Author Topic: Move out with roommates or continue to live in parents basement & invest?  (Read 6051 times)


  • Bristles
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Hi everybody. I'll try to keep this as concrete as possible.

About me.
24 years old
will start my masters degree in finance (will cost me $28k across 1.5 years)
Current salary $35k (will continue making this throughout my schooling)
Roth IRA $29k
Individual Account $51k
Loans = Car. $7500, $100 monthly.
currently live for free at my parents house.  They don't even charge me for the food I eat.

I've been itching to get a place for a while now, and my friend just asked me if I want to move out in October. I understand that housing isn't technically an investment, but with roommates paying you, it is.

I am a little concerned with the idea that I have no idea where I'll work in 1.5 years after my masters, but at the same time I could always rent out this place I get & buy another house closer to my new work.

pulling numbers out of my ass...

House loan = $225k
Int Rate = 3.125%
Monthly Payment = $1567
Elecricity = $150
Gas = $50
Internet = $40
other expenses that I can't think of (PMI?) = $100

My plan is 2 roommates at $500 each (utilities included?)

Revenue = $1000 - utilties = $660.

1567 - 660 = 907 negative cash flow.

Although I have negative cash flow, I'm getting an estimated 72% roi... But not so fast, I'm not calculating the 3.125% interest, but I feel like the appreciation of my house will counter that (read an article online that real estate has gained 5% average in the last 20 years). 

I'm also not considering anything breaking... So take 330 (half of my profit) dedicated for expenses (new roof, other BS I have to fix, etc).  I'm still at 36% ROI... I live for free, expenses paid on behalf of my 2 roommates, & make more money than I can in the market?

I have to be missing something?


  • Bristles
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Down payment.  Bank claims "as little as 3.5%", Lets say I put 10% down.


907 * 12 = $10884 (this is the negative cash flow I have to put into the house).

$330 * 12 = $3960 profit (even setting aside $3960 a year for expenses).

11.86% ROI (3960/(10884+22500)...

If I had my finance calculator on me I could get the exact ROI (I did it very, very lazy, I know). 

So since I have 1 friend who is offering to live with me... Should I take advantage of this opportunity?


  • Walrus Stache
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Real estate appreciates at approximately the rate of inflation over the long run. It's not an "investment" unless you are renting it out to someone (and turning a monthly profit). It can be a good idea to buy a place to live in if it's cheaper to buy than rent. But in your case the situation is the opposite. You would be far better off financially saving all this money and investing it in the stock market for the long run. Now, if you would prefer to have a house with roommates instead of living with your parents, you can certainly do that. But realize that your preference is costing you over $1k/month, and exposing you to a bunch of risk (maintenance costs, housing market declines, roommate problems, roommates not paying rent, etc).

You're also forgetting the cost to sell the house (frequently 10% of the sale price).


  • Handlebar Stache
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will start my masters degree in finance
pulling numbers out of my ass...

Hmmm, looks like you are training for a profession as a financial advisor ;-)

My suggestion is not to buy the place. You need to keep a house for at least 5 years before you can break even on the selling costs (approx 6-8%).

You do not know where you are planning to go, so why be anchored by this house ?


  • 5 O'Clock Shadow
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I would recommend staying at home til you are done with school. If you do decide to buy, why buy $225k house? If you want to be a landlord why not get a 2 or 3 family house and rent out one room in your unit and the other unit(s)?

Around here (CT), you can get a freshly renovated 3 family for about $200K that is ready to rent and give you positive cashflow. In other parts of the country you can do even better.


  • Handlebar Stache
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Only way I would even consider this is if you can get a house that you can rent, cash flow positive, once you move out. Otherwise, just live at home for 1.5 years or rent a place of your own. A 1 bdrm apartment is like $600/month, if living with parents is hurting your style.


  • Walrus Stache
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Staying at home will allow you to save, invest, and have freedom to take a job halfway across the country if you so chose.

What if you buy this house and suddenly it needs a new roof? Or something else that requires a big cash outlay?

What if interest rates rocket over the next 2 years and suddenly house prices cool off and you are under water?

Not things I would want to deal with while working a job AND getting a masters. Just my $.02


  • Bristles
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Hm... You guys are probably right.  Honestly I have it pretty easy at my parents house as well, which will let me have more time to focus in school.  I guess I saw this as an opportunity to make money while living on my own.  I'll stay put & just invest in the market.

Thanks guys!


  • Bristles
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Hmmm, looks like you are training for a profession as a financial advisor ;-)

I actually work for financial advisors!  Haha!  They make up at least 50% of the things they say. Haha.


  • Pencil Stache
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When I graduated college in 1991, I was fortunate to be making $40K. (I went balls out on internships in college, knew exactly what I wanted to do).

Mom had died four months earlier. Dad asked if I could come back home since youngest sister was just 14 and he was lost.

I stayed four years until she graduated, banked probably 80-90 percent of my money. Did freelance work, too.

Expedited the FIRE process, not that I'm there yet. Of course, I didn't need to return home, which changed the dynamic. Would have been different had I needed to come back for financial reasons.

I'd stay home.


  • Handlebar Stache
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- Google says house rates are 3.875% today (good credit), not 3.125%
- Consider if the roommates move out, how you'd cover your share
- Consider what you do if you discover your friends while awesome, are terrible roommates, and the effect that could have on going into this whole house buying arrangement and your friendship.
- Your roommates will likely want cable.  It's difficult to avoid paying for a portion then.
- You need to include insurance, taxes
- Do you live in the south?  Your electric is so high!  (Ours is $70 at the high point - and that with a really inefficient fridge.)
- PMI is a ridiculous charge for not having enough money down.  Avoid it.
- Don't buy if you won't be in a place for 5 years.

