How to Save $5000 a Year — As a Homeowner or a Renter
Published on - December 23rd, 2008 (by J.D. Roth) J.D. is on vacation. This is a guest post from Alison Wiley, who writes about more joy and less consumption at Diamond-Cut Life.
Friendly married couple, both professionals in sustainability, seeks one competent, friendly person to serve as Home & Garden Manager in exchange for free rent.
That’s the opener to the Craigslist ad that has saved us about $5,000, turned our weedy front lawn into a beautiful garden, and freed up six hours of our time per week.
Conversely, two bright, energetic college graduates have each repaid about $2,500 on their student loans that they would still owe if they hadn’t been (one at a time) our housemates, working in exchange for rent. A work/rent exchange can be a win-win for both parties, especially in this tightening economy, and could revolve around child care, home repairs, cooking, painting, etc. rather than gardening. While some people would craft this as a landlord/tenant arrangement, especially if living quarters were completely separate, it works nicely for us as a housemate arrangement.
Here are the common-sense rules that have worked for us.
The recruitment ad should be specific, giving a clear picture of what both parties should expect. Here’s the rest of our Craigslist ad:
We’re offering:
- Pleasant house with spacious, sunny bedroom for you
- $16-$21/hour in rent/util. for skilled, reliable work
- Great location by Mt Tabor Park
You are:
- Organized and able to keep an accurate work-log
- Available to work 5.5-6 hours/week
- Experienced at gardening & housekeeping
- Able to make vegetarian meals and enjoy them with us
- Experienced at living with others
- Equipped with references, both employment and housemates
- Comfortable with green lifestyle, i.e. CFL’s, low hot-water use, composting
If you are qualified, please email a letter of interest and your phone number. I’ll call or write back if I see a possible fit. Thank you!
The “hiring” process is similar to that for any job. If their written information looks good, do a phone interview. If they sound good, have an in-person interview. Volunteer lots of information, including downsides (“Sorry, but your bedroom will be hot in the summer.”) If everyone is seeing a fit, arrange a paid trial work-session. (Seeing the person actually work is the most important step.) Finally, check references from both employers and housemates.
The applicant must feel right to you at each stage in order to move to the next stage. Past experience in hiring is great, but even without it, you can generally tell if a person is responsible and has the work ethic and social skills you need in a working housemate.
The paid work-session tells you much more about a person’s actual work-skills than either their resume or references – but references are still crucial. Also critical: do you like the person and feel comfortable? The housemate fit is probably more a make-or-break than their work-skills.
Have all parties sign a simple, written agreement. Ours was a single page and included cost of rent plus utilities; rate of starting pay and possibility of raises; our groceries agreement; spreadsheet-based work-log to be updated and turned in every Sunday. It was for six months, with either party able to cut it short with 30 days notice.
Be willing to supervise your housemate who is working for rent. They can only succeed in their role with your active involvement, especially in the beginning. Be clear on what tasks they will do. At the same time, don’t micromanage, or expect perfect performance. Be quick to praise and appreciate.
Practice healthy boundaries. When they are not working, they’re off duty, i.e. your housemate and not an employee. It’s not a 24/7 job. Conversely, if the agreed-upon work isn’t getting done steadily, the person may need to pay the difference in cash (if that’s in the written agreement), or eventually be asked to leave. I once wrote a note to Steve when he was temporarily slacking off: “This is a real job, despite the fact I like you. Do these tasks today.” He did them.
Have fun with the new, different situation. Our ‘working housemates’ have brought lively, positive energy into our home, and plenty of laughs. Two out of three have remained our friends after moving on to other living situations. Someone asked me once about the wisdom of having a ‘stranger’ live in my home. I replied, “Well, all of my friends were strangers — until they became my friends.”
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@ Jen # 49: “Skirting a few bucks on taxes” may not seem too awful on an individual basis, but under-reporting of income is a huge problem in a national basis. As you say, the law is the law, and if everyone paid taxes according to the law, we would all be better off.
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That’s true, Anon. Maybe it’s a false distinction to differentiate on the basis of the amount of money involved. I.E., stealing is stealing, whether you steal millions or a few bucks.
