How To Live Rent Free

It’s a cold Saturday night in Chicago and I’m huddled on the back porch of a three-floor walk-up chatting with a few friends about apartment hunting. In the past year, apartment rents have gone up 4.8% in Chicago and in the hot neighborhoods rents are up 15% year over year. Over the past 4 years, rents are up over 50%. Here’s a deeper analysis of the rents in cities across the United States. It’s insane.

My friend Brian, who recently broke up with his girlfriend, just can’t find a cheap enough place to live in the same neighborhood. “It’s so tough man,” he opens up, exhausted after looking at apartments all day. “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 – even if it’s just $5 a day.

I’m stoked to talk money with my homies. I’ve had a bit of wine, so I couldn’t help it. “What if you could live rent-free Brian?”

He knows I blog about money, but still looked at me like I’m an idiot.

Can I Really Live Rent Free?

Yes, you can live rent free. Which can make a massive difference for your future net-worth. So many people spend too much money on rent – they get the luxury apartment (hate that phrase) in a hot neighborhood and drop 50% of their take home pay on a place. A majority of those luxury apartments (still hate that phrase) renters are still living paycheck to paycheck. Then they say they don’t have enough money to save. Uh…

Rent is many people’s biggest expense and biggest opportunity to save money. I always recommend trying to optimize your biggest expense first, since it can have the future value of investing that savings can be massive. Seriously, don’t rent an expensive apartment unless you are already investing at least 20% of your income. Pay yourself first by saving at least 20%, then you can spend the rest. If you have enough to rent a nice place have at it.

But if you want to retire early, gain financial independence, reach financial freedom – whatever you want to call it, you gotta keep your living expenses in check.

Save Money on Rent

For a slightly different perspective, we previously covered saving money on rent in this Millennial Money podcast episode.

In 2010 when I was starting my financial independence journey, I decided to downgrade my apartment from $1,500 to $800 a month and invest the difference. The value of every $1 I saved then, using a simple investing strategy, is worth $3.25 today. The total value of the money I saved by downgrading my apartment for one year (while I also saved up to buy my first property), is worth $27,300 today. That’s a ton of saving (that’s still growing btw) and if it compounds annually at 7% (pretty realistic) and I don’t add a single dollar to it – that $27,300 I saved on rent in 2010 will be worth $207,814 in 30 years. I’ll take that over granite counters any day.

But, I was still paying $800 per month. What if you could live rent-free, or even make money from renting? It’s actually possible, and in some cases, pretty easy to live rent free in many cities in the United States (and in some places abroad).

5 Ways to Live Rent Free (or actually make money renting!)

  1. Rent, Then Sublet for More Money (The Rent Side Hustle)
  2. Rent a House and Rent Out the Other Rooms
  3. Airbnb
  4. Buy a House and Pay the Mortgage with Renters (House Hacking)
  5. Barter For Free Rent (Value Exchange)

1. Rent an Apartment, Then Sublet it for More Money (aka “The Rent Side Hustle”)

live rent free

While I only did this once for 2 months, it worked like a charm and I made $1,200. Honestly, I wish I’d thought of it sooner. It’s a strategy I highly recommend. The idea is simple – you sublet your apartment for more than you pay for rent and bank the difference. You can even go looking for an apartment with the specific goal of doing this and it makes it easier if it’s another unit in your building or an apartment you are familiar with. Not all buildings or landlord allow this practice (check your contract closely), but a vast majority of the rental contracts I’ve reviewed don’t have restrictions or language about “sublet rental rates”. Yes, they have restrictions on when and how you can sublet, but not on the rental rate that you can charge the subletter. Sometimes, the money is between the lines. ?

The rent side hustle is a lot easier to do if you have a hands-off landlord or live in a neighborhood where you got a really good deal. I recommended this to one of my friends who’s landlord hasn’t increased his rent in 5 years. The property rents have more than doubled in his Chicago neighborhood. Now he sublets it and makes $1,200 a month. As long as his rent check arrives, his landlord doesn’t bother him. This is particularly easy in neighborhoods that have high student turnover or buildings with management companies that are overworked and underpaid (most!).

