Rent vs Own House with roomates?

[BurnHard]

Should be easy enough to figure out, but all this punching to the head has left me with a useless and unused math degree and lots of stupid questions.

Rent vs. Own - tons of calculators out there that do the math for you.
But what if I have roommates (friends), they pay a large chunk of the monthly mortgage, vs. renting with same roommates?

Say, $400k loan, 20% down, 5% 30year, roommates pay 2/3rds of mortgage - vs. sharing a $2000/month rental with 3 people?

[belgian]

Only questions you really have to answer are:

1) will it be worth the same/more when you sell it?
2) will you be able to sell it when you need to?

If the answers to both are yes then your choice is clear.

[BeanDip4All]

how long do you plan to stay in one spot? the duration of your remaining in the house comes heavily into play here...

[hutash]

I am too lazy to do the math, but what you charge roommatesmis the gong rate for the area, and has nothing to do with your mortgage. If the numbers crunch right the three roommates should take care near 100% of your payment.

[BurnHard]

Only questions you really have to answer are:

1) will it be worth the same/more when you sell it?
2) will you be able to sell it when you need to?

If the answers to both are yes then your choice is clear.

Well, assuming the real estate market is near bottom, and I keep the place several decades, I'd think value would go up or at least maintain.

how long do you plan to stay in one spot? the duration of your remaining in the house comes heavily into play here...

Difficult to say. Maybe 2-3 years, maybe more. But the idea would be to keep the place, rent it out if I plan on traveling or living elsewhere for a while, but I will always come back to Boulder at least for the foreseeable ~10-15 years future...

[Sirshredalot]

A significant consideration should be the tax consequences of making the house 2/3 a rental property. Also, your transaction costs associated with buying and selling the house can look pretty large if you're only talking a 2 or 3 year time period that you'd own. Just some shit to think over.

[Dubbs]

A significant consideration should be the tax consequences of making the house 2/3 a rental property. Also, your transaction costs associated with buying and selling the house can look pretty large if you're only talking a 2 or 3 year time period that you'd own. Just some shit to think over.

Why would you ever report the income? Seems like that's a can of worms that could easily be avoided. Agreed on the transaction costs, though. I did a similar thing. It's great to have other people pay some of your mortgage. Just be sure to get a good price. You really make your money by negotiating a good purchase price. Don't bank on appreciation.

[Trainwreck]

If the numbers crunch right the three roommates should take care near 100% of your payment.

This.

Why would you ever report the income?

This too.

Since you already have the room mates and are thinking long term I would go for it. But take out a mortgage you can afford yourself just in case.

[MakeFast]

But take out a mortgage you can afford yourself just in case.

This, a thousand times this.

I say go for it as long as you can get a mortgage you can afford yourself.

[Cono Este]

Never sell a house. If you move, save up for a new one and rent the old one.

[Microcosm]

Why would you ever report the income? Seems like that's a can of worms that could easily be avoided. Agreed on the transaction costs, though. I did a similar thing. It's great to have other people pay some of your mortgage. Just be sure to get a good price. You really make your money by negotiating a good purchase price. Don't bank on appreciation.

I think this would depend on how trustworthy the roommates are. A contract which says "you owe me $$$" is never a bad thing. I assume you have to report the income to have a legitimate contract, but I could very well be wrong.

[PowTron]

You have $80,000 cash sitting around to through into this house? If that is so, why not buy a house 10 minutes away for half the price, then save yourself a shit ton of money?

[Danno]

But take out a mortgage you can afford yourself just in case.

This x1000.

I have gone this route, had roommates for the first few years I owned the house. But you need to be prepared to still pay the mortgage if they all flake. Also, it may seem like it's exactly the same as renting with roommates, but it is not. You become the landlord, everything falls on you, the relationships change. I had roommates for many years as a co-renter, had some conflicts but mostly good, then as a landlord had back-to-back psychos, first guy stole from me and the next guy was so fucking aggro and crazy that I had to kick him out. I don't have roommates anymore (unless you count my fiancee).

