Hello! Enjoy this blog post from a blog friend of mine. As you know, I'm all about having roommates in order to lower your expenses. Here's what Adam has learned from having roommates.
I've always had roommates.
Since the day I got to college, I've been splitting rooms, apartments and houses with a long parade of strangers (college just puts you with somebody), friends, fraternity brothers, and acquaintances. Some of them have worked out great. They were phenomenal roommates and have become lifelong friends. Others were complete disasters, even if they were nice people.
Personalities can clash, ideas about cleanliness can vary significantly, and other issues that never occurred to you can pop up.
When I graduated college and started my career, I really didn't have to have a roommate. I was living in a low cost part of the country, making a solid salary, and could have easily afforded a 1 bedroom apartment or even a house with a bit of savings.
Instead, I just kept the streak alive. My first apartment was a 2-bedroom, 1 bath, in an older complex. It wasn't fancy, but it was 5 minutes from work, in a decent neighborhood, and only cost $600 a month (that is not a typo). I didn't know anyone in my new city, so I started out living solo, but as I made friends, I found another guy looking for a place to live. Once we hit it off, he moved in and my bills instantly dropped by half. For the next year, I spent $300 on rent and maybe another $150 on utilities and internet.
Over the next 3 years I didn't have another steady roommate, however, I did have interns live with me each summer, paying $600 a month, covering my entire rent for 3 months. This was essentially the same as having a roommate 6 months a year. Interns can be a great trial run for having roommates since they are usually there less than 12 weeks with a nice, fixed move out date.
Once I moved from my super low cost city to Houston, I initially split a place with a friend and after buying a house, I've had 2 roommates. Unfortunately, most of my friends make similar money to myself, so I could not find a friend to move in. So we (my girlfriend and I), decided to get aggressive and turned to my favorite furniture spot – Craigslist.
We’ve actually had to incredibly good experiences thus far. Our first roommate lived with us for a year and has become a good friend. The second roommate still lives with us. She’s fun, quiet, and respectful of the house and our space. After keeping the streak alive for 10 years, I think I’ve learned a few things.
1. Roommates are the single easiest way for a BIG WIN.
I’m a big believer in big wins. They have a major impact on your finances and often can be left to run on autopilot once they’re set up. The downside is they can be tough.
It’s easy to say max your IRA / 401k, but you don’t always have the money. It’s easy to say go to college debt free, but on a practical level it can be tough.
Your living expenses (rent, mortgage, utilities, etc) is likely your single largest expense, and it’s the single easiest to cut with a roommate. It’s a BIG BIG WIN. If you're simply willing to share your space, your rent instantly cuts in half and if you own your place, you may be able to even live for free. Getting that roommate can also help forgive a lot of small personal finance sins, like keeping the cable or your latte habit because your more than making up for it with that monthly check.
2. It’s tax free.
If your splitting an apartment you are deducting you may be deducting your expenses by 50%, but if you think about how much extra cash you would have to earn to cover those costs, it’s well more than 50%. An extra $600 in rent is more like a $1,000 pre-tax.
If you own your place, I won’t give tax advice, but how you report your roommates contribution, I’ll leave up to you.
3. Upfront Rules are Crucial.
With every roommate I’ve had, particularly once it was in my home (not a rental), I’ve found a new ground rule I should have laid out before they moved in. If you want a smooth relationship with someone it’s crucial to discuss everything up front and make clear every single expectation.
The number one things I’ve found are cleanliness (in painful detail, particularly shared spaces and the kitchen), pets (no and no and no), noise, guests, the thermostat, and any potential shared groceries or items such as kitchen gear. Another one many young people should cover is internet rules, particularly around downloading. You don’t want to get busted by Comcast or the government for ripping the newest season of Game of Thrones and you didn’t even know it was happening.
Finally, put it in writing. Not as a contract to sign. Just on paper so that there’s no confusion or accusations later about what were the rules.
4. There are Fringe Benefits.
Having a quality roommate is like having an automatic house sitter and dog watcher. We like to travel and unfortunately have zero family anywhere in Texas. The amount of money we’ve saved by having roommates that are happy to watch our dogs for a weekend or a week is HUGE. I felt much better about our 10 days in Brazil knowing someone was home with the dogs.
Not to mention the peace of mind, knowing someone you trust is watching your animals and they’re staying in their own house, backyard, and there weren’t any major upheavals like there would be if you stuck them in a kennel for a week. This has been the biggest benefit that never occurred to me.
5. Craigslist Can Work (it’s not scary).
Depending on what part of the country you live in, finding a place to live or roommates on Craigslist is either completely normal or considered a way to meet a serial killer. I find that people on the coasts (NYC, San Fran, LA) tend to be really comfortable on CL, while the Midwest and South find it a bit scary. Here’s how we find our roommates:
Create detailed description of your home (no address), the space for rent, your lifestyle and expectations. We include our age range, our drinking and socializing habits, our work hours, and our expectations on all those issues. It’s also worth noting no smoking or drugs. We also usually include a photo of the house and the room (which is fully furnished).
Ask for a Facebook and Linkedin profile. This is the crucial step I’ve found. You may not meet a person you click with, but if they have a super normal facebook, with friends, events, and family, they’re probably not a serial killer. Linkedin helps ensure that they have a quality, paying job and a solid job history, and shouldn’t have an issues paying the rent.
If you are really worried about it you can also background check who you are dealing with. We’ve never actually taken this step.
Most emails can go in the trash immediately. We’ve found that if we get 50 emails, less than 10 are worth responding to, 5 we have a phone call with an invite to see the place, and there’s usually a clear 1-2 that we click with and think would be a good fit.
Only choose people you can see yourself hanging out with. This isn’t a tenant in a rental house. You’ll be sharing your kitchen, watching tv together, and likely meeting their friends and sharing experiences.
Roommates have been a primary part of my personal finance strategy of focusing on Big Wins have allowed me to save tens of thousands over the past decade that would otherwise have gone to living expenses. We’ve also made great friends, learned about other cultures, and enjoyed a lot of great conversations. While the roommate situation will probably stop once we have kids, it’s a great strategy for the 20-something crowd.
Author bio: Adam Chudy is a writer, analyst and investor living in Houston, Texas. For more on personal finance, investing, travel, gardening, personal improvement, and living a better life, check out the blog at AdamChudy.com and on Twitter @AdamChudy.
Are you interested in having roommates? Why or why not?
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