Another opportunity – look to take over existing leases from your friends or even on Craiglist. When you take over a lease, then you can immediately potentially sublet it for more money. There are tons of deals to be found if you look hard enough. But make sure you do your homework. This is one bonus of rent’s increasing so quickly because if you’ve lived in a neighborhood awhile, you can likely sublet your apartment for quite a bit more than you currently pay. 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

This is an easy way to live rent-free, as long as you are responsible for paying and collecting the rent. 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. If it’s a 3, 4, or 5 bedroom apartment or house it should be pretty easy for you to add $100-$200 to each individual room rate to cover the cost of your own. While this is easier to do when you are renting the other apartment rooms to non-friends, it can work with your friends too, since you can tell them their rent is a bit higher since you are taking on the burden of the lease and making payments. This is likely going on all around you, so if you are young, or you want to live with roommates this is a great option to live rent free.

craigslist treehouse apartment

This is a real Craiglist ad. I gotta give this guy props for hustling his treehouse. FTW!

 

3. Airbnb Your Extra Rooms, and/or Your Full Apartment When You Travel

This is a no brainer and I know a lot of people who not only live for free, they actually make money on their apartment. But be careful because there can be restrictions on home sharing in your rental agreement, especially if you live in a corporate building. If you have an old school landlord they likely won’t have restrictions, but make sure to check. Also, make sure you save money for taxes since Airbnb income is taxable and I know some people who’ve been burned by the IRS from their Airbnb income. 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”)

Let’s go a whole step further and buy a property, so you can have an investment, make some money renting out rooms, and then also live rent free! Wha? That’s the trifecta. ??? One myth is that you need a 20% down payment. 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. While it doesn’t always make sense to buy, given the very high rents in most cities, buying might not end up being cheaper. If you are going to live in the same city for a least a few years (check the rent vs. buy calculations using the link below), you could actually make quite a bit of money on the investment. Check out my post on how to best analyze whether you should rent or buy a home in your market.

Note: Stay tuned for an upcoming series of detailed guest posts and podcasts on how to start house hacking.

5. Live at Home or with a Friend and Barter for Free Rent (aka “Value Exchange, Not Freeloading”)

This is actually a lot more common than you might realize. If you have something of value (whether skills or an asset like a car), you can barter it for either discounted, or even free rent. One Millennial Money reader recently emailed me to let me know she lets her roommates use her car and she also cooks for them, in exchange for free rent. You can do the same thing if you decide to move back in with your parents – barter for the privilege of free rent and the opportunity to save and invest your money instead.

Important Tips to Living Rent Free

Some words of caution:

1. Rental income is taxable income, so be careful and make sure you save at least 30% of your rental income for your taxes

2. Always make sure you have renter’s insurance and hunt for insurance that covers the property even if you aren’t saying in it!

3. Read contracts super carefully (yes I know it’s a pain but it’s worth it). 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.

4. Be cool. Don’t charge your homies a ton of rent if they can’t afford it. Be open with them.

5. If you move back home with your parents, offer to pay rent or do enough chores/add enough value so you don’t take advantage of their goodwill.

How do you live rent free?

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Grant Sabatier

Creator of Millennial Money and Author of Financial Freedom (Penguin Random House). Dubbed "The Millennial Millionaire" by CNBC, Grant went from $2.26 to over $1 million in 5 years, reaching financial independence at age 30. Grant has been featured in The New York Times, Wall Street Journal, BBC, NPR, Money Magazine and many others. He uses Personal Capital to manage his money in 10 minutes a month.

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Posted in: Real Estate, Save Money