If you want to live with your friends, I'd suggest renting with them instead.

And shesh, regardless, pay for your own groceries!


  • Guest
If you get along great with your parents, I also say that you should live with your parents. Save like crazy for your FI and House Downpayment purchase.


  • 5 O'Clock Shadow
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I say living with parents is fine, BUT IMO unless you didn't have a job you should offer to pay for your living expenses (at least pitch in for food and utilities). I'm not saying there's anything wrong with living with your parents free of charge, but especially if they aren't FIRE yet, I personally wouldn't want to put the burden of extra expenses on my own parents. And they would still be doing you a great favor by letting you live rent-free

Again just my 2 cents.


  • Stubble
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What I hate about MOST all mortgage calculators is they never include property taxes.

And it appears you did not include property taxes.  These can make your monthly investment significantly higher. 


  • 5 O'Clock Shadow
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A house loan of $225K on a $35K salary won't get appproved. An underwriter also won't include roommate income as part of your qualifications.
« Last Edit: July 24, 2015, 06:10:11 PM by Stupendous »

Frankies Girl

  • Magnum Stache
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I'm confused... do you mean that you would buy a house by yourself and your friend(s) would live with you and pay you rent? (hell no)
Or would you go in together to buy a house as co-owners? (dear god no)

Either move would be pretty horrible in my opinion (if you could even be approved for a decent house loan on $35k salary), but then I do think you have a great setup right now as long as you like your parents okay and no one is feeling resentful or taken advantage of. I do think you should be paying some nominal amount to your parents to offset the food and utilities you consume just for the principle of the thing, but there is absolutely nothing wrong with staying with your parents and concentrating on school and job and saving like crazy.

And today I was just thinking how nice it would be to be a renter again... the gas company finally came out this morning to repair the corroded pipe that was leaking gas, and I was worried about even being able to cook dinner if they didn't come out to finish, I had to set up sprinklers all over my (dying) yard so the grass doesn't turn into dust, I broke a window screen while washing windows, and noticed that we need to replace some rotted fascia board near a soffit vent (which is just another reminder that a roof replacement in the near future). That was just today. Owning a home can really, really suck sometimes - it is constant maintenance, so you either pay someone to do it, do it yourself, or ignore it until it becomes a big expensive problem which then loops back to have to pay someone to do it or do it yourself... sigh.


  • Bristles
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I've been itching to get a place for a while now, and my friend just asked me if I want to move out in October. I understand that housing isn't technically an investment, but with roommates paying you, it is.

So even if you did get this place, are your friends guaranteeing they'd stay with you for X amount of time? Red Flag!!!  What happens if you don't do well as room mates despite being friends and they bail?  Often happens.  You're stuck with a BIG payment potentially all by yourself.  And finding new room mates is hard.  Your 'friends' want you to do all the heavy lifting.  Easy for them to say move out, not so much for you.  you're the one with the cement shoes on.

Also, what if the roof leaks, the foundation needs a repair, the fridge breaks down or any of 100 little things need maintenance?  Would you be able to cover those expenses?  I had a friend just have a $10k basement/sewer repair.  She sure wasn't expecting that

Also, have you added up taxes, water, electricity, gas, insurance, cable, internet, etc etc etc into those estimates? You only got a few of those covered in your estimates.  That's a huge cost to most places even if split.  Its not just the mortgage to worry about.

Also with you not being sure you'll even be working in that city when you are done your program that's another huge red flag.  all this for only 18 months?  Red flag again.  Stay at home, wish em luck, and save your money for when you're done your program and find a job in which ever city you want then look at a house when your job is stable


  • Magnum Stache
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Likely moving in a couple of years for a job?

Oh FUCK NO don't buy a house. Transaction costs will easily eat 8+%* of the value of the house. So, presume on a $250k house that you are flushing $20k+ down the toilet as soon as you sign for it. Yeah, most of it is taken out of your ass at the back end when you sell it - doesn't matter. It's effectively gone already.

*6% to Realtors(tm). 0.5-1% for title insurance. 1% mortgage origination fee. 1-2% prepping the house to sell. 0.5% on various inspections, lawyers, filing fees, et cetera.


  • Bristles
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Hey guys!  Sorry I haven’t replied recently… Life got busy!

To answer all questions in one post….

Yes, I offer to pay for my living expenses for my parents.  They consistently say no, so I found I can pay things off in other ways.  I’d changed every bulb to LED, bought a nest thermostat, etc to make their bills smaller.  We received a bill a couple days ago, and it’s literally the smallest it’s ever been in the last 10 years.  While that probably still isn’t enough… I do need to just sneak money to them.  It’s honestly weird that they refuse to take my money.  Just throwing this out there so I don’t look like an absolute cheap ass (this is probably another factor in moving out).

As tvan pointed out… I did miss calculating property taxes.

It seems that after all the number crunching… I’m breaking even at best.  For the amount of risk… It doesn’t seem to make sense.  But for some reason I keep staring at housing… Looking for something to buy. Haha.  wtf.

Thanks everyone for commenting.  Was going to get preapproved for a loan today, but I'll hold off for another 2 years.


  • Bristles
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Why not move out with the friends, but rent rather than buy?  You're 24, time to leave the nest!


  • Magnum Stache
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If you want to move out of your parents house, that's fine. Great even. But do not buy a place until you know you're willing to be there minimum 5 years. Rent something. You can even rent a house or townhouse!

As for contributing to your parents - good for you for trying. Have a discussion with them, explain that it's making you feel like a loser that you're not paying rent or anything. Maybe they really don't need the money. If not, then sock it into savings/investments so that when you're more settled you'll have a 20% down payment.

Plus, you're going to grad school. Avoid student loans!