How to Win Your Rental Bidding War
You’re taking a tour of what you hope will be your new apartment. It’s perfect in almost every way – the location, the square footage, and the amenities are exactly what you want. The posted rent is reasonable, especially for the hot rental market in your city.
Then the landlord asks, “What’s your best offer?”
Wait, what? Bidding wars used to apply only to purchasing a home or condo. But a new phenomenon has arrived in some cities: rental bidding wars. With sky-high demand for rental units, consumers now face this additional obstacle on the way to finding that perfect apartment.
This process can become an added financial stressor and potential hardship, so here are a few tips to win your rental bidding war – and to safeguard your finances.
Realize There’s No Magic Number
It would be great if you could reach out to any landlord with a set price and know it will be enough to land the rental. That’s not always the case.
A good starting point is often 10% more than the posted rent. For a one-bedroom apartment listed at $2,000, that translates to an offer of $2,200. However, each situation is different, so don’t expect that 10% will always get the job done.
“Some experts say 10% should be enough to win the lease, but we know of landlords who’ve received almost 40% over the original asking price,” says Rachel Stults, managing editor of Realtor.com.
Understand the Going Rate
You’ll need to do some homework to determine what comparable units are going for in the area where you want to live. Websites like hotpads.com allow you to see the median rent for units by city and even by neighborhood.
If you’re looking for a studio apartment in a specific neighborhood and the median price is $1,500, it’s not wise to bid more on a unit already listed at $2,000. You also want to stay within your budget.
It’s often advised that renters should not spend more than 30% of their gross income on rent. This is a good rule of thumb, but the current market may require stretching that number. Don’t forget that you’ll also have to pay for utilities, internet, and possibly other monthly expenses.
Flex Your Financial Muscles
Being in a strong financial position and having a significant amount of money in your savings gives you an advantage over your rental competition. However, that’s easier said than done. Building up your savings is accomplished over time, not in an instant.
But it’s something you can work toward now that will help your status as a renter in the future, and it will help prepare for your monthly expenses. Axos Bank offers high-yield savings and checking accounts to get you started on the road to increased financial strength.
“You should have as much money as possible stowed away in a savings account,” Stults said. “Think about it: If you were a landlord and had two equal applicants bidding the same amount, and one had $10,000 in the bank and the other had $500, which one would you pick?”
Submit Your Application Early
Patience pays off in many situations. But not in a hot rental market. With a rental you want, you’ll need to be aggressive and get your application in with lightning speed. This is especially true for rentals in high demand.
“Avoid the bidding war by being first,” says Jonas Bordo, CEO and co-founder of Dwellsy, an online rental housing marketplace. “Many landlords go with the inquiries in the order in which they're submitted, and if you“re the first, you can move rapidly at each step through the process before a bidding war materializes.”
Get your documents organized immediately. You should have quick access to your pay stubs, bank statements, and a utility bill. It helps to have them in digital form, so they can be texted or emailed to a landlord at a moment“s notice.
Give Yourself Some Credit
Similar to beefing up your bank account, having a strong credit score can move you ahead of your competition. Again, this is a bigger factor in cities with the highest-demand rentals.
“Given the stiff competition with bidding, my advice to renters is to work on their credit rating,” says Jon Sanborn, co-founder of Brotherly Love Real Estate in Philadelphia. “Renter profiles are changing, as they have more money and better credit scores. With a higher credit score, applicants can put down a larger security deposit.”
There are several ways to build your credit history and improve your score. Keep in mind that you should not take out additional loans or apply for new credit cards while awaiting rental approval because that can negatively impact your credit score.
Stay Within Your Budget
We’ve talked about a few ways to win your bidding war. But remember: Winning is sometimes defined by not getting the rental.
Setting a budget and sticking to it are essential in your apartment search. Determine a number you’re willing to spend, and don’t go over it. If a landlord is asking for $300 a month more than that number, then walking away is a victory for you and your financial health.
Once you’ve determined your spending limit, start looking for rentals below that limit . This will provide the cushion you need if you have to increase your offer beyond the posted rent.
The ultimate goal is to find a rental unit that fits your needs. But if it comes at the cost of breaking the bank, it’s not worth it. Follow these tips and you’ll have a leg up on the competition if you encounter a bidding war for your next apartment.
This blog post was published by Axos Bank on October 5, 2022, and last updated on October 5, 2022.