Author Topic: Advice on a Renting Situation  (Read 3514 times)

darkshark16

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Advice on a Renting Situation
« on: August 30, 2015, 06:35:25 AM »
Hi all,

So here's my current situation, my parents graciously put down 30k on a 118k house for me to live in and for most of the past 2 years I managed to do this quite well, living with a roommate only paying $400 a month. My parents aren't really charging me anything extra on top of the mortgage, which is nice to rent from someone that isn't profiting off you and keeping the funds in the family, well besides the interest.

Here's my dilemma, my roommate is moving out this weekend and getting married on a whim. He told me he was moving just 2 weeks ago and I've kinda been shellshocked since. My rent is now going to double to $800 a month. I wish I could get a new roommate but because my family put down the deposit, they ONLY want me living with someone I know and that they approve of. Currently there's no one that fits the bill here. I've checked with all my close friends already.

So here are my options as I see them:

1) I could stay where I am paying the extra on the house. It's just an 8 mile drive to work, it's in a great location, and it's a place I could see myself buckling down for the next decade or three and starting a family in. I have zero debt, am maxing out both my Roth and pension plans and feel like those two will be more than enough to accomplish my goals for retirement. (my work offers a pension instead of a matching 401k, their 401ks that they do offer are lousy with high fees, no match, and I'm in a low enough tax bracket that there's not as much incentive for me to invest there.) The only thing that irks me with this setup is that I can't save more than around $50 a month into a taxable fund to serve as an extra emergency fund or help pay for large upcoming purchases that may hit me down the road (marriage, kids, lasik). But I am in a entry level position at work and see myself moving to a higher paid one that would allow for me to invest in a taxable fund in a couple years or so. And who knows, around that time or earlier a roommate may just pop up and I'll go back down to paying the $400 a month.

2) Probably the most Mustachian option (and the one that I'm sure many of you will nod your heads to) is to get out of the house and get an apt right on top of work. Well, I work at a state university and all the apts in the area are overpriced and surrounded by college kids. Most in the area go for well over $800 a month, the cheapest I could find was 750 and would allow me to bike to work, so I'd probably save about 100 there a month over living alone in the house. But the apts are older and the area is a little questionable, I read some reviews of car break-ins and bikes being stolen. The only way this would make more sense to me is if I sold my car for 13k and bought an older car for 7k and invested the 6k difference. I'm not sure I want to do that though because I have a 2014 car that is paid for and still under warranty for the next 8.5 years (thanks Hyundai!) and I planned on keeping it for well beyond that.

3) I get a studio apt in the area I'm living in now and pay $650ish a month. Here I would probably save around 200 more a month that could go into a taxable account.

So on one side I stay in the house and am still set for retirement, but I worry a little more over big purchases that could loom in the future, or I get an apt and save 1-200 a month that could go into a taxable account to have those purchases covered, except then on top of those big purchases, I may also be adding in saving for a house downpayment down the road, and be right back to square one. I do like my setup now how I'm renting from my parents and not paying much extra on top of the mortgage and would prefer it to an apt that keeps raising their rent each time I renew the lease. Apt prices are definitely on the rise in my city, in just the two years I've lived in the house I've seen the average 1br rate (according to numbeo.com) jumped from 650 to 740. What do you think I should do? Thanks up front for reading and commenting with your advice/thoughts.

« Last Edit: August 30, 2015, 06:45:13 AM by darkshark16 »

firewalker

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Re: Advice on a Renting Situation
« Reply #1 on: August 30, 2015, 06:57:41 AM »
You say you would be reduced to 50 bucks a month savings. That tells me you have been saving 450 per month for about 24 months or about $10,000.00 so far. If so, you can afford to hold off on jumping ship. Keep your eye out for new roomie options and keep saving what you can.