But where I get frustrated and eventually decide one can’t look to the law for any indication of what’s fair or right is the IRS’s inconsistency with this stuff. Going back to restaurant servers as an example, the IRS knows they don’t report 100% of their tips – it’s an accepted practice. They’ve never prosecuted this, because it would kill the restaurant industry if they did. The take home pay of servers would fall so much that restaurants would have to pay them more to attract competent ones, and they can’t afford that.
So in order to keep restaurants profitable, the IRS turns a blind eye.
And – having once worked for an accountant for some multi-millionaires – I can assure you that many rich people avoid paying a bit more in taxes than someone who makes, oh, $50k a year. Sometimes even less than that. The IRS knows about this, too.
So to keep the rich rich, the IRS turns a blind eye.
And when you hand out mortgages like candy, exactly opposite your mandate of only giving mortgages to people you know can pay them, you get millions or billions from the Treasury as punishment. Not exactly sending the right message about the importance of following the law in the US, is it?
So while the law is the law even when it’s wrong or outdated, and cheating is never victimless, and I do want the author to realize this, I am at a loss as to how it’s REALLY any different from letting your mother come live with you in exchange for babysitting and some cooking. It’s a false distinction the law is making there – just like the others I mentioned above – and I can understand her frustration. The law IS an ass in this case, I’m afraid.
Also, I wanted to make it clear I wasn’t condemning the author as a person. It sounds like she was ignorant of the payroll tax implications until we brought it up.
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When my sister spent a year doing PT child care for us, I did everything as “by the book” as I could. I used a payroll company that specialized in household employees, I paid all the taxes for federal, state, etc, and I provided her with all the documentation she needed for taxes. Even with the payroll company explaining everything step by step, the process was absolutely miserable, convoluted, and disheartening. More than once, I thought I’d taken care of everything, only to find that paperwork didn’t go through properly.
I initially did this, rather than pay her under the table, because I wanted to be totally above board, and not have to be concerned about breaking the law. Instead of feeling secure, I’m now worried that I actually made myself MORE obvious to the agencies by paying the taxes, because it’s much easier for them to find mistakes on the taxes I filed than it is for them to find someone who never bothered filing in the first place. And, with how confusing the system was, I’m dreadfully nervous that I *did* make a mistake somewhere along the line.
I can’t imagine how insanely twisted the process for filing payroll would be in a barter system. It was bad enough paying cash. There’s definitely something wrong with a system when they make it so hard for regular folks to be honest and above board. It’s like they actually WANT people to pay folks under the table, so that they don’t have to get involved with all of these “piddling” salary transactions.
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My husband and I rented out our spare bedroom (to my previous roommate from before I was married) until a few months before our first child was born. We paid taxes on the income just like any other rental income. The arrangement worked out great for all involved.
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Hi,
I’ve followed this thread for a while, now I’d like to stop getting notified of new comments, but I can’t find a link to unsubscribe. Can anyone point me in the right direction?
Thanks,
Chris
EDIT: Sorry, I just found it. My mistake.
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I have been the happy beneficiary of such an arrangement. I was a caretaker for a winter home one year in exchange for free rent. I had to pay the utilty bills and make sure gas ,oil etc were filled at the end of my stay. I wasn’t perfect, but made a point of fixing and or replacing items that had I broken or worn out. It saved me financially and I will always be grateful for the opportunity. I was a word of mouth referral.
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@ Nancy # 53 & Jan # 52: I completely agree with you – the tax code is so complicated and Byzantine that no one other than experts understand it; it is poorly, and inconsistently, enforced; and encourages evasion. Unfortunately, our elected representatives in Washington D.C. (aka POTUS & Congress) cannot stop themselves from tinkering with the tax code to favor their pet project, or to reward their favorite lobbyist or biggest donor. I would love to see a simple, fair, progressive income tax, with very few (if any) exemptions.
@ Elena # 56 You owe federal income tax on the fair market value of the rent that your employer/landlord waived in exchange for your services as a caretaker.
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It’s unfair to make the author report the $5,000 bartering income because she cannot deduct the expense of providing $5,000 of free rent. The tax code treats it as income – but there’s no income, it’s a wash in practice! Leave her alone.
