It’s a cold Saturday night in Chicago and I’m on the back porch of a three-floor walk-up chatting with a few friends about apartment hunting. In the past year, apartment rents in Chicago have gone up 4.8% and in the hot neighborhoods they have gone up 15%. Many people have had to look for more affordable housing in the city. Rents have increased over 50% over the past 4 years. Here’s a deeper analysis of the rents in cities across the United States. It’s insane.
Brian, who recently broke up with his girlfriend, can’t find a cheap place to live in the same neighborhood. He hasn’t been able to find anything affordable. He was exhausted after looking at apartments all day. I’m not sure if I can do this much longer. “I just can’t afford a nice place.” He went on to share that he hadn’t saved any money in the past 2 years because “I get two paychecks a month – my rent paycheck and my student loan paycheck.” It’s a situation so many people are in, but everyone should be saving something.
I want to talk money with my friends. I’ve learned a lot about money management and I’m excited to share it with you. I had a bit of wine, so I couldn’t help but drink it. I started to laugh uncontrollably as I was feeling so relaxed.
What if you could live rent-free Brian?
He knows I write about money, but still looked at me like an idiot. He’s not a fan of my new passion for personal finance.
Can I Really Live Rent Free?
You can live rent-free. It can make a huge difference in your net worth. By saving a small amount of money every month, you can start to build a healthy savings account that will serve as a foundation for financial security.
Many people spend too much money on rent because they get the luxury apartment in a hot neighborhood and drop 50% of their take- home pay. This leaves them with very little to cover other basic expenses and can be a recipe for financial disaster. Most of the luxury apartments are still living paycheck to paycheck. They say they don’t have enough money to save. They feel powerless because of their financial situation. Uh…
Rent is the biggest expense for a lot of people. You can make sure you get the most bang for your buck by shopping around for the best deals. The future value of investing that savings can be massive is why I always recommend trying to maximize your biggest expense first. The compounding effect can create a large amount of wealth if you invest your savings over time. Unless you are already investing at least 20% of your income, don’t rent an expensive apartment. You can spend the rest if you save at least 20%. It feels good to watch your savings grow. You can rent a nice place if you have enough. If you budget wisely, you can afford to stay in that nice place for a long time.
If you want to retire early, gain financial independence, and reach financial freedom, you need to keep your living expenses in check. It’s important to find a balance between spending money on what you need and saving money for your future goals.
In 2010 when I was starting my financial independence journey, I decided to invest the difference between the old apartment and the new one. The value of every $1 I saved then, using a simple investing strategy, is worth $3.25 today. The money I saved by downgrading my apartment is worth $27,300 today. I’m happy that I made the decision to downsize my apartment for a year and watch my savings grow, as it has allowed me to make a significant investment in my future. In 30 years, that $27,300 I saved on rent in 2010 will be worth $200,000. I will take that over granite counter any day.
I was still paying a lot of money. If you could live rent-free or make money from renting, what would you do? It is possible to live rent-free in many cities in the United States and abroad. You can make rent-free living a reality with a little planning and creativity.
5 Ways to Live Rent Free (or actually make money renting!)
- Rent, Then Sublet for More Money (The Rent Side Hustle)
- Rent a House and Rent Out the Other Rooms
- Airbnb
- Buy a House and Pay the Mortgage with Renters (House Hacking)
- Barter For Free Rent (Value Exchange)
1. Rent an Apartment, Then Sublet it for More Money
- “The Rent Side Hustle”
I made $1,200 after doing this once for 2 months. I was able to save a lot of money in a short period of time, and it motivated me to find other ways to make more money. I wish I had thought of it sooner. I should have pursued this idea a long time ago. I highly recommend this strategy. This is the way to go if you want to increase productivity and efficiency.
The idea is to sublet your apartment for more money than you pay in rent. While living in the same place, this could be a great way to supplement your income. If it is another unit in your building or apartment that you are familiar with, you can even look for an apartment with a specific goal in mind.
Not all buildings or landlords allow this practice, but a vast majority of the rental contracts I have reviewed don’t have restrictions or language about “sublet rental rates”. They have restrictions on when and how you can sublet, but not on the rental rate that you can charge the subletter. You need to make sure that you comply with all applicable laws when you sublet the rental unit. The money can be between the lines. You have to be smart to find it.
If you live in a neighborhood with a really good deal, you can do the rent side hustle. You can supplement your income by saving more for the future. One of my friends has a landlord who hasn’t increased his rent in 5 years. My friend was delightedwith the idea and is now looking for other ways to save money.
In his Chicago neighborhood, the property rents have more than doubled. Many of the residents have been forced to leave. He sublets it and makes $1,200 a month. He can save most of his income for a down payment on his own place. His landlord doesn’t bother him if his rent check arrives. He is thankful for the peace and quiet that his rent provides. It’s easy in neighborhoods with high student turnover and buildings with management companies that are underpaid. Tenants are often unable to get their landlord to respond to maintenance requests in a timely manner.
