Buying a home, and renting out the other room. this is how you calculate that!
Before I became a professor, I had to study myself, I’ve been a student myself. I’ve lived in a student home myself. I’ve lived in a room of 100 square feet, which is kinda similar to 9 m2.. as a student.
I’ll tell you this, it’s horrible.
Then again.. you only sleep and study there.. spend most of your time, when you’re not in the university.. well, this is why, studying in the university library was a better option. At least for the space
But, I got sick of that.. I wanted to have my own place
So.. I got myself a home.. and I rented out the other rooms.
Let’s run the numbers.
Purchased a home for about 350k
Mortgage for the home, is around 1100 euros per month. Since I will be living in the home myself, the interest rates for the mortgage is different. And I hardly need to do a downpayment, only somewhat like 2% but hey.. that’s neglectable.
Now, I could live in this home for 1100 bucks per month.
But I had 3 rooms to spare.. so, instead.. I just rented out these other rooms.
For 400 bucks each. Meaning, I was making 1200 euros per month on rent.
If you don’t mind living with other people in one home, and you have the option to do so. Living together with other people bring a lot of pros, as you will never have to be alone , if you don’t like it.
And if you want your alone time, you can retreat into your own room.
In my case, I would be making money and living free in my own home.
But if you can’t, let’s pretend you only have 2 spare rooms, you would still be making 800 euros per month, meaning your bills would decrease a lot more already. So still a good deal. Having others to pay for your bills.
Now, if we continue with the 2 spare rooms, you might think you’re paying 300 euros per month to live in your own home, and that’s correct up front
But don’t forget the equity of your home also grows per year, with about 5%
And not only that.. how about your mortgage you’re paying off, each year. With about 10k per year.
So after 1 year. Your home is valued 5% more, is 367.500 17.5k extra, and with the mortgage being paid off, that’s another 10k
So in total, you’re getting 27.5k per year in equity and mortgage growth.
And you’re only paying 300 euors per month. To be exact, you’re paying 3600 euros, to get 27k in value growth, just because there are 2 other people , helping you pay and increase the value of your home.
So, as a real estate investor, absolutely good deal!
For your money 3600 euros input annually, you’ll get 27k value, that’s 13% ROI. Absolutely good deal.