Also, a code on paper doesn’t have anything to do with “the law.” Law is an older word with a sense of justice and rightness in it. If you think it is immoral to not follow anything written down by a government agency, you’re immoral, and dangerous, and a sucker for tyranny. I am thankful “taxable income” is underreported and some stays in the hands of regular people. It keeps our economy healthier and money useful, instead of being wasted on nothing.
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Anon,
Ok, we get it. You don’t like the “underground economy” and anyone that doens’t pay taxes on bartered items should be put in irons. Please stop repeating yourself over and over. We get the point!!!!! Unless you have something besides flogging to add, shut the heck up!!!!
Others,
I think a lot of the posters are missing the point. Suppose I build a new house and it doesn’t have a lawn. I could hire a lawn company and pay $4800 for grading, seeding, sprinkler system, etc. Or you could simply rent a room out to someone that happens to be a gardener. An easier solution would be to just rent a spare room out in your house for $400 because the odds of finding a gardener looking for a cheap room is pretty low.
“Oh my god, who would have a stranger in their home???”
You people have obviously never been assigned to a random roommate in the dorms or have ever shared a flat with 5 other people, 3 of whom you’ve never met. It’s not that bad and I haven’t heard of anyone being hacked to death in the middle of the night by their Craig’s List roommates. 2 of my friend’s mothers actually had renters move in after their divorces. 1 was a new vet assistant in town and the other was a graduate student looking to get out of the city. These renters allowed both of these single moms to keep their houses out of forecloser.
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Though most cases when living with complete strangers are harmless, keep in mind people with CHILDREN (though I dont have any) may not want just anybody moving in their home.
I moved into a couple’s home after my divorce for a bit while I was working on getting back on my feet. The husband was a small business owner and the wife was a community organizer and parents of a seven year old. I called two references and they checked out. Sounds good to me.
They didnt hack me to death, but they decided it was in their best interest to steal my debit card information and clean out my checking account. The proof was the cell phone bill in their name that was paid for and the deliveries of clothes from Macys, and other merchants that matched all of the fraudulent charges.
I would have been better off sleeping in my car.
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Catching up on my RSS reading… would like to point out that I would also do a background check on the employee. Really with anyone I don’t know really well living with me.
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There are social service agencies located in many larger cities which specialize in making shared housing arrangements like this, usually for the elderly and infirm who might not be able to remain in their own homes without some live in help. They find that it generally works best when placing someone younger with someone older, and can sometimes help place recent college grads, divorcees and the unemployed who might not find affordable housing otherwise.
This may involve a minimal or a direct trade for services, but all arrangements are contractual and they help with that. The agencies that I know of locally in WA state utilize criminal background checks and compatibility testing for everyone involved, which would probably be a good idea for anyone considering something like this.
Here’s the link to the Tacoma WA agency.
http://shstac-pc.com/
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Well, it didn’t work out well for us. I know our case is different. We let a couple 20 simethings live in our camper because they had no place to go, no money, a broke down car and a drug habit. All we asked is that he help with chores, which was less than an hour per day and carry in firewood.
We fed them. Bob often bought their kerosine and cigs when they were totally broke. we often cooked, other times She cooked but then had the nerve to throw it up in my face as things were coming to a head. This is funny, she baked a cake, ate all but two pieces of it. Baked another one a couple days later. They ate that one, too. “But I baked those cakes for you. I didn’t have to.”
After a while they both acted like they were being treated like slaves. Yes, we have a nice little set up here, a nice little camper, but we worked for it, all of it.
My husband kicked them out after he caught her snooping and pilfering. It wasn’t pretty. Like they say, no kind deed goes unpunished.
I know this situation is not exactly what you all are talking about but I just wanted to warn people who feel sorry for people who are down on their luck and work out a mutually advantageous arrangement.
We should have known that the reason they were “down on their luck” is because they don’t want to work and thought they should be able to eat our food, use our shower, water, electricity, TV, computer, and pilfer pain pills and still whine about living in a small but comfortable camper.
So be careful. I sure wouldn’t bring anyone into my home. It was bad enough having them in the camper.
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