Housing Decisions

How to make the best possible housing decision

Get our best tips and tricks for securing a place you’ll love to live in—without breaking the bank.

Podcast transcript

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PETE: Welcome back to How Not to Move Back in With Your Parents here on the IU MoneySmarts radio network. I’m Pete the Planner, joined as always by Alex. Alex, hello sir.

ALEX: Round two.

PETE: Round two. Second episode, second semester here on How Not to Move Back in With Your Parents. People are already talking about their housing decision. Not for this semester, cuz that decision’s already been made, but next fall. I think one of the most shocking things about college students, generally, my good friend, Alex, they’re not exactly preplanners. They don’t think I had a lot, but this is one of the situations that they really do, and that’s making a housing decision for next semester.

ALEX: That’s absolutely right, because it’s so crucial, too, for us if you wanna get a good spot on campus depending on your apartment, housing, things like that. The scary thing is I know people for next year, so the 2014-15 school year who booked their house over the summer previously.

PETE: Okay, say that again. So when did this happen?

ALEX: So it is spring of 2014 right now, right?

PETE: Yeah, sure.

ALEX: In summer.

PETE: Actually, it is not spring, it’s spring semester.

ALEX: Spring semester, year 2014. It’s January, okay, whatever. Sorry, spring semester, [INAUDIBLE].

PETE: Look, I’m getting older. I don’t need time to pass that fast.

ALEX: Right, so it’s spring semester 2014, summer 2013, they had already booked to their house for the coming 2014-2015 school year.

PETE: And I think what can happen anytime that supply and demand get involved. Cuz this conversation really is a supply and demand conversation when it comes to college housing. When you get into the working world, it can seem like that at times, but the more you separate yourself from the emotions of making a housing decision, not only as college student but as a working adult, it will serve you better if you take emotions out of it, because then you can make some poor decisions. The other element to housing decisions, as a college student, they need to consider, are you need to look at how much should you spend on housing as college student if you’re going to be doing this, obviously, as a renter. So what’s tough, Alex, as you know, how much of your household pay, when you’re a working adult, how much should go towards housing from a take-home perspective?

ALEX: I believe 25%.

PETE: 25% is correct, and that’s why the co-host of the show, and for getting that right, you get an entire case of Turtle Wax.

ALEX: Turtle Wax.

PETE: I don’t know. Maybe we’ll see if we can get you some Turtle Wax. Do you know what Turtle Wax is?

ALEX: I have no clue.

PETE: You really have no idea?

ALEX: No.

PETE: Turtle Wax is a car wax made by the Turtle Corporation. So you don’t actually wax a turtle, which sounds like something.

ALEX: Right, I assumed that. It sounds like wax that comes from a turtle, which is confusing in itself.

PETE: Yeah, it’s just car wax.

ALEX: But I also don’t own a car, so-

PETE: Yeah, well, that makes it easy. So do you own a turtle?

ALEX: No, no.

PETE: 25% of take-home pay generally should go towards mortgage payment or rent, so the unique part about being a student is there’s generally no pay. The living expenses you have are either part of a student loan package, or they’re being funded because your parents, or you, or someone saved money for you. So anytime you’re bleeding down an asset, because that’s what you’re doing when you have housing. The challenges of being a college student, as it relate to housing, you create a second household for your family. You create basically a vacation home, and you’re the only person that lives in it, and you better not be on vacation cuz you better be studying. That’s the challenge. Because it’s hard to say what is an appropriate amount to spend on that because you’re bleeding down an asset. You’re spending down savings, or you’re living off of a loan, and that creates the challenges. So Alex, I put this to you my friend. When you made your housing decision, when you went out, did you have a dollar figure in mind that you personally could spend or that your group of guys that you were gonna live with came to a conclusion?

ALEX: I did have a dollar amount in mind, and mine might be a more specific situation because of how I’ve gone through housing in college and my parents, things like that.

PETE: Sure.

ALEX: Because for a lot of kids, parents are paying for their housing, and they’ll tell them you have this amount to spend. So in my personal situation, my dad told me, when I’m going for senior housing, that we don’t care where you live. That’s your decision with who you want, but we will pay up to what we pay currently for you to live in the fraternity house.

PETE: Okay, so I would assume, like most people, you were fine. I’m going to take that amount that you’ve just given me as a budget, and I’m gonna do the best I can. I’m gonna get the most house, the most bang for the buck. Is that what you did?

