no-longer-nyc_large

The data is current as of 2012, and housing costs in the District of Columbia and San Francisco have risen since then. In D.C., the rise in housing costs is being led by the redevelopment and gentrification of the downtown area, which in turn is being triggered by the high relative number of government and government-related jobs, particularly in the defense contracting sector. Baby boomers are also moving from the suburbs into the city.

In San Francisco, housing costs have always been high, but they’re spiking because of a confluence of factors. The continued boom in technology companies in Silicon Valley — most notably Apple, Google, and Facebook — means that a growing cadre of high-paid employees want to live in the area. Add in a longtime lack of housing development in the city, and you have a rise in housing prices that has become a contentious issue in the San Francisco Bay area as longtime renters are priced out of the city. TechCrunch’s Kim-Mai Cutler provides a great, in-depth piece on San Francisco’s housing problem.

The difference in annual housing costs between the two most expensive cities and the national average is a staggering $10,000. Excluding New York City, the difference between the two most expensive cities and other major U.S. metropolitan areas is over $5,000 annually. If you’re thinking of moving, it’s smart to compare costs carefully before moving to one of the most expensive cities in the U.S.

National differences in housing cost

While the above data is just from major U.S. cities, we have other data from the Bureau of Economic Analysis showing the real value of housing dollars in each state compared with the national average.

real-value-of-housing_large

You can see that generally, coastal states are more expensive than non-coastal states, as many people enjoy living near the ocean. You can also see that the Northeast on average is more expensive than the rest of the country except for California. These high costs, coupled with better weather and low to no income taxes, are why many retirees move south to Florida, Texas, etc.

If considering moving to a more expensive city, you should be sure the benefits will be worth the extra expense. For instance, while I pay a high cost of living to live in New York City, the quality of life that I get in the city makes it well worth it, in my opinion. While New York state is ranked poorly in terms of the happiest states in the U.S., New York City is ranked in the top quartile by happiness among U.S. cities, according to the Gallup-Healthways Well-Being Index.

The most important thing is to live in a place where you are happy. While the main determinants of happiness are the same for everyone, the specifics vary. Be sure that an increased cost of living comes with an increased quality of life.

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