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Best ER Method Ever - Get a Free Dream House, and Get Paid to Live There
Old 08-28-2009, 03:13 AM   #1
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Best ER Method Ever - Get a Free Dream House, and Get Paid to Live There

This is my first real post on a web forum ever... but I had to share my little ER "secret" with all you folks. Love the forum, but haven't seen this single biggest ER trick shared on the site... Without it, there’s no way I would have been FIRE’d at 30. It was the single best financial decision of my life.

What I did was buy more house than I needed (5 bedrooms), and I used a home equity line to get every single toy and feature I wanted for it. Usually, that would be a bad idea for ER, but I rent out all 4 extra rooms, and having a dream home with every feature, toy and gadget greatly increases the amout of rent I can charge each of my housemates. I raise the rent every time I have a vacancy and I am amazed that there are always people willing to pay more to live in such a full-featured house.

Its good value for people who don't have any "stuff" because they get all the stuff and toys they could ever want, included in the price of rent--and EACH person is willing to pay the same additional premium even though I only had to buy the gadgets and feature once. I collect more in rent than the monthy payment on the loans and other house expenses, so I essentially get paid to live in my dream home. And with our monthly expenses shared 6 ways, my girlfriend and I basically get an 83% discount on our housekeeper, utilities, DSL, gamefly, netflix, etc. Plus, when we travel the world for more than a few weeks at a time, we can rent out our room as well (if we want) to help out even more with the travel costs (god bless craigslist).

I've met some really cool friends this way too. One taight me to rock climb and wakeboard. Another taught me secrets of budget world travel. Never had a bad experience from a roommate, in part because I have so much demand for spots in the house that I get my pick of the crop. My latest roommate showed up at the interview with a top 10 list of reasons I should pick her to pay me to live in my dream house. It's insane.

Anyhow, I never write on forums, but I thought that any ER forum would be incomplete without this tidbit of experience. I tell people about my situation all the time and try to convince people to do it for themselves, but they never do. Hopefully one of you out there will do it!

Worried about privacy? Most of the time, people are out working or on the computer or TV in their room. There are almost twice as many rooms in the house than there are poeple, so it is statistically impossible to not have a place for privacy. And its nice to have the option to have nice folks to go and hang out with if I want. I've become such close friends with so many quality, hand-chosen people that I wouldn't trade that for anything. Even my girlfriend likes having housemates because she knows it is the key to our FIRE. (In the interest of full and fair disclosure, my first girlfriend was more shortsighted about it, so I had to lowercase-fire her.

Worried about theft? I've never had any problem with my pick of the crop roommates... but anything over your deductible would be covered by insurance, and anytning less than that is chump change in comparison to the rent and expense savings you get each and every day. With the amount I bring in, someone could walk off with my flatscreen TV every week or a full load of groceries every day--and I'd still be better off financially. But again, I've never had any problems at all.

Worried about a messy house? Try an 83% discount on a housekeeper. I couldn't afford a housekeeper on my own, but when I only pay 1/6 of the cost, we can have a houseekeeper to keep the place spotless. I also only have to do 17% of the remaining chores... and if someone doesn't do their share, so what? 33% or 50% of the chores is still less than 100%.

Worried about a problem housemate? Boot them out. You're the landlord. Its your house. I've never had to do it, but its nice to know that I could if need be.

Worried about having other people around your kids? Its certainly better (in so many ways) than leaving your kids with a babysitter or daycare or alone all day while you're out working to pay the mortgage yourself. Use rent to get FIRE'd and you can actually spend time with your kids yourself. Why would your kids be home alone if you're FIRE'd? And unlike day care or a babysitter, you live with the people who are around your kids, so you have a better opportunity to judge their reliability. If you even have one shred of doubt about whether a housemate would be good around your kids, why the heck would you select them to be a housemate when you have the pick of the crop?

Don't like people? Like to walk around naked outside of your bedroom at all hours of the day? I can't help you.

Hope this helps someone out... good luck!
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Old 08-28-2009, 06:41 AM   #2
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I'm glad it is working for you. It sounds like a win-win: You are making money and other folks are probably paying less than they would for a decent apartment.

But--it would never work for me. College and Uncle Sam pretty much cured me of any desire to have roommates who are not family members. I like to come home from work and be free of people and interpersonal drama. Living it 24/7 would just be too much.

But, we're all different and this sounds like a good option for some people.
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Old 08-28-2009, 07:23 AM   #3
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Hey, I lived like that once. But none of us could get a loan for the dream house so we all just shared the rent
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Old 08-28-2009, 08:12 AM   #4
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I am a housemate in a similar situation. I pay a very nominal fee for living expenses, live in a great area, with wonderful people, in a nicer house than I would choose to afford on my own. There are a few drawbacks that are completely outweighed by the pros. A wonderful thing for my ER goals!
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Old 08-28-2009, 08:20 AM   #5
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College cured me of the multiple roommate thing. Oh the characters, in my apt as well as others in the multi-unit house. I think that is when I started a lifetime habit of cynicism about human behavior.
I was considering renting out the lower half of my house when I was on my own some years back, for the same reason of expense sharing.
Like you, I was going to be very stringent about who I would rent to. It never happened, as my solitude situation changed for the better (dh2b).

