Subsidizing mortgage with renters

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blink2ce
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Joined: Wed Jul 15, 2020 1:28 pm

Subsidizing mortgage with renters

Post by blink2ce »

Hi,

I'm at the beginning of my ERE transition. I am living in a large city in Texas now but will likely move north towards the Great Lakes. I like the colder weather. There are lot of inexpensive houses up that way as well.

Question for you all regarding housing -- Does it make financial sense to get a mortgage for a three bedroom house and live in one room while renting the other two out? This would be a very easy way for me to live, since I already have roommates. It seems like a very easy way to get a low housing cost and I don't see many people talking about it.

If I buy a house in the Grand Rapids, MI area worth $150,000 with 3.5% interest and I put down a $30,000 down payment, the mortgage would be $874. It should be easy to rent each room out for $350 (or more), meaning that my contribution to the mortgage would be a maximum of $174.This is significantly under the ERE limit of a ~$450 budget for housing costs. There will be items that break which would need repairs or replacement, but with a couple of hundred dollars a month for materials and a willingness to do my own repairs, it seems like this would be very feasible and financially wise.

I know that the ERE philosophy is that a mortgage is a "death-lock" and that paying interest is to be avoided always. But in the case of having renters cover most or all of the mortgage it seems like there isn't much downside as long as I plan to stay living in (and renting) the house for a long time.

What are your thoughts?

BeyondtheWrap
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Joined: Thu Jul 22, 2010 3:38 pm
Location: NYC

Re: Subsidizing mortgage with renters

Post by BeyondtheWrap »

Mortgage and repairs are not the only costs to owning a house. You will likely also have property taxes, insurance, and multiple utilities, so it could still go over your $450 monthly limit.

That being said, it sounds like a good plan especially considering you actually enjoy doing your own repairs and living with roommates.

rube
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Re: Subsidizing mortgage with renters

Post by rube »

Well known strategy at bigger pockets.com but see comments from BeyondtheWrap

blink2ce
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Joined: Wed Jul 15, 2020 1:28 pm

Re: Subsidizing mortgage with renters

Post by blink2ce »

Thanks Rube and BeyondtheWrap!

jacob
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Re: Subsidizing mortgage with renters

Post by jacob »

It's called "house hacking" these days.

blink2ce
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Re: Subsidizing mortgage with renters

Post by blink2ce »

Thanks Jacob!! I searched using that term and found a lot of good resources.

sky
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Re: Subsidizing mortgage with renters

Post by sky »

@blink2ce

I am curious why you chose GR?

blink2ce
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Re: Subsidizing mortgage with renters

Post by blink2ce »

Hi Sky, I haven't chosen any city yet but I mentioned GR just because it is a medium-sized city with some technology jobs and it is possible to buy houses there for $150k pretty easily (or less sometimes, from my research on Zillow). Grand Rapids looks very walkable from Google Maps. Michigan is cold and has lots of forests and great landscapes. These factors are the main things I am looking for.

There are other cities that look good to me too, like Lansing, MI, Ann Arbor, MI, Duluth, MN, Syracuse, NY, and Albany, NY. I want to take a tour of these cities whenever it is advisable to travel again so that I can check them out for myself.

sky
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Re: Subsidizing mortgage with renters

Post by sky »

GR seems to be popular at the moment. If you eventually decide on GR, let me know if I can help. I have lived there several times and know some of the neighborhoods pretty well.

blink2ce
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Re: Subsidizing mortgage with renters

Post by blink2ce »

Thank you Sky! I will keep that in mind.

Frugalitifree
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Re: Subsidizing mortgage with renters

Post by Frugalitifree »

I did this for quite some time and found it very effective. My housemates overpaid my mortgage and I lived with renters a lot of my life so no issue for me on that front. Alas I (happily) found a significant other and we preferred to live w/o others so together we pay the mortgage now(I pay the lion's share- its my property), yet this is about 50% of what we would be paying if renting so it still makes sense right now.

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Lemur
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Re: Subsidizing mortgage with renters

Post by Lemur »

Spouse and I have ben subsidizing our rent (as well as utilities) with my sister for almost 4 years now (everyone is on the landlord lease; nothing illegal lol). Its made a huge difference in savings rate and total dollars...we tracked dollar for dollar since then and we've both saved $56k each (for us; this doesn't even count the increased returns on investments since all savings went to investments). I suppose I can roughly estimate around $65k or so.

If I had to stack list of life decisions....'house hacking' / 'rent hacking' has probably been in top 5 of good decisions.

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