A housing proposition worth considering

19474836759_8a7c88da40_zWhile enjoying coffee with a friend last week, the subject of her annoying roommate came up and an intriguing proposition emerged.

This girlfriend is having an interesting year. She quit her 9-to-5 job to focus on her small business and live a less stressful life. How jealous am I?! In order to maintain this lifestyle, one cost-cutting measure she’s taken is renting out a room in her 2 bedroom / 2 bath condo. Her current tenant isn’t working out and she plans to end his monthly rental agreement soon. She then asked me if I was interested in taking his place.

On the surface, this might seem like the last thing I’d want to do. As I’ve touched upon in a previous post, I love my condo and am quite comfortable living my independent lifestyle in it. However, her suggestion seems worthy of consideration.

  • Could this one move be an excellent way to reduce my expenses, increase my income, and ramp up my savings?
  • Would it allow me the flexibility to take some time off work (AKA my first mini-retirement)?
  • Would it be easier to leave my well-paying job with a long commute for one closer to home that pays less but makes me happier?

I figured the least I could do is take a deeper look.

“Pros” / Financial Gains:

  1. My new rent would be $1,000, down from about $1,750 (mortgage, property tax, and HOA dues). Monthly savings of $750.
  2. Utilities would be included in rent. I currently pay about $130 (electricity, trash, water, internet, and Netflix). Monthly savings of $130.
  3. After a quick search online, it looks like I could rent my condo for about $2,100 per month, which would net me $350.
  4. Her condo is lovely and has all the amenities I need (central A/C, dishwasher, pool), as well as a newly remodeled kitchen.

Potential savings/income is $1,230 per month, or $14,760 per year!

“Cons” / Financial Losses:

  1. Moving costs to the new place, which is only a couple of miles away, are estimated to be $500.
  2. Assuming I would rent my condo unfurnished, I’d sell some older furniture and store my better pieces. I estimate this to be about $125 per month in storage fees. I’ll also explore the possibility of renting furnished.
  3. I would manage my rental, so no additional costs for a property manager. But there are costs that come with vacancies between tenants, damage to the interior, my time spent managing, etc. I do have emergency savings to cover the unexpected. If I move forward, a more detailed analysis of landlord costs will be required.
  4. Potential updates to my condo to make it more renter-friendly. For example, should I replace my temperamental clothes washer or change out the old bedroom carpet? Will my 40-year old A/C kick the bucket with lots of tenant use?
Potential costs are difficult to quantify, but would likely be $1,000 – $3,000 to set this all up.

The biggest question is: How will this impact my lifestyle?

  1. My two cats are welcome in the new condo (deal breaker if they were not).
  2. Loss of some privacy. I would have my own bedroom and bathroom, but the living room and kitchen are shared. I’ve lived on my own for 10 years; would I enjoy sharing space with a friend? Would it get weird when I’m dating someone or would we have sorority-style pillow fights on Friday nights?
  3. The new condo is near my same neighborhood, but a much longer walk to  shops I frequent (mainly Trader Joes and my favorite coffee shop). Although it is walkable to it’s own local shops, restaurants, and bars.
  4. Potential hassle/stress of being a landlord. I could enlist the help of a realtor friend in finding quality tenants. Would I need to form an LLC? Much research is needed on this front.
  5. I wouldn’t have my stuff. Would I feel like a guest in her home, rather than my own comfy space? On the other hand, this could be an excellent opportunity to stretch my minimalist comfort zone!
  6. I would be removed from my home owner’s association (physically away from the building, not kicked out or anything). Formerly, this would be a negative. But all the work and stress I’ve undergone over the past year being on my HOA board has made me decide to step down in January and let other homeowners take the reigns.

After this analysis, I’m not much closer to making a decision (although it is helpful to get these thoughts out). Fortunately, I have a couple of months to consider if this is right for me and then make all the preparations.

(Image: duncan)

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