Kaikou

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Re: Advice on a Renting Situation
« Reply #2 on: August 30, 2015, 07:15:08 AM »
So is the house yours or what?

darkshark16

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Re: Advice on a Renting Situation
« Reply #3 on: August 30, 2015, 07:24:47 AM »
Thanks for the assurance firewalker, I will still be able to max out my roth at 450 a month but outside of that only be left with an additional savings of 50 to go into a taxable fund. so I think you're right maybe I shouldn't look to abandon ship so soon. Yesterday was a wake up call for me on apartment prices when I was shopping near my work area and seeing 1 bedrooms go for $900-1k.

darkshark16

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Re: Advice on a Renting Situation
« Reply #4 on: August 30, 2015, 07:27:33 AM »
Kaikou,

My parents said they bought the house for me, but it's in their name and I rent it from them. They put down the 30k and are not asking for that back, but maybe when I'm more established in my 40s or 50s I would like to pay them back/buy it from them and have the house in my name. If I left the house, I wouldn't be getting anything for it, the 30k would go back to my parents, as would any money that I've put into it thus far.

Kaikou

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Re: Advice on a Renting Situation
« Reply #5 on: August 30, 2015, 07:46:32 AM »
Kaikou,

My parents said they bought the house for me, but it's in their name and I rent it from them. They put down the 30k and are not asking for that back, but maybe when I'm more established in my 40s or 50s I would like to pay them back/buy it from them and have the house in my name. If I left the house, I wouldn't be getting anything for it, the 30k would go back to my parents, as would any money that I've put into it thus far.

So the rent that's paid every month goes towards the mortgage? And if you pay the whole mortgage then it's your house? But if you leave early the house will be sold with mommy and daddy keeping all the change?


If what I outlined above is true, I'd be gone. Seems like you are too tied down with your parents. Why wouldn't they just gift you the 30k? The benefit is for them, which is okay if you SEE it that way.

Are you going to stay at this college?

Also more importantly will your future SO be on board with this arrangement? Personally I would want no part of it. Unless you planned to pay it off asap to reap the benefit.

What is the guarantor that your parents will be giving you the house once paid? Do they realistically expect their money back?

darkshark16

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Re: Advice on a Renting Situation
« Reply #6 on: August 30, 2015, 08:09:49 AM »
Yes the 800 rent that I pay is the full cost of the mortgage, and if I pay the whole mortgage then it's my house, but yeah its in their name so they would keep the change if I left, much like an apartment would too.

I have a good relationship with my family and they did the same for my brother and bought him a house which he now lives in happily with his wife. They said they'd rather invest some of their money in their children and that they aren't looking to make profit off of us. Most houses in my neighborhood rent for 12-1400 so I kind of see it as a benefit to me as well because I'm getting the house at a much lower rate than the market price and I'm thinking that I'd rather pay my parents and keep the cash in the family rather than to some apartment complex that is looking to get the most out of a bottom line.

I am planning on staying at the college, at least for the next few years and then I'll look for a higher position with the university or look somewhere else if the pay is much higher, but right now I don't have much experience in my field and as it stands I like my job, it's a very stress-free university environment that I believe would be much less stress than working for a private corporation. I have to stay in state to keep the pension and the cost of living is pretty low here compared to other big cities with state universities.

if my future SO is on board with the arrangement then great, but if she's not, then we could still leave since were renting and I guess I wouldn't be much worse off than if I had just gone to an apartment. If she wants to pay it off and have it in our name then I would imagine this would also be more easily done on a dual income.

My parents are realistic and may eventually want the 30k back for what they invested into the house. But they also like to be secret about their generosity and have done things in the past where they have surprised me with something free that they had first said they wanted to charge me for, so I could see it going either way in the future with them eventually just giving me the house when paid off and not asking for the 30k back or just asking for that amount much later on down the road.

Side note, this whole situation started a couple years ago when someone tried forced entry on the apartment I was living in while I was in the apartment, it scared the hell out of me and I never slept the same in that apartment ever since. So it was then that I decided on living in the house and moved in with a roomie.
« Last Edit: August 30, 2015, 08:11:30 AM by darkshark16 »

music lover

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Re: Advice on a Renting Situation
« Reply #7 on: August 30, 2015, 08:53:02 AM »
Kaikou,

My parents said they bought the house for me, but it's in their name and I rent it from them. They put down the 30k and are not asking for that back, but maybe when I'm more established in my 40s or 50s I would like to pay them back/buy it from them and have the house in my name. If I left the house, I wouldn't be getting anything for it, the 30k would go back to my parents, as would any money that I've put into it thus far.

