Reader Story: I Paid for Graduate School by Renting out Rooms

Just curious how you were able to pay to finish the basement. I am assuming you didn’t take on more debt to do it since that would defeat the purpose of not taking on grad school debt…

I was always told that you should never have to pay for graduate school. The school pays you. Currently, my wife is in graduate school, and they are paying her ~$13,000 per year to be an assistant instructor, and on top of that, she gets health insurance and free use of public transportation. I needed to get a job to pay the rest of our bills, and just happened to land one at the university. Now I am taking classes for free too (albeit one at a time).

@mike it’s amazing how you can work and still take 2 graduate-level courses per semester! Great determination! Good ideas!

Thank you for sharing your story!

Good for you! I’m also curious about the basement renovation. We keep putting off major renovations (floors and kitchen) until I know we have job stability.

My sister is renting out two rooms in her house, one to her roommate back when she was renting and one to a temporary nursing program that sends a nurse to work in her city for a few months at a time. She did put the standard 20% down and I don’t think she’s pre-paying the mortgage at her 4.3% 30 year rate. I’m pretty sure that extra money funds fantastic vacations. (But she’s hitting all her savings goals, so she’s doing fine.)

We have an extra MIL suite that is only used when the relatives visit, but we’re not allowed to rent to anybody unrelated to us, which is annoying, though it does keep the college students out (or at least in hiding). I wish our covenant allowed one unrelated person in the household but it doesn’t. And they do sue and foreclose on people.

Ugh… living in a basement and paying two mortgages… Doesn’t sound that awesome to me.

thanks for sharing your story. this smart financial choice seems to work well for you. i was hoping to hear more about how you do choose roommates. i checked our your blog and couldn’t find any posts on this, either.

I was just curious where in the country you lived that you could get away with $600 rent for a single room in a house! Yikes!

Mike,disregard any negative comments you see. I love it when people are transparent. You admitted your mistakes and offered a solution of how you corrected it. You are simply trying to say what works for you, and if you would like to do the same, then follow my tips. Thanks for your story because it has gotten me to think about more ways to be creative to make money.

My mother did this with our sizeable house once kids had more or less moved out. College students brought in a lot of income for her. There are always people who will say, “Great, but I could never do that.” All right, but I guess you don’t like easy paths to wealth, then.

How long did you own the property before you started renting it out? And how did you pay the mortgage? Did the rent for the rooms cover that on top of your tuition costs?

Two and a half years ago friends of mine talked me into renting the two bedroom townhouse next door to them after I got a substantial raise. The rent was fine, and I could write off some as I work from home, but as the months wore on the place just seemed too big.

After some thought, I decided to look for a roommate. I set the rent as a “good deal” ($100-200 less than you’d pay in this area) and all utilities included. Basically, whoever moved in would have a stress-free place that was professionally cleaned every other week, all the bills were paid, it was furnished, I bought all the household supplies, and the worst thing about it would be that I work from home. Also by handling all of those issues I set up the dynamic of how the house would run. I wanted a very “you run your room, I run the rest of the house” vibe, too, not in a control freak way, just in a way where I offered a discount to retain more say in the living space. I like decorating and having the public areas of my house look attractive.

I found my roommate by looking in the living situations wanted section of Craigslist. You have to fish through a lot of junk (and cuh-razy postings) but you’ll find a few nice, sane people. It lets you take your time looking for just the right person — though being in LA there’s a lot more traffic on the site than perhaps elsewhere.

My eventual roommate was about 10 years younger with a similar nerdy bent. Being in her early-mid-20s with a good income she wanted to live somewhere affordable and comfortable, but didn’t really have a ton of furniture or that much experience in the whole “real life” thing out of college. It was a pretty perfect fit, though I did need to learn to let a few things go. Was it going to kill me that she ran a network cable across my living room floor six hours a week for better latency when raiding? No. Was it going to kill her to put that cable away when finished so the living room looked less like nerdtown, even though there’s no reasonable reason a single cable should annoy someone? No.

After a year she needed to move out (her boyfriend moved here) right as a friend a little older than me was going through a divorce. He moved in and it’s been the same deal, with a little more give-and-take with food and supplies.

With that money I paid off my debts, took lessons, traveled, and saved. While I was the last person some thought should have a roommate (real life friends tried to stage an intervention over beer when I mentioned my plan!), by setting groundrules (“throttle your torrents when I’m gaming, please”) and being particular it’s been an incredibly positive experience that I plan on repeating whenever I need money in the future.