[Danno]

I think this would depend on how trustworthy the roommates are. A contract which says "you owe me $$$" is never a bad thing. I assume you have to report the income to have a legitimate contract, but I could very well be wrong.

Huh? A valid and enforceable contract between two people has nothing to do with IRS reporting.

[4matic]

Why would you ever report the income? Seems like that's a can of worms that could easily be avoided. Agreed on the transaction costs, though. I did a similar thing. It's great to have other people pay some of your mortgage. Just be sure to get a good price. You really make your money by negotiating a good purchase price. Don't bank on appreciation.

You need to be sure that your roommates don't claim a renters credit on their state returns. If they do it is a traceable item all the way to the IRS. I suppose you can structure the payments as expenses. I've never heard of anyone getting caught but tax budgets are tight.

[ass-to-mouth]

20% down is silly. FTHB FHA loans only require 3.5% down. Colorado is a non-recourse state. So if the housing market continues to tank just walk away. Go for it!

[BurnHard]

Damn lots of advice since last night, thanks!

1. I wouldn't plan on selling after 2-3 years. I would live there myself for 2-3 years, then rent out while I travel or live elsewhere. 10 years later I would prolly live there again.

2. Current roommates are very good friends and been roommates for years. I trust them. One of them just started a 6-8 year physics PhD program, he aint going anywhere, he'd be likely to rent from me for a long time. Not to mention Boulder has a strong rental market. No worries with IRS with current roommates, may become a worry if I get random roommates, dunno.

3. I definitely plan on taking out a mortgage I can 100% afford on my own.

4. Buying 10 minutes outside of Boulder would save me some money (definitely not 50% cheaper!) but would have a weaker rental market. Not to mention I wanna live IN Boulder - willing to pay the price, especially if it's a property I plan on keeping for a long time.

5. Definitely planning on keeping the property and fully turning it into a rental property down the road if I move away.


EDIT: This won't happen for another year and a half or so ... I have shitty credit, need to fix it, and I only have 6 months employment history before which I was unemployed for over a year. And no, don't have $80k yet, saving ...

[XXX-er]

are you saying own a house with roommates OR own a house and have roomates pay you who becomes the LL ?

Owning a house with someone you are not married to is not a good Idea from what I have seen cuz any kind of hassle you are as good as married

owning a house and having roomates pay you rent is OK cuz if there are any problems they leave and you just get new roomates

having a house with a suite is the BEST IME ,my last house had a basement suite and I made 40K tax free over 6 years So I just put 50% down on a house close to downtown (lower travel costs)which is basicly 2 selfcontained 2 bedroom apartments with seperate entrances & seperate laundry so I will live in the top while the bottom rent pays the mortgage and probably half of the monthly expenses ... SO my net personal housing cost is estimated at <300$

I am going to claim the income because i can write off at least 50% of the expenses, there will be no capitol gains if I sell cuz its a principle res

IME if you are there to watch people they don't fuck with your house and I am not even going to advertise ... only rent to people I know by word of mouth



come to think of it buying a house with people I was married to didn't work either

[Danno]

4. Buying 10 minutes outside of Boulder would save me some money (definitely not 50% cheaper!) but would have a weaker rental market. Not to mention I wanna live IN Boulder - willing to pay the price, especially if it's a property I plan on keeping for a long time.

Buying in Boulder is worth the premium, both from a QoL standpoint and from an investment standpoint. As you are probably aware, though, there really isn't a "near bottom" in this market. It continues to rise for the most part, issue is how fast it rises. My home hasn't really lost any value during this "housing crash" and has appreciated quite a bit over the 6 years I have owned it. So you should be aware that the home you can buy now for $400k now may not be available anywhere near that price 18 months from now.

