Monday, May 26, 2014

The perks of rental property and cohousing

For many people, the idea of owning rental property is overwhelming or scary... or both.  We certainly didn't go into home ownership thinking that it would become the primary income for one of us.  But over the years of hosting interns and having paying tenants, we've been able to build some amazing friendships and get ahead on our savings.

Renting our our upstairs guest room and bath, the larger of the two bedrooms upstairs, just seemed to make good financial sense when we really thought about it.  What good was it doing us to be paying $250 a month (the approximate cost of that space by the time we factored in its portion of mortgage, utilities, etc.) for it to only be used a few weekends out of the year?  After we got comfortable with the idea of co-housing, we realized this was really the only way to go for us.  By renting that space out for somewhere between $350-$400 a month, we're able to cover those expenses, plus put some extra into retirement savings and Wubba's savings account.

When we built our home, we always knew we'd finish out the basement into an apartment to use as rental space.  The one bedroom apartment is scheduled to be finished at the end of June, along with a great outdoor space, and we can't wait!  Because this space is totally separate from our home, with a separate entrance and dedicated parking, we know we'll be able to make about $550-$600 a month by renting it out (we could make more if it had shared laundry).

When we're consistently renting out both spaces, it will almost cover our entire mortgage payment, which means that we can contribute more toward that payment of our own money.  Thus, we'll be able to pay off our mortgage earlier than planned (we're already working toward an early payoff by contributing an extra $100/month), which will save us a huge amount over the long haul.  (If you haven't looked into it, do yourself a favor and do so!  It's amazing what a little extra payment will do over the long term, probably saving you over $100,000.)  Of course, this is key to our plan of having a stay at home parent for the next several years.  But it also means that if we continue to do it, then early retirement could be a possibility for both of us, which would be amazing.  And the rental income would be a great supplement to our retirement income, and might even mean that we'd need to save less overall, if we were to redo our projections with this income in mind.

So, what does all this have to do with green living?  Well, we know that by co-housing, we're collectively using fewer resources.  With the upstairs tenant, we share kitchen space, which means that person isn't purchasing kitchen tools, pots and pans, plates, glassware, etc.  It also means that when you consider all that goes into a building, we're using fewer resources in terms of building supplies, etc. rather than having the tenants living in their own single family homes.  We could go on and on about how this facilitates resource sharing and using less resources, but you get the idea.

There are also some wonderful side benefits for us; things we didn't initially anticipate, but have been wonderful for our quality of life.  1)  We're not having to do as much maintenance with the upstairs space, as long as we're choosy about our tenants.  They are required to clean and maintain their space, so it makes our regular cleaning load lighter.  (Of course, there's the cleaning after they move out if they don't do a sufficient job, but we hold their security deposit for just that reason.)  2)  We've made some wonderful friends this way, and it's been fun to learn from other people.  We often share recipes, pick up book recommendations, etc. from our tenants.  It also means that we've got a built in network of people to stay with when we travel.  (Seattle or NYC anyone?  We've got couches or floors to crash on in both locales.)  3)  For our kid(s) (we plan to have at least one more sometime in the future), it means they will share a bedroom.  While this may be tight and lead to a few arguments, we know from lots of anecdotal evidence and scientific research that young children especially tend to sleep better and have a stronger relationship with siblings if they share sleeping space.  4)  It's forced us to declutter and get rid of junk.  We just don't have the storage space anymore.  And it's been a total blessing.  We've been able to sell some of our junk on eBay, and donate most of the rest, which comes back as a tax deduction.  And it's meant less stuff we have to maintain, store, or generally trip over.

It's certainly not for everyone, but we know it's made a huge difference in our quality of life and our financial picture.  Have you ever considered owning rental property?  Co-housing?  Or maybe your college dorm experience was enough for you to write off living with a stranger forever... I'd love to hear from you!

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