Living with roommates after college to house hack

Having one or two roommates can be fun in your teenage years. Maybe you attend a boarding school in high school where you needed a roommate. If the roommate worked out,it was a positive experience and that person or persons became somewhat of your school family while you were away studying far from your actual family.  The same could be said for your college years. Typically if you are living with someone who is like you or shares similar habits,you will get along much better.  Being able to get along is the main focus.  You do not need to be friends or spend a lot of time with a roommate as long as there is respect for the other person and you can go about your life without any problems.  By the time many of us graduate from college,  we are either done with the idea of having roommates or we are forced to have a roommate for financial reasons.

Now, I was a person that did not love having a roommate all the time but when I bought my first property, I ended up going this route to prioritize my finances.  I had three roommates for one year and then two for a little longer and then one for a little while longer still.  This choice allowed me to get into a more expensive property by not having to shell out a good portion of my money to afford the mortgage.  My first tenants happened to be roommates and from a financial standpoint it was a great decision when I look back. 

The business mindset

The difference now was that I was doing this as a business and not for fun.  These were not friends that I was living with, they were tenants. I was providing housing to them and in turn they were paying me for the time spent in my property.  I have the responsibility of providing them with a proper living environment that met the terms that were agreed upon.  They had the responsibility of paying rent on time,  taking care of their rooms,  and contributing to keeping the house clean and safe for all who occupied it.  I recommend making the same rules that you would for a tenant who had an entire unit to themselves also apply to someone renting a room in a shared space.  

From my experience, these are important guidelines to follow when renting out bedrooms or sections of your home to other individuals in order to generate some extra income.

Writing a contract

Drafting a lease is probably the most important component of having a roommate as a tenant.   You want to define the length of the lease, the payment terms, what they are allowed to do as far as guests, pets, and behavior is concerned.  You should also outline the penalties that will result from not following the required terms and conditions. For example, if the trash is not sorted from the recycling and the city fines the house, the responsible tenant will be accountable for paying this citation.  In my roommate leases, I specified that each of them would have to ask for landlord permission to have more than eight people in the house at any given time. This prevents big disagreements from occurring with other members of the house.  The lease must follow all laws and regulations for the city and state in which it is being issued.  Tenants do have rights and we must make sure that they are presented in a clear and concise way. As the owner of the house and landlord, you have the responsibility of defining what is and what is not permissible.  If there are no rules defined then it is ambiguous as to what is okay and what is not okay.  Be sure to take the time and write a lease that is signed by all parties prior to letting any roommates occupy the home.  If things take a turn for the worst, this agreement will cover you when dealing with police or even in court if for some reason a problem escalated to that level.   We are discussing ways to make sure that does not happen at all costs. 

Who to live with

Okay, enough with the legal matters and fine print.  Next, we will get into the day to day life of successfully living with roommates as a 20-something year old adult.  When selecting people to live with, it’s a good idea to determine how they live prior to being your roommate.  If it’s possible to see their current space or apartment, it will say a lot about how they will treat your house.  It is good to grab a coffee or a quick bite with any potential roommates to determine how their personality is and whether or not they would mesh well with others. 

If you are working with people who are total strangers and not people that you’ve known in the past, it’s a good idea to ask some key questions. Will they work in an office or will they be working from the house most of the time? Do they have any pets? Do they plan to have many visitors? Are they in a relationship where the significant other could be staying over a few nights per week?  Do they cook a lot or get takeout? What time do they typically go to bed and wake up in the morning?  The answers to these questions will help you determine how compatible a potential roommate is.  The more differences, the more likely it is for a disagreement to occur.

Getting the place set up

You can set up the property in a way that helps everyone stay organized and reduce conflict.   For each bedroom door, I changed the door knobs to ones that had a lock with a unique key.  This way, each person could have their private space and feel secure about whatever valuables were left in the house.  Near the front door, there was a bin to sort the mail.  Each person has a slot with their name on it and letters that were addressed to them could be put in the  appropriate slot.  Whoever gets the mail from the mailbox can sort it into the bin.  Having a whiteboard in the kitchen or other common area is a nice idea as well.  The trash and recycling days, when people are on vacation, contractor visits and planned work, and anything else that pertains to others create clarity and reduce surprises. 

Every property can be run differently.  If you prefer the roommates to take turns with different household tasks, you will want to explain this prior to moving in. Tasks can include cleaning the bathrooms, taking out the trash, mowing the lawn, refilling the gas for the grill, shoveling snow,  and much more.  The tasks can be displayed on a whiteboard and a schedule can show whose turn it is to do what week-by-week.  Because it is hard to keep a house very clean with multiple people living there,  it could make sense to hire cleaners.  Since you are making money as a landlord,  you can outsource some of your tasks to save you time and hassle. If someone is not contributing as they should be, it is best to find a time to talk to them in private to see what can be changed to improve the situation. 

Why are we doing this again?

So let’s take a look at the financial advantages of living with roommates.  I’m going to use the financials for my single family home to explain how the roommate tenants benefited me financially.  My monthly mortgage was exactly $2,800.  This did not include utilities such as gas, electric,  water,  or Internet.  We can say that the total cost was around $3,100 per month.   My house had a finished basement when I purchased it but I renovated it myself and made that space into my bedroom.  This left me with 3 full size bedrooms on the second floor. I rented two rooms for $750 each and the smaller room for $600.  All of this together produced a monthly income of $2100. My total expenses of $3,100 subtract income of $2,100 left me with only $1,000 that I needed to pay to live in my property.  After 1 year my PMI was removed from my mortgage and the payment dropped to $2400.  I then refinanced to a lower interest rate which brought my payment down to $2,275 per month.  For the three years that I had roommates,  I generated approximately $42,000 extra dollars that I put towards savings, investments into my Roth IRA, and home improvements.  During these three years the property also appreciated in value by over $120,000. If I had waited until I could afford a monthly payment by myself, I would have missed out on this equity gain.  

Wrapping it all up 

I still believe that a multi-family is a good first property to buy.  As we can see here,  you can still work towards Financial Independence by starting with a single family or condo with extra bedrooms.   If you are planning on buying a property and having roommates,  I recommend a house with at least three bedrooms and at least two bathrooms.  a basement or attic that can be finished is an added bonus.  Also, there will be more vehicles at the property so off street parking for one or two cars can make this arrangement much easier.   If buying a single-family or condo,  you want to make sure that the  property will cash flow positive after you move out or has increased in value through appreciation To where you could sell  it at a profit.  This will make the first house the first step and key experience to doing other things in real estate.  

If you have any questions about a single family house hack please make sure to leave a comment below or contact me on any of the social platforms.