Strategy 69 of 107 · new for the five-year plan
Rent the whole house out and live somewhere free or cheaper
What it is
Move in with family, take a job that includes housing, or rent something much cheaper for a few years.
Steps
- Move in with family, take a job that includes housing, or rent something much cheaper for a few years.
- Rent the whole home at market rent with a written lease and screened tenants.
- Send the full rent, after the home's own costs, to principal on top of the regular payment.
- Move back within three years: owning and living in the home 2 of the 5 years before a sale keeps the home-sale exclusion.
Repeat: Monthly, for up to three years at a time.
Measure: Monthly rent after taxes, insurance, repairs and vacancy.
Try it in the calculator Enter its amount in "Monthly non-income amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- Check the mortgage's occupancy clause; many require living there for the first year.
- Rental income is taxable, and depreciation taken while rented is taxed when you sell.
- Tenants, repairs and vacancy are real costs.
Who it fits
Married couples, Newlyweds, Single, College students, No high school diploma, No college degree, Average household
Needs
Could move out or relocate for a few years
How predictable
Depends on people or program rules (tenants, family, IRS records, lenders)
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (married couples). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: move in with family, take a job that includes housing, or rent something much cheaper for a few years.
Suppose it brings $2,000 a month on principal from this strategy, not from the paycheck. The loan would be paid off in 8 years 4 months instead of 30 years, saving about $293,382 in interest. To finish in five years, they would still need about $1,974 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sequences that use it
- Five-year sprint: move out and rent it: The whole rent goes to principal for up to three years, idle savings go in, and each recast lowers the required payment. Move back in time to keep the home-sale exclusion.
Sources and more information
Where to get help
Related strategies
- 70. Move into the accessory unit and rent the main house
- 65. Bank account sign-up bonuses, without credit pulls
- 64. Selling another property? Carry the note and route its payments to principal
- 63. Business owners: pay your children for real work
- 62. Self-employed: take the home office deduction and send the tax saved to principal
- 61. Merge households: a parent sells, moves in and shares the costs