[BurnHard]

are you saying own a house with roommates OR own a house and have roomates pay you who becomes the LL ?

Owning a house with someone you are not married to is not a good Idea from what I have seen cuz any kind of hassle you are as good as married

owning a house and having roomates pay you rent is OK cuz if there are any problems they leave and you just get new roomates

having a house with a suite is the BEST IME ,my last house had a basement suite and I made 40K tax free over 6 years So I just put 50% down on a house close to downtown (lower travel costs)which is basicly 2 selfcontained 2 bedroom apartments with seperate entrances & seperate laundry so I will live in the top while the bottom rent pays the mortgage and probably half of the monthly expenses ... SO my net personal housing cost is estimated at <300$

I am going to claim the income because i can write off at least 50% of the expenses, there will be no capitol gains if I sell cuz its a principle res

IME if you are there to watch people they don't fuck with your house and I am not even going to advertise ... only rent to people I know by word of mouth



come to think of it buying a house with people I was married to didn't work either

LOL

Thansk for the input.
Latter scenario - I buy the house, I rent part of it out to roommates. Having a separate suite actually sounds like an awesome idea, makes renting even easier ...

[BurnHard]

Buying in Boulder is worth the premium, both from a QoL standpoint and from an investment standpoint. As you are probably aware, though, there really isn't a "near bottom" in this market. It continues to rise for the most part, issue is how fast it rises. My home hasn't really lost any value during this "housing crash" and has appreciated quite a bit over the 6 years I have owned it. So you should be aware that the home you can buy now for $400k now may not be available anywhere near that price 18 months from now.

Yeah. Not much I can do about it now other than rob a bank. Made shitty decisions in the past with my credit (mostly medical collections related, didn't have any consumer credit problems), it'll take a while to fix. Should probably talk to a mortgage broker to figure out what needs to be fixed and how long it could take.

[XXX-er]

the new tenant is a good ski bud yeah he is opposed to paying for me to live but is REALLY stoked to be only 2 blocks from work/the bars/shop/resturants and the good mtnbiking rightthere to go for a quick lunch time burn

sure his rent was 250$ cheaper out of town BUT he spent 300-600$ a month on fuel to drive everywhere ,his bar bills are high cuz instead of driving home after work he used to stick around town after work to eat and drink in the bar before going out at night socially and then he worried if he is gona hit a police roadblock driving home to his ?CHEAP? out of town rental which would cost him 2K minimum for blowing over .

IMO you must consider ALL costs to living out of town ,I was spending 150$ a month on fuel which is gona be reduced to 50$

20$ to thro new tires on the old townie bike ... big savings

[4matic]

Yeah. Not much I can do about it now other than rob a bank. Made shitty decisions in the past with my credit (mostly medical collections related, didn't have any consumer credit problems), it'll take a while to fix. Should probably talk to a mortgage broker to figure out what needs to be fixed and how long it could take.

No need to talk to a mortgage broker, he'll just charge you up for a credit report. The only way to fix it is pay your delinquent bills and ask the creditor to note it on your report. A high cash down is the only way to fix it.

[Downbound Train]

Room mates....Paying CASH. No brainer.

I wouldn't put a lot of money down. What if you put 20% down and the house drops 20%. Pooooof..Gone.

I'd rather have a little higher payment and keep my cash in something else.

[PowTron]

I agree property value and such is much more likely to hold in Boulder proper, just don't count on that for sure. Many people never thought we would see the value of our homes drop as much as they already have in Colorado, and while I would like to think it is the bottom, who knows.

Every foreclosure, every short sale around you...they will drop the value of YOUR home as well. I recommended buying outside a bit if you already had a chunk of cash laying around that would pay for a large portion of the house, then you could make money back and then some by charging rent and wipe out your mortgage FAST.

FWIW, the value of my home (not anywhere NEAR Boulder, but still in what was considered a "safe" market) has dropped 33K in the last 18 months...fucking awesome, let me tell you.