So the rent that's paid every month goes towards the mortgage? And if you pay the whole mortgage then it's your house? But if you leave early the house will be sold with mommy and daddy keeping all the change?


If what I outlined above is true, I'd be gone. Seems like you are too tied down with your parents. Why wouldn't they just gift you the 30k? The benefit is for them, which is okay if you SEE it that way.

Are you going to stay at this college?

Also more importantly will your future SO be on board with this arrangement? Personally I would want no part of it. Unless you planned to pay it off asap to reap the benefit.

What is the guarantor that your parents will be giving you the house once paid? Do they realistically expect their money back?

I see it the other way...the parents generously provided a $30k down payment and are "renting" the house to their child for less than market value. Once the house is paid off it is his/hers to keep. An apartment would cost within $100 of the current monthly payment, so there is no benefit to moving because all the built in equity PLUS the $30k down payment would be lost....for a mere $100 a month.

To me it's a no brainer...I would stay and pay off the house.
« Last Edit: August 30, 2015, 08:55:30 AM by music lover »

lbmustache

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Re: Advice on a Renting Situation
« Reply #8 on: August 30, 2015, 10:07:01 AM »
Stay in your current place and keep looking for a roommate. You will meet more people at school and can possibly find someone new.

stashing_it

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Re: Advice on a Renting Situation
« Reply #9 on: August 30, 2015, 10:07:45 AM »
I wish I could get a new roommate but because my family put down the deposit, they ONLY want me living with someone I know and that they approve of. Currently there's no one that fits the bill here. I've checked with all my close friends already.

For me, this is what needs to change.    In my opinion your parents need to be more flexible about who is your roommate.    After all, you will still be there so it is unlikely this person will trash the house without your knowledge

It sounds like $400 rent for the area is well below market rate, so I think you would be able to find another roommate if you weren't restricted to only people they know.

What would your parents do if you said you couldn't afford to live there and were moving out ?    Would they sell the house, or rent it to another person, said person likely someone who they didn't know well ?


While you were getting another roommate, I'd consider increasing their portion of the rent.  The $400 rent is your parents subsidizing you.  You don't necessarily need to share that with a roommate.   I might go  $500 (them) and $300 (you)  or $600 and $200   depending on what the market rate is.      If they ask why, it's because you own the house, they are renting from you at close to the market rate, and you are paying the remaining mortgage to the bank

music lover

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Re: Advice on a Renting Situation
« Reply #10 on: August 30, 2015, 10:52:21 AM »
While you were getting another roommate, I'd consider increasing their portion of the rent.  The $400 rent is your parents subsidizing you.  You don't necessarily need to share that with a roommate.   I might go  $500 (them) and $300 (you)  or $600 and $200   depending on what the market rate is.      If they ask why, it's because you own the house, they are renting from you at close to the market rate, and you are paying the remaining mortgage to the bank

I agree 100%. There is no need to split the cost equally or to even tell a potential roommate what the OP is paying. That is none of their business, and, in fact, I wouldn't even tell them the details. They are simply renting a room, not sharing in the purchase of a house. Choose a rent close to fair market value, and potential renters have the option to take it or leave it.
« Last Edit: August 30, 2015, 10:54:25 AM by music lover »

darkshark16

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Re: Advice on a Renting Situation
« Reply #11 on: August 30, 2015, 12:43:41 PM »
Thanks for all the great feedback guys!

I think I will stay put for now and not resort into flight mode haha. I'll keep my eyes peeled for a new roommate to have move in with me. What happened with this last roommate was he was a friend of a friend and my parents just asked to meet him and ultimately they approved and it worked out. So I think as long as they get to meet him and see that he's not a psycho, they should probably be okay with it. :)

If I were to move out my parents would just sell the house over renting it out to people they didn't know. They said they got the house for me and not to rent out to other people—unless I was living there.

I guess I need to brush up on my networking skills and find some nice people that need a place to live.

dess1313

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Re: Advice on a Renting Situation
« Reply #12 on: August 30, 2015, 06:43:11 PM »
i agree.  the long term value is staying in the house.  Your future outcome looks positive, this is just a short term crunch.  Most definitely up the rent if you're not already splitting utilities, make sure you get the best out of the situation.  This will give you more padding for future room mate splits