There’s a match for just about every living situation you want to set up if you take your time.

Hi Mike,
Just returned from your site and think it’s very interesting. I strongly admire that you’re honoring your mortgage commitment and finding legitimate ways to pay it down. Your stance is commendable in this era of the so-called “strategic” default. Good luck to you.

I had the same apartment in rent-controlled L.A. throughout the ’80s. I always had a roommate. Several of these roommates became fast friends and we are still close to this day.
By the time I’d been in the apartment a few years, my roomies were paying the “big” half of the rent, allowing me to save for my first house. I’m now living in house #3 and house #4 is currently a rental and will be my (early) retirement home.

One question, one comment:
Do you report your rental income to the IRS? It’s different if you’re the homeowner collecting rents than if you’re splitting rent with someone and paying an outside landlord.
I’ll make the comment as gently as possible: Proofreading is a valuable skill. A little cultivation of said skill would enhance your site considerably. There’s even a typo in your “Hello” box.

Final note – Sadly, I think your trust in “Sharon” is unlikely to be rewarded. Anyone who calls in sick to a brand-new job and is not hospitalized or at least visibly injured has a lot of maturing to do. It shouldn’t happen on your dime.

Ann: Did I say it was “the” easy path to wealth? Did I anything about useful degrees or high-paying jobs being or not being paths to wealth? For that matter, did I say anything about being born into relative financial comfort being a pre-forged path into even greater wealth?

I do not understand what your comment has to do with what I said, therefore, I don’t know why you referred to my post while making your statement.

I do the same thing (except I didn’t go to grad school) I graduated in May 2008, bought a 4 bedroom house, and rented out 3 of the rooms to friends. As a result I have a house with no mortgage to pay because others are paying it for me. I’ve never had anyone miss a payment. The one thing I think keeps things all together is a contract. This way both the landlord and roomates are on the same page about whats expected.

Upper middle class “soccer moms” in an upscale neighborhood do not typically rent out rooms to strangers – some of my friends were afraid for me. It was also illegal in my neighborhood. I told my neighbors what I was up and made sure they were on board and wouldn’t report me or my tenants to the police.

I never had any problem collecting rent. I did not look into insurance – my plan was to say these were friends of the family staying over if asked. (might have been a very stupid plan… but my 3 kids’ friends slept over all the time – I had an open door policy).

I paid for all utilities too, and in the end did not make out as well as I hoped because having tenants did add to my water, gas and electric bill. Next time I would charge more rent. (I charged $400/room and rented 2 rooms on the third floor of a 3 story house – my 17 year old son and I slept on the second floor, and my older kids slept wherever they could when they were home from college).

The house is now up for sale – rather than continue to rent out rooms I decided to sell it and move to a much smaller place.

When I was in college, I use to dream about what you did (minus living in the basement, although, since it’s finished I guess that’s good too).

Sounds like you are very Money savvy!

I would like to do something similar for my son and daughter in the future, if I ever get enough money for such a great idea!

Congratulations! Great story!

I would caution people to make sure that they can get safely out of the basement in case of fire. Have a smoke hood and fire extinguisher so you can get out, and at least two safe ways out. You also need a smoke detector and carbon monoxide detector on all levels.

I also rent out two bedrooms in my house. I found my roommates/tenants through Craigslist and checked out their references before taking them on. I also put together a rental agreement based on a standard lease form.

My motive behind taking on roommates wasn’t to meet my financial commitments, but simply to boost my income so I could pay extra towards the mortgage and save money for vacations faster. So I didn’t price the rooms very high.

I have 2 26 year old guys as roommates and they spend most of their time in their rooms on the second floor, at work, or at school. They share a bath upstairs and I have my own bedroom and bathroom on the first floor. We do share the kitchen and laundry facilities, and they have full access to the rest of the house, too, they just choose to not use it.

We’re coming close to one year of this arrangement and all is well. I do report the income on my taxes, but I also get to claim expenses, too. Any repairs and maintenance to the house — inside or outside — are legitimate business expenses, as are a portion of the utilities. It’s been a good thing for me and I don’t regret it at all.