Take over existing leases from your friends on Craiglist. You can research local property management companies to see if they have short-term leases. If you take over a lease, you can sublet it for more money. Before you take over and let someone else take over, you need to understand the terms of the lease. If you look hard, you can find a lot of deals. Comparison shopping can help you find the best deals. Make sure you do your homework. Don’t be afraid to ask for help if you need it. If you have lived in a neighborhood for a while, you can sublet your apartment for quite a bit more than you are currently paying. It is possible to make some extra money by living in your desired neighborhood. Unless your landlord is super savvy, then find a new landlord
2. Rent a House, Sign the Lease, Then Rent Out the Other Rooms (and your treehouse?) at a Higher Rate
If you are responsible for paying and collecting rent, this is an easy way to live rent-free. It’s a great way to save money and still have a place to live. Find a great apartment at a great price, lock it down, then rent it to friends or other people at a higher per room rate than you are paying. It is possible to have a steady stream of income from your rental and also enjoy the convenience of living in a great apartment.
If it is a 3, 4, or 5-bedroom apartment or house, it is easy for you to add $100-$200 to each individual room rate to cover the cost of your own. You can make more money by offering services such as cleaning, laundry, and grocery shopping. Since you are taking on the burden of the lease and making payments, it can work with your friends as well, since you can tell them their rent is a bit higher. Everyone has a clear understanding of the financial responsibility when it comes to rent and other expenses, so it’s important to communicate with your roommates.
If you are young or want to live with roommates, this is a great option to live rent-free.
3. Airbnb Your Extra Rooms, and/or Your Full Apartment When You Travel
I know a lot of people who live for free and make money on their apartment. If you live in a corporate building, there can be restrictions on home sharing in your rental agreement. If you rent out part of your home, you should check with your landlord to make sure it’s in line with your lease.
If you have an old-school landlord, make sure to check them out. It is always a good idea to read the lease thoroughly before signing, as you may find that your landlord has restrictions in place. I know some people who have been burned by the IRS because of their Airbnb income, so make sure you save money for taxes. It’s important to keep a record of your income and expenses.
You also want to be extra careful if you are renting out your own rental, since there are limitations on what will be covered with your renter’s insurance (ALWAYS HAVE RENTER’S INSURANCE).
Check out this post written by a friend of mine who makes five figures a month renting on Airbnb.
4. Buy a House With as Little as 5% Down or with an FHA Loan, Then Rent the Rooms to Cover the Cost of the Mortgage (aka “House Hacking”)
Buying a property will allow you to have an investment, make money renting out rooms, and live rent-free. This would be a great investment and could provide you with a stable and comfortable living space. Wha? That’s the trifecta. ???
There is a myth that you need a 20% down payment. It’s a myth that you need perfect credit to get a mortgage. In my opinion, too many people wait until they have a full 20% down payment and miss opportunities to buy into appreciating real estate markets.
Given the high rents in most cities, buying might not be cheaper. Buying can be a wise financial decision for people who want to stay in one place for a long time. If you are going to live in the same city for a few years, check the rent. Buying a home can be a good idea if you research the market and make an informed decision. You could make quite a bit of money on the investment if you use the link below. With careful budgeting, and a keen eye for deals, you can easily do with the help of the free online.
Check out my post on how to best analyze whether you should rent or buy a home in your market.
5. Live at Home or with a Friend and Barter for Free Rent (aka “Value Exchange, Not Freeloading”)
This is more common than you might think. Everyone has different levels of success and failure. If you have something of value, you can barter it for something else.
I received an email from a reader who said she lets her roommates use her car and cooks for them in exchange for free rent. She says it has been a great way to save money and build strong relationships with her roommates. If you decide to move back in with your parents, you can barter for the privilege of free rent and the chance to save and invest your money. Give them a hand with household chores in exchange for reduced rent or even rent-free living.
Important Tips for Living Rent Free: Words of Caution
- Rental income is taxable income, so be careful and make sure you save at least 30% of your rental income for your taxes
- Make sure you have renter’s insurance and look for insurance that covers the property even if you don’t say so in the policy. You need to read the fine print of your policy to know what is and isn’t covered.
- I know it is a pain but it is worth it. Asking questions will make sure you understand the agreement. Every rental and sublet contract is unique, so make sure you cover your bases and what you are trying to do is legal, based on the agreements.
- Be cool. If they can’t afford it, don’t charge them a ton of rent. If needed, be willing to work with your friends on rent. Be open with them. Encourage your children to express their feelings and listen to them.
- If you move back home with your parents, you should offer to pay rent or do more chores so you don’t take advantage of them.
How should you live rent free?
Save Money on Rent
Saving money on rent was covered in the previous episode. You can get the best value for your rental dollars if you follow the tips from that episode.
