Here’s another reader question:
First off, thank you for writing a great blog! Easy to read, understandable, and to the point!
If you may I would like your input on something.
I am 21 years old, getting married this summer and have paid off all student loans and have no debt.
My wife and I will be looking for somewhere to live and we are considering purchasing a home instead of renting. What do you think about us purchasing a larger home than we would normally be able to afford and renting out 3 rooms to counter the more expensive mortgage payments? We live in an area where I am sure we would have no trouble renting rooms. It’s a very high demand in this area, especially for anything under $600/month. Do you know anybody that has purchased a house with intentions of renting it out while living there in order to purchase a more expensive home? We would be happy having roommates for 5 years or so and then we would be able to afford the mortgage payments ourselves.
I receive a TON of e-mails from new homeowners or about to be new homeowners asking about the feasibility of renting out a room given situation A and B. Here’s an e-mail from a few weeks ago.
For your situation, I would focus on location so that you can aim to get 100% occupancy out of the rooms unless the 3-bedroom house is in a very desirable area. The last thing you want to do is have a house more than what you can afford and not have the rooms rented to cover your expenses. Or worse, you’ll become desperate to find anyone to move in and end up with undesirable roommates.
Some folks argue that you should buy as much house as you can afford because you’ll make more money in 2-4 years from now from promotions and raises. So having roommates as soon as your close will definitely alleviate any financial burden until those promotions and raises kick in.
In my opinion, you should focus on getting the occupancy as high as you can because you’re buying something bigger than you can chew on.
One of my biggest regrets is not renting out my rooms when I first moved in. I was only compelled to rent out a room because I needed money for graduate school and discovered that renting out a room turned out to be a great way to make some extra money.
You also state on having roommates for 5 years or so, but are you ready to make that commitment? Having 2 roommates for 5 years(assuming 100% occupancy) will certainly translate to a nice chunk of change to pay down your mortgage of make improvements. I would focus on the former than make improvements when it’s just you and your wife living in the house.
Anyone in similar situation or was in a similar care to share your thoughts?