Glad it's w*rking out for you.
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Old 08-28-2009, 08:26 AM   #6
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Congratulations on finding a way that works for you and allowed you to ER at such a young age! I really think that the key to reaching ER goals is to know yourself thoroughly, and what you are and aren't willing to give up to get there.

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Originally Posted by samclem View Post
College and Uncle Sam pretty much cured me of any desire to have roommates who are not family members.
Same here, except in my case it's any roommates at all and Uncle Sam had nothing to do with it.

I would rather live in a hovel by myself than in the finest mansion with roommates. But this works for 30FIRE, and kudos to him and to all of the others here who have found a personally satisfying way to reach ER.

This morning after sleeping undisturbed until I was ready to get up, with no roommates to awaken me any earlier than that, I am enjoying a long, quiet cup of coffee and listening to the birds, with no roommates to disturb my solitude. My home is my castle, and this is my version of bliss.
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Old 08-28-2009, 09:00 AM   #7
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That sounds pretty awesome. But for my family, I could easily see myself doing just that.

I know a guy from high school that bought a really nice townhouse in the nice part of town, rented out the 3 or 4 bedrooms, and lived in the finished basement. He received more in rent from his roomies than he paid out in the mortgage, so he was living basically free. And each roommate probably paid less than 1/2 the cost of what they would pay were they to actually rent a 1 BR or studio in the same area.

At some point though, there is a certain stigma attached to "having roommates". Works great for 20-somethings and no one bats an eye. But I could see how an older person could have a hard time attracting and retaining a mate (or having a family) if they had roommates like this. And many people value their privacy very highly.

I do think this potential source of revenue is frequently overlooked, and could be (and probably would be) a good plan B or plan C were things to get rough for ER's. I'm sure I could rent out a furnished room in my house and use the rent to pay all utilities for all of us, plus property taxes and insurance on the house.
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Old 08-28-2009, 09:17 AM   #8
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I am so glad that this arrangement is working for you 30Fire....but like others have said, I will never live with roommates again! I lived with these two girls who were my friends and were the MESSIEST, drama-laden b****es ever!
Plus, my home is my place where I can just be.....I don't want to share that with people who I don't really know and there is not enough money that would make it worth my while.
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Old 08-28-2009, 09:23 AM   #9
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It is a great idea and I'm glad it is working for you !
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Old 08-28-2009, 10:28 AM   #10
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What I did was buy more house than I needed (5 bedrooms), and I used a home equity line to get every single toy and feature I wanted for it.
I like your thinking, but I have an even better twist on your method.

Take out a teaser-rate ARM, and when the rate increases cry and wail "I'm losing my home! My American Dream has turned into a nightmare and it's all the fault of greedy bankers and predatory lenders!" Then find a way to get "laid off" by your j*b (hint hint) and simply stop paying your mortgage, enjoy the foreclosure moratorium, declare bankruptcy, wait for Barney Frank to get his cram-down legislation going, and go on TV and enjoy the media pity party.

Then get a job as a financial reporter at the NY Times and write a book about how our greedy, capitalist society is taking advantage of innocent people like you ... you could become a best-selling author and use your income from royalties (along with all the profit you'll reap from selling your house once the principal has been reduced but you can hang onto every dime of profit you make on it) to buy even more real estate and build your empire.

Ah, yes. America. Gotta love it.

(I'm just kidding here, this isn't directed at "you", just that this was the first thing that came to mind when I started reading your post, and when I read "buy more house than I needed" that was the first thing that came to mind. I'm glad you've found a good living arrangement for you. And no, I'm not bitter about the bail outs ... not at all. )
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Old 08-28-2009, 11:21 AM   #11
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Shared accommodations can work great for veterans.

It's not unusual for a group of 2-5 military friends to live together, especially when one or more of them are deployed. They may lose their housing allowance if gone for a long time, but their roommates are watching their stuff while enjoying the extra space.

In the good ol' boomer days it was common for members of opposite crews to share a lease. They'd meet aboard the submarine for a few days of crew turnover every four months or so and then head home for a month of R&R followed by offcrew training before the next crew swap. Depending on rank, some crewmembers received a housing allowance all year long and could easily bank half (or more) of it.

