Saturday, 31 October 2020

Where It Costs the Most to Upgrade Your Apartment

Where It Costs the Most to Upgrade Your Apartment
22 Sep
4:30

Updated on Tuesday, September 22, 2020

For renters living in an apartment amid the coronavirus crisis, a once-cozy bedroom may be feeling cramped, especially if they’re working from home. But there’s good news, unless they live in St. Louis or Los Angeles.

As some Americans fled cities because of the crisis, the cost of renting a one-bedroom apartment fell in July 2020, compared with the same period last year, in 35 of the 100 largest U.S. metros. Renters looking to upgrade to a two-bedroom may be able to do so for cheaper, according to the latest MagnifyMoney research.

That, of course, depends on where you live. Here’s what we found.

Key findings

  • St. Louis residents can expect to pay 40.7% more on average if they want to upgrade from a one-bedroom to a two-bedroom rental, the highest among the metros we studied.
  • Los Angeles has the second-highest cost of upgrading. Renters here who want an additional bedroom are looking at paying $830 more on average – a 38.8% increase.
  • In Minneapolis, renters looking to upgrade to a two-bedroom will see their housing costs increase by $520 a month on average, or 37.4%.
    • Assuming an average cost of driving of 62 cents per mile, Minneapolis workers would break even when upgrading their apartment if they cut 839 commuting miles per month, or roughly 19 miles per trip.
  • Memphis, Tenn., residents need to pay the least to upgrade their living space. Our analysis shows Memphis renters need to pay just an extra 6% on average to go from a one-bedroom to a two-bedroom.
  • In Cleveland, the difference in price between a one-bedroom and two-bedroom apartment is fairly small. The average two-bedroom costs just $60 more a month than a one-bedroom, or 6.4%.
  • In Indianapolis, residents would need to pay an additional 6.9% in rent on average to move to a more spacious apartment. In commuting terms, that is equal to driving about 97 miles a month, or less than two miles per trip.
  • For people who have already been planning a move to a bigger space and have kept their source of income, now could be a good time to move. The prices for one-bedroom apartments are down year over year in 35 metros, while the prices of two-bedroom apartments are down year over year in 25 metros.
  • In dollars, California cities tend to come with the highest price tag. In San Francisco, moving from a one-bedroom to a two-bedroom costs an additional $1,010 a month on average. In Oakland, Calif., that figure is $680 a month on average.

Metros with biggest 1-bedroom rental year-over-year changes

Three Midwest metros – Cleveland, Indianapolis and Columbus, Ohio – saw the largest year-over-year percentage increases in pricing for one-bedroom apartments. Rounding out the top five were St. Petersburg, Fla. and Reno, Nev.

The metros with the largest year-over-year percentage decreases were more varied in location, with the Northeast, Midwest, West and South all represented. Two of the bottom five cities are in Texas.

Metros with biggest 2-bedroom rental year-over-year changes

Meanwhile, while looking at the largest year-over-year percentage increases in pricing for two-bedroom apartments, the Northeast and Midwest each have two metros among the top five, with the South taking the other spot.

As for the metros with the largest year-over-year percentage decreases, the West took four spots (California occupied three), while New York took one.

How shortening commute can affect breakeven point to upgrade

To make up for an increase in rent prices, moving closer to your workplace can lower the cost of commuting, as can working from home. In some metros, the cost of rent is so high that cutting a commute wouldn’t be enough to cover an increase.

The following examples illustrate how moving closer to work – or working from home – can save enough money to break even on a rent increase (Wichita, Kan. and Memphis, Tenn.) and where a shorter commute won’t do the trick (San Francisco).

  • In Wichita and Memphis, the cost to upgrade to a two-bedroom from a one-bedroom is $50 on average. Based on 62 cents per mile, a driver would need to cut commuting by about 81 miles over the month (or about four miles a workday) to make up that $50 difference.
  • In San Francisco, the cost to upgrade to a two-bedroom is $1,010. Based on 62 cents per mile, a driver would need to cut commuting by about 1,629 miles a month (or about 74 miles a workday) to make up that $1,010 difference.

4 signs you’re ready to consider a 2-bedroom apartment

No. 1: Your home is your office

If your office is closed due to social distancing measures (some offices have remained permanently closed) during the COVID-19 pandemic, moving to a two-bedroom apartment with room for a proper office can help cut down on stress and keep you feeling productive.

No. 2: Your family is growing

If you’re planning on having a child in the near future, you’ll likely want to upgrade to a bigger apartment so the baby can have a nursery or to create a quiet place to work from home.

No. 3: You moved far from home

It’s OK to be excited to spread your wings and feel a bit homesick at the same time. If you’ve made a big move and live far from loved ones, you may want an apartment with room for a guest bedroom that Mom or your bestie can crash in when they visit. The more the merrier.

No. 4: Your budget can accommodate an upgrade

Sarah Berger, MagnifyMoney’s millennial finance columnist, said you should generally not spend more than 30% of your gross income on rent. If you’ve recently received a pay raise and can still afford to allocate 30% of your income on rent, you could afford the higher cost. That being said, Berger warns to be wary of lifestyle creep. “Just because you can afford to pay for a bigger or more expensive place doesn’t mean you should,” she said.

How to save money to upgrade to a 2-bedroom apartment

  • Save more – and spend less. Ramp up your savings and cut back on unnecessary expenses. Berger recommended trimming recurring subscriptions, cooking more meals at home or negotiating a lower cable bill.
  • Make passive income. Berger advised pulling in passive income to increase your savings even faster. This can range from moving money to high-yield savings accounts or money market accounts to using cashback credit cards.
  • Find a roommate. If you have your heart set on a two-bedroom apartment but aren’t sure you can swing it, finding a roommate can be helpful. “It might not be feasible to afford a two-bedroom by yourself quite yet, and having a roomie splitting that rent check could be a short-term solution while you build up your savings,” Berger said.
  • Move in with family. Continue cutting a “rent” check if you move in with your family, Berger suggested, but put that money in a savings account dedicated to your future housing expenses.

Methodology

Researchers analyzed July 2020 apartment and rent data from Zumper to estimate the cost of moving from a one-bedroom to a two-bedroom in the 100 largest metros in the U.S. metros were ranked from highest to lowest based on percentage difference. The AAA average cost per mile for 15,000 miles a year – 62 cents – was used to calculate the breakeven points.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Source: https://www.magnifymoney.com/blog/news/cost-to-upgrade-apartment-study/

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