ALEX: Exactly, it’s what I tried to do, and I’m very conscious of trying to keep that as low as possible. Because another thing that needs to be brought up for college housing is utilities. Because you have to talk to your realtor. Is it included, is it not? How much can you expect? You should talk to the people currently living in that house how much you can expect for utilities. Cuz that can undercut some people, and they won’t see it coming.

PETE: How many dudes are you living with?

ALEX: Ten, ten total on my house next year.

PETE: Do we have, we play this podcast, people listen on different devices. I wonder if they see my particular blood pressure monitor readings as they listen to it. Because when you just said you’re living with ten people, the ten total, nine other guys and you, that stresses me out. Does that stress you out?

ALEX: No, because I’m finishing up living with 100. [LAUGH]

PETE: No, it’s a good point. But how are you guys dealing with, and this is a really important element, how are you dealing with splitting the cost? Do you all pay into a pot? Do you all individually pay the landlord, how do you split utilities, who’s the treasurer, I gotta know these things.

ALEX: Right, and this is a good tip for people who wanna save extra money going into a house. So our house, technically, is supposed to sleep eight, but they allow ten with all the rules for safety.

All: [CROSSTALK]

PETE: Fire and everything else.

ALEX: Exactly.

PETE: Sure.

ALEX: So there’s a total rent that everyone needs to pay that gets split up. But since it’s an eight person house sleeping ten, we’re gonna have four total people. We’re gonna share rooms together, so we’re gonna have two rooms with two people in each. So our deal with that is obviously, since people don’t wanna share room, other people are sharing the rooms, and we’ll get lower rate, and everyone else will pay higher to have their own room.

PETE: Everyone agreed to those terms?

ALEX: Yes.

PETE: Are you sleeping in a single or a double?

ALEX: We haven’t decided it yet. We know the prices we’re gonna pay for single and double rooms, but we don’t know whose and which yet. It’s gonna get interesting.

PETE: Is it gonna be a draft, or like a battle to the. If they came to like a royal rumble where violence was involved, I’d probably be in trouble, you seem like you could handle yourself.

ALEX: Yeah, definitely.

PETE: So what will happen? I wanna know, at the end of the month or beginning of the month, who pays who, and how does the money get to the landlord?

ALEX: So we have one guy who really took the reigns in getting the house. And so he will get his own room because he did the work, things like that, but we’re all responsible for our own checks, getting the right tin.

PETE: To him, or to the landlord?

ALEX: We’re going to get it the landlord. Because they don’t care how would it get’s to them. As long as they get the money, they’re not too worried about it.

PETE: And may I say that I think I like that better that paying one person. It’s not about trust. It really is not about trust, it’s just about anytime you’re in a financial setting, you want to mitigate your risks, which mean, look at all the possible things that can go wrong, and try to eliminate those. Anytime you have one party, a fellow student, accepting the money and passing it on, there’s five million things that can go wrong for you, the person paying that other kid, or the worst is that kid himself. If he’s the one responsible for paying the rent, and 30% of the dudes in the house don’t pay the rent, he’s personally in trouble.

ALEX: Yep.

PETE: So that makes sense. How about utilities? Is it just additional to rent, and you just pay extra to the-

ALEX: Right, so our utilities. And this is through most houses I have heard of, no matter what school, utilities are not included. So that’s gonna to be on you to talk to the people currently there. Cuz usually, when you’re going through house tours, things like that, you’ll be able to meet the current renters who are living in the house. You need to talk to them about how much it usually is. Are they buying big cable packages as well? How much do they usually use? Because that could really add on costs that you might not be ready for.

PETE: The last thing I wanna say on this before we send you on your merry way this week is this. When giving yourself a budget on housing, and earlier I said, Alex, I’m guessing you took that budget number and went and tried to find as much house as you could for that dollar amount. I would urge you, as you listen to this, to not actually do that. I would urge you to set a budget and not try to hit that budget by maxing it out, but saying that I will not spend any more than that. And if you find a situation that’s less than that, spend less. Now I know that seems like an obvious statement, but I’ll tell you what I see from working adults, there’s mortgage calculators out there, and they try to type in their income and see, how much living expense can I afford? And that’s exactly what I’m gonna do. And it’s a trap. The more fun you wanna have in college, the less you need to spend on housing. The more fun you wanna have by spending money in college, going on spring break and do those other things, don’t trap yourself to a lease. As a working adult, you’re not going to want to trap yourself to a mortgage. So Alex, thanks, as always, for joining me. For more information I urge you to go to moneysmarts.iu.edu, and we’ll see you next time here on How Not to Move Back in With Your Parents.

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