Being a landlord is a lot different than simply renting a single bedroom or a basement. I can testify that landlording an entire separate residence can be stressful (it was when I did it) but renting a room can be a turnkey operation that, with the right renter, brings in enough money to make a serious dent in household expenses like possibly completely making a mortgage payment or if the house is paid-for, better yet it’s all gravy because the rise in utilities cause by one person is minimal, especially if that person is a…

College student! My mother lived near a college with constant severe housing shortages. Students were so grateful to have a basement room with its own bathroom, and a laundry tub for a sink and they could set up their own microwave and mini-fridge… that’s luxury living for a college student who otherwise had no housing. And they’d behave… if not, they were kicked out and someone else was already on a waiting list to take their place. Not sure if anything written was ever signed; I think this was all under-the-table and informal and as for anyone suing or making insurance claims… LOL, no.

Note that this does not constitute being a “boarder” – a whole ‘nother concept. When you occupy your house but let the student use the basement with its own entrance, you really only see them when they are paying rent and when they are moving out at the end of the semester.

A friend of mine is about to do this or a short-term basis to make a bit more cash to pay for the new windows she needs in her flat. A mutual friend needs somewhere to stay as she’s back from overseas so it all sounds great for both of them.

The friend with the flat has a history of renting to various friends on shortish-term basis’ when she needs extra cash or fancies some company, and then she enjoys the alone time when she doesn’t have a house mate.

My wife is thinking about getting her Masters so this is a great solution to consider. We’re also upside down on our mortgage with little hope of digging ourselves out. An extra hundred bucks a month to rent a room is a great idea. Thanks!

I did this for a year, more for social reasons than financial. I was recently divorced and lonely. I was fortunate to find a great roommate via word of mouth, and we had no problems. We even took a trip to France together!

Great sotry

I love it because you never know how some great, money-making ideas, and potential new lines of work, will come your way in life.

Something real similar happened with me. It just kind of fell out of the sky to me, and now I do it for a living.

Best of luck to the author

My husband and I rented out 2 of the 3 bedrooms when we bought our first home, and for the next 7 years.

I’m glad we did it. We prepaid our mortgage, financed some remodeling on our house, and I enjoyed the company.

You have to be very careful finding roommates. We were lucky with our first two, because I’d lived with both of them in student housing, and knew their habits, trustworthiness, personalities, etc. One had also been my husband’s roommate already for several years too, so we knew we’d be compatible. He didn’t move out until he moved in with his fiancee, and today almost 10 years later, they’re both still practically family. So we really lucked out.

When anyone moved out, we found another roommate through our social connections. At one time I looked for a renter through other means (Craigslist), and it was daunting to try to decide if any of the candidates would work out. I always wound up renting to friends or acquaintances instead, and while we all have our quirks and habits that annoy others, it worked out fine.

We divided the cost of utilities by the number of people. I never thought about insurance, but I did pay taxes on the rental income. Since that meant I could deduct some of our household expenses, it made little difference overall on our taxes.

Something nobody’s mentioned here is the social capital derived from having a larger household of adults. I’m a fairly shy person. Having some extraverted people in my house really increased my exposure to people, events, music, films, books, organizations, ideas, you name it. I cannot tell you how much value I gained from that. Need to borrow a truck? Roommate 1′s friend has one. Have some garden produce to give away? Roommate 2′s sister loves zucchini. I’m not suggesting people should expect to find their new best friends by renting rooms, but building social networks outside your job is a huge bonus for a shy person living in a city.

I do have to say, though, that I shared a bedroom as a child, lived in cooperative housing all through college, and enjoy having a fair amount of activity in my house. Sure, I often wished I had a bathroom that stayed clean for more than four hours. I did more than my share of housework. But it allowed us to buy a nice house in a part of town I loved, and fill it with life.

I really like the readers stories much better, I find that I’m not as interested in PF blogs as I once used to be. It just seems that articles tend to get repetitive on all PF blogs, and I’m not trying to be rude.

There are only so many ways that writers can tell people to save, find balance between saving & spending, saving for retirement, being wise, etc.

Don’t get me wrong I still like PF blogs and GRS is my favorite out of all the PF blogs, but I just don’t know is it just me that gets bored of stuff after you
really know it and practice it?

I do like readers stories because you feel happy when someone succeeds, and its cool to get into someone’s thought processes as how they succeeded. I kind of wish there were more reader stories, they’re great, and its cool to know how others succeeded.

Reader stories are what gave me hope when I was digging myself out of debt, that it was possible to change my spendthrift ways. I’m no longer a spendthrift but I still love the readers stories best. ;D