21 Comments
    Erik @ The Mastermind Within
    Posted May 05 2017
    I do #4 with 2 bedrooms in my house. It's a great deal! I'm effectively paying $400 a month in "rent", though I'm also building over $500 a month in equity! :) One point to make, when renting out a house, you don't necessarily need to save 30% of your income on the rental income. There are many tax benefits to renting out your house: interest expense, PMI, and any house expenses are tax deductible. Great post Grant
      Grant Sabatier
      Grant @MillennialMoney
      Posted May 05 2017
      Thanks Erik. Good points about the tax deductions!
    B Aussie
    Posted May 05 2017
    You totally left out house sitting! That's free & there are short and long term opportunities. Not quite as good as having your own place but for a year or two it's worth the money saved!
      Grant Sabatier
      Grant @MillennialMoney
      Posted May 06 2017
      Great point!
    Ross
    Posted May 07 2017
    Although you talked about buying a single family home and renting out bedrooms, you could also buy a duplex or fourplex and live rent free. We used a VA loan to buy a duplex under 420k with no money down and owner occupy 1 side of the duplex. At the end of the day our we are living rent free.
      Grant Sabatier
      Grant @MillennialMoney
      Posted May 07 2017
      Thanks for sharing Ross. I will be posting a full house hacking post soon that builds out the idea of purchasing a duplex or fourplex in greater detail. I look forward to your thoughts.
    The Savvy Couple
    Posted May 09 2017
    Love the idea of buying a house and renting out rooms to cover the cost. This summer we plan on renting (AirBnB) our house while we are on vacation. Total win win!
    Matt Kuhn
    Posted May 16 2017
    Awesome ideas. A buddy of mine is doing pest control this summer, and him and his wife decided to sub-lease their (fully furnished) apartment while they're away. So not only are they making money doing the summer job, their bringing in a couple hundred dollars of passive income on the side. Definitely a great way to make time work for you.
      Grant Sabatier
      Grant Sabatier
      Posted May 16 2017
      Thanks Matt.
    Mark
    Posted Jun 06 2017
    Great article! Regarding your first point, you charged $600 more per month to the guy you subletted your apartment to? I could see charging $200 more...but how the heck did you get away with charging a whopping $600 more?!?!
      Grant Sabatier
      Grant Sabatier
      Posted Jun 10 2017
      It was comparable to the other rates in the market. I know it was crazy!
    mike palko
    Posted Jul 23 2017
    A double whammy would be to combine renting out a duplex and then also having a roommate in your half of the duplex as well :)
      Grant Sabatier
      Grant Sabatier
      Posted Jul 25 2017
      BOOM! Totally.
    Erika Brady
    Posted Sep 09 2017
    These are such great tips, thank you so much for sharing! I always thought it was a little sneaky to charge more when renting it out, but the way you put it finally made sense to me. And I have never even considered renting it out while I'm on vacation! I think I will definitely have to try that out. Such a smart idea!
    Feldon
    Posted Sep 17 2017
    This reminded me why I sought out to get a house years ago! Thanks Grant! This is a great lesson on the value of leverage and homeownership.
      Grant Sabatier
      Grant Sabatier
      Posted Sep 18 2017
      Thanks Feldon
    Annie
    Posted Nov 10 2017
    Hi Grant! I am new to your blog, but I've been enjoying reading various articles. I am a 32 year old special ed teacher, and I'm very fortunate in that I live in my parents 2nd home for a small "maintenance fee"- in the silicon valley! My husband is still getting through school so I am the sole earner, but I've been very proud of myself for saving every penny into around 43,000 of savings over 2 years on a teaching salary. And I paid for our wedding this past summer as well, without dipping into that! I'd like to mention one amazing type of job that can be a great opportunity for people with the right temperament, although not many know about it. I started as an in home care professional working with adults with developmental disabilities. Not only did it lead me to my very in demand career, but I held 3 "housemate" or "live in" positions where I basically worked off any rent by sleeping in the house to be there in case of emergencies. The field is low paying, but they really need good people and you can sub to get a lot of hours and supplement your pay. If you are responsible, caring and will do a good job (I'm passionate about disabilities and these people can be vulnerable, so I need to emphasize that), it can be a great opportunity, especially for students and sin e people. My husband and I are now expecting our 1st child, and my plan is to save in cash until we can afford a home in an area with very low real estate costs. Do you have any thoughts on this? I'd be putting all my savings (besides my district sponsored retirement fund) into this investment, then trying to save again with no mortgage to use the entire house as a rental property. I know there's a debate about investing vs buying in cash, but I'm very risk averse, my husband and I have student loans, and we want to have kids so I love the safety net feeling of the no-mortgage prospect...
      Grant Sabatier
      Grant Sabatier
      Posted Nov 13 2017
      Thanks Annie
    Vicki
    Posted Apr 19 2018
    Hey Grant, great job on writing this article. I read a lot of blog posts and I never heard of a topic like this. I love the part about Air BNB your extra rooms!!! Thanks!
    Mel
    Posted Apr 19 2018
    There are a lot of jobs you can do that will cover your housing - at least for a few years while paying off student loans. I worked for a cruise line and lived on boats, joined the circus and lives on a train and in RVs, and did a few children's theater tours where I pretty much lived out of hotels for months at a time. I managed to pay off student loans and build up savings by doing that for years on a small salary.
    AirKeeper Australia
    Posted May 03 2018
    Great article and excellent write-up. Those tips are really a big help. Thumbs up for this.

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