I need the help of the hive mind. Thank goodness for the internet.
Assuming all goes as planned, I’ll be moving in a little over a month. Into My! New! House! Scary.
I’m currently in an apartment with a roommate and I’ve invited her to come with me. I sort of feel obligated – otherwise I’m breaking the lease and abandoning her. She’s a friend, and it feels like the right thing to do. Besides, it’s a 3 bedroom house, and rental income will be awesome.
So here’s the question – what do I charge her for rent? Remember, we’re in the Washington, D.C. area, which is pretty pricey.
Currently, I pay the bigger part of the rent, and she pays $950, all utilities and cable included. In our house, the mortgage will be about $250 less than my rent, but that doesn’t include utilities or all the extra costs, like the security system I want to put in, and of course the awesome awesome taxes. Roommate is not the cleanest person in the world, so I’m also planning to hire a maid service to come in about twice a month. I’m thinking that will cost $80-$120/visit. It’s expensive, but it will save a lot of stress on my part, as I know it will infuriate me to have to clean her bathroom for her and clean the kitchen. (Yes, I realize this doesn’t make her the ideal roommate, but it is what it is.) The interior of the house is all recently refurbished and I really want to keep it nice.
The house is significantly bigger than the apartment, but the downside is that it’s much further from the Metro. She’s going to have to take a bus to the Metro to get to work (or ride with me when it’s convenient for her).
So what do I charge the roommate? I was thinking of asking $750 plus utilities, but after a quick survey of Craigslist, that might be high. So now I’m thinking $750 flat. Does that sound fair? Too much?
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.
I charge my roommate a flat fee, plus the cable bill is in her name and she pays it entirely. There’s nothing worse than splitting hairs over utilities.
Completely fair, especially considering the cost/time/headache/nightmare of finding another roommate you can trust.
I say 750 plus utilities sounds fair
I don’t know ANYTHING about rents in your area, but why wouldn’t you charge her the same as she’s paying now: $950 with cable and utilities included? You’re going to need that extra $250 you’re saving on the rent to pay for the extra utilities and the cleaning service.
Just a though.
~Angela~
Angela, we’re moving to a much less convenient area. Right now, we live within walking distance of a metro, grocery stores, etc. Our house will be driving/bus distance to all those things. Most notably, it’s adding a bus trip to her daily commute, which is not an insignificant deal (houses within walking distance to the metro were WAY more expensive). So I can’t in good conscience charge her the same.
Frankly I think you’d be within your rights to ask $800 plus utilities. I find that most people going from apartments to houses grossly underestimate how much utilities cost on their own. I did it back when I went from renting to owning. It was so much more than I anticipated, particularly once Pepco raised their rates (I’m in the MD burbs so quite familiar with local rates). Add to that the security and cleaning (not to mention cable), and you’ve probably more than made up the difference between the current rent and the mortgage. I have a 3 bedroom townhouse and I paid ~$150 electric, ~120 gas, ~70 water/sewer average over the course of a year, higher electric in summer, higher gas in winter, back when we had Pepco. Then cable on top of that, and for us phone service (we need to have a landline phone for a variety of reasons). It all adds up quickly. Of course there are a lot of ways to minimize those costs – no cable, no landline, keeping the thermostat high in summer and low in winter, etc.
I guess for me I’d rather overestimate, then ask her to pay less later if indeed I find that actual expenses justify it, rather than risk shortchanging myself. I might feel differently if she was a perfect roommate, though. Just something to consider.
FishyGirl, this is great info. We’re also in MD, so getting an idea of local rates definitely helps. I may present these numbers to her when I talk to her about rent.
I’m reluctant to ask her to split utilities because she will nickel and dime me. I know how she works. And in many ways, she will be right. Water use – she takes her laundry home to her parents’ house, so I will be the only one doing laundry. Cable – she can live without it. Sure, she uses it, but would prefer to just shut it off (right now, she pays the equivalent of 1/3 of the bill, which is what she would pay if we didn’t have the extra services that I want). And in terms of heating/electric – well, I’d be using those anyway even if she weren’t there. Plus on some level, I like keeping control. If I want it to be warmer or cooler in the house, it’s my call. If I come home one summer day and just need to turn the AC down a bit more than normal, that’s my choice and I pay for it. If I want to keep things cold in the winter to save money, I can do that too. (We do have a programmable thermostat, which we will definitely be using.)
Essentially, I want to keep it fair to both of us, but I also want to keep it at a point where she still wants to live there. She’s not a perfect roommate, but she could be much worse. Most importantly, I trust her in my home and I trust her with my pets. I would like to cut it down from what she pays now, so she feels like the move from the more convenient apartment is a good one. But I also don’t want to give her the deal of a lifetime.
I totally get what you are saying about trust and your pets – those things are important. Very important. But she isn’t perfect, and the stress from a move sometimes can magnify the differences. It is easier to negotiate things down later than it is to raise the rent if you find yourself in a bind trying to meet expenses. Be careful and don’t shortchange yourself.
She may find that once she moves to a house, vs. an apartment, a lot of things change, i.e., more convenient to do laundry there than haul it to mom’s house, nicer to just hang out at home because there’s more space and you’re less likely to need to escape if you’re getting on each other’s nerves. If it’s a 3 bedroom house, I’d say that 1/3 of the utilities is more than fair, and you still maintain control because you have the majority stake AND your name is on the mortgage. If she wasn’t there, yes, you’d still be using heat, for example, but you could shut off more registers to parts of the house you aren’t using and she isn’t using either, and in terms of electric, there won’t be lights on or appliances running in rooms where you aren’t. You could negotiate on the cable, and also run the cable only to “your” rooms of the house. Some people who say they could do without it find that a lot harder when actually faced with doing it – I know I did. 🙂
Since you know the address of the property, can you call the utility companies and find out what the utility bills were in the house for the last year or two? That would give you an even better estimate of expenses than an anonymous person on the internet 🙂 and maybe that will help you make your decision. Feel free to email me offline and I’d be happy you give you more specifics, which as you well know can vary widely depending on what suburb you’re in.
And good luck! It’s amazingly stressful, but rewarding. Congratulations!
Why not charge her a flat rate for rent and a flat rate for utilities. Say $750 rent and $100 utilities? That still is a savings for her. Or see if she will at least split the house cleaner with you.
Congratulations on the house! I hope everything is on track 🙂 Considering the variables and knowing the area… I think a flat rate of $750 is fair. Spare yourself the quibbling about the utilities. She doesn’t sound like she tends to be particularly wasteful. I’d couch it this way: let her know that there are still a lot of unknowns going into the new house. You’d like to charge her a flat rate of $750 to start out for the remainder of the time you would have had on your previous lease (to address and assuage your guilt over uprooting her) but revisit it at the end of that time period based on the actual cost of living/commuting/utilities/etc. That leaves the door open to renegotiate in the future at a specified time so it won’t be like you’re springing anything on her if you decide you’d like to charge more. And, if she decides it’s too much, you won’t have any reason to feel bad if she decides to leave.
By the way, are you moving somewhere in Montgomery County? We decided to move to PG so we could afford to be right next to a metro stop. We are a one car household with vastly different schedules so it was a high priority for us. Even though I have a car, I still take the train because, unlike you, I don’t have free parking (that is awesome!) It was hard to leave the Takoma area, but I love our new house!