There were also the perpetual rumors of the girlfriend who was considered part of the "fringe benefits" of the shared lease. Not sure whether the benefit was accruing to the girlfriend or to her "Blue & Gold roomates". Of course this was also a two-edged sword...
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Old 08-28-2009, 11:42 AM   #12
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Was that the story of the burned car, the flooded apartment, the drug squad? (or did that guy manage to p*ss off his girlfriend all by himself?)

ta,
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Old 08-28-2009, 11:48 AM   #13
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You must have a lot of parking space for all your roommates' cars! My city would slap me with zoning fines up the wazoo if we tried renting out rooms in our house, so you're lucky you can do it there.
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Old 08-28-2009, 01:38 PM   #14
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Welcome to the Forum, 30FIRE!

Paul Terhorst was my ER guru. In his chapter on “Bare-bones retirement” in “Cashing in on the American Dream” he suggests that if you don’t have enough money to retire, you can consider “bare-bones retirement.” Page 243, “Most important--students and bare bones retirees--share living space with others....sacrifice is a part of bare-bones retirement....”

This living arrangement may not be popular on this board, but I for one, did it until I was about 48 years old, that is, I had a roommate. Cheaper/shared rent was one of the frugal techniques that helped grow my net worth. Communal living is probably the norm all over the world, extended families, even married couples with or without kids are not doing it on their own.

What you describe, 30FIRE, sounds idyllic. Are you really retired if you are acting as a landlord? For that matter, am I really retired since I do some volunteer work, albeit without pay?
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Old 08-28-2009, 02:07 PM   #15
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This is my first real post on a web forum ever... but I had to share my little ER "secret" with all you folks. Love the forum, but haven't seen this single biggest ER trick shared on the site... Without it, there’s no way I would have been FIRE’d at 30. It was the single best financial decision of my life.

What I did was buy more house than I needed (5 bedrooms), and I used a home equity line to get every single toy and feature I wanted for it. Usually, that would be a bad idea for ER, but I rent out all 4 extra rooms, and having a dream home with every feature, toy and gadget greatly increases the amout of rent I can charge each of my housemates. I raise the rent every time I have a vacancy and I am amazed that there are always people willing to pay more to live in such a full-featured house.

Its good value for people who don't have any "stuff" because they get all the stuff and toys they could ever want, included in the price of rent--and EACH person is willing to pay the same additional premium even though I only had to buy the gadgets and feature once. I collect more in rent than the monthy payment on the loans and other house expenses, so I essentially get paid to live in my dream home. And with our monthly expenses shared 6 ways, my girlfriend and I basically get an 83% discount on our housekeeper, utilities, DSL, gamefly, netflix, etc. Plus, when we travel the world for more than a few weeks at a time, we can rent out our room as well (if we want) to help out even more with the travel costs (god bless craigslist).
Very interesting situation.
Didn't notice if you mention the area you are in?
How about some pictures of the Pad?
I would love to see the place.
Steve
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Old 08-28-2009, 02:23 PM   #16
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You must have a lot of parking space for all your roommates' cars! My city would slap me with zoning fines up the wazoo if we tried renting out rooms in our house, so you're lucky you can do it there.
I think our city has an ordinance prohibiting more than 4 unrelated persons living in a single family residence. But how they would ever know, I know not. Maybe if your neighbors ratted you out?

Good point about the cars though. However in my non-HOA governed neighborhood we have ample on street parking available without restriction. That plus I have enough parking for about 10 on-site. Guess it depends on your individual situation.
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Old 08-28-2009, 03:23 PM   #17
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Once in my life shared an old Victorian house, on the Hudson river with private pier, in South Nyack NY. We could not afford a boat, so we rented the pier for some sailing time.

The location and environs were fantastic, the housemates were an oddball bunch. One an ex-seminary student turned piano player, great BS artist, got the gigs. One drummer, working on his degree in between gigs. One corporate shrink, exiled by his wife, and yours truly the techie.

It lasted about a year and a half, the groupies and hangers-on got to be real tiresome, all of which was expertly analyzed by our in house shrink.

It was a good experience, ..... once.
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Old 08-28-2009, 03:32 PM   #18
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Was that the story of the burned car, the flooded apartment, the drug squad? (or did that guy manage to p*ss off his girlfriend all by himself?)
ta,
mew
Yes. Never break up with your girlfriend and kick her out of "your" house on the night before you leave the country for four months.

Or at least change the locks.

Every submarine homeport has at least one of these stories. Sometimes every crew...
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Old 08-28-2009, 03:57 PM   #19
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I think your choice is great, as long as you can find great room mates, that don't drive you crazy. Also, as others mentioned, you are still young and adaptable. As you get older I think you tend to want to have things your way, and are less adaptable.

I did it once, only with one person. She was nice enough, but was a talker and that drove me crazy. But the financial savings wasn't as great as yours, so when she left, I never tried again.
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Old 08-28-2009, 04:29 PM   #20
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There were also the perpetual rumors of the girlfriend who was considered part of the "fringe benefits" of the shared lease. Not sure whether the benefit was accruing to the girlfriend or to her "Blue & Gold roomates". Of course this was also a two-edged sword...
Takes the term "hot bunking" to a new level.
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