My husband and I got married young, at 22 and 23, when my husband was a young ensign in the Navy. I was newly graduated from college. He was stationed in Texas. I struggled finding employment, so I went back to grad school. After we used the rest of the funds from our undergraduate degrees, it was important to pay cash for my master’s degree. We were already on a tight budget, so I had to find creative ways to reduce our costs.
We did the normal cost cutting attempts.
- We couponed. (I still do).
- We limited our shopping trip to twice a month to prevent any extra spending.
- We would share meals whenever we did go out to eat for our date night.
- We hung out with family on the weekends instead of traveling.
- The list goes on …
Yet at the end of the day it felt like we were barely scratching the surface. After careful consideration, I realized that all of our cost cutting measures didn’t affect the largest expense that we had — housing. If we could reduce what we paid for this one thing, it would greatly reduce our expenses in one measure.
At first the reduction was simply our rent, and later our mortgage was reduced. Reducing our living expenses became my quest — first for balance budgeting and later as a funding source for early retirement. While we have not succeeded on the early retirement, four years into our journey we have succeeded in covering our mortgage and utilities.
Over the years, I have found that there are four ways to greatly reduce housing costs, which in turn can help you live mortgage or rent free. Here are some ways to take a bite out of a huge cost.
4 Ways to Live Mortgage or Rent Free
1) Live with Roommates – The first way we got ahead was to have a roommate. We shared a large house with a friend when we were first married. We had the back two rooms and he had the front room. Instead of paying approximately $1,400 a month including utilities we paid $700. Plus we shared the cleaning, the cooking, and the landscaping. While having roommates during our first year of marriage had its moments, it allowed us to save $17,000 for our first house while still paying cash for my graduate degree. I was still working full to part time during that year.
2) Live in a Multi-Plex – At our next duty station we plan on buying a multi-plex. The goal is to live in one unit rent-free based on the other three rented units paying the bills. The great thing about a multi-plex is that you can count the income of the rented out units to help qualify for your loan. Plus the FHA loan (https://www.reluctantlandlord.net/mortgages-made-simple/) allows you to put 3.5% down. For many people this allows you to not only save a significant amount of money but you can begin with a small amount of start up costs.
As always with any great opportunity there are downsides . You have to leverage a lot of debt and deal with multiple personalities. Being a landlord has had many ulcer inducing moments and it is not for anyone.
Author’s note- Owning a house should not be something that you do lightly. As discovered in the recession one can lose their shirt in the real estate market. On the other hand, as always in moderation, it can be a blessing. We have a net worth of over $400k and are in a good financial position because of our houses.
3) Have an In-law Suite – For many people living with multiple people is not appealing. Another way to reduce or live mortgage or rent free is having an in-law suite or renting out your basement. I know of many people who have turned a side area of their home into a vacation rental, a fully furnished executive suite, or simply a normal rental. If you have a separate entrance off your house you can easily supplement your income. Guest quarters can become a vacation rental or executive suite when it’s not occupied.
Again, there is a downside. Having strangers in your home and not being able to use your entire unit can stink. It is important to know local regulations since some areas have very strict rules. If you live in a HOA or are renting, this might not be feasible. Many landlords do not allow subleasing. It is also important to remember that some areas have more than a demand than others. Still, this is a great way to have a side income turning already owned space into a rental.
4) Rent Out Your Previous Home Instead of Selling it for the Down Payment – As we have discussed being a landlord is not for everyone. Still, if you are trying to stretch your dollar as far as possible, selling your current house for the down payment money might not be financially prudent. As I discussed in don’t lose money selling your house, depending on your rent versus mortgage, with today’s low interest rates you could be making a mistake.
It is important to remember that houses have expenses and vacancy potential. Not selling your house would still leave a liability and could have long term consequences. Still, if you are willing to be a landlord and have a healthy emergency fund then it could be more prudent in your case to keep rather than sell.
My husband and I saved $60,000 over the last year so living frugally is still very important. We have greatly reduced our bottom line by focusing on housing as our largest reduction. We have also been able have a larger effect on our early retirement account.
How do you reduce your living expenses? Have you been able to live rent free? How about mortgage free?