Rent Splitting Guide for Roommates
So, you're moving into a new apartment with roommates. Congratulations! A new place to decorate, and a new lifestyle awaits!
While moving in with new roommates is exciting, before jumping in and signing a lease, an important thing to think about is how to fairly share all the expenses. It's easy to figure out when there are two people and one bedroom, or four people and two identical bedrooms, but what if there are three people and two bedrooms? Or two people with two bedrooms but one bedroom is larger and has a private full bath? That's when things get a little more interesting.
The two most important things in splitting rent and bills are communication and compromise. Everyone has different backgrounds, upbringings, and expectations. Some people are really easy-going, and some are... well, less so. With good communication and a willingness to compromise, most issues can be handled with relative ease and grace.
Beyond that, here are the fundamental considerations for sharing the finances in an apartment with roommates:
Step 1: How Long Will You Rent Together?
It is important to have at least a basic plan for how long you will rent together. When splitting rent amongst several people, getting a commitment from everyone on how long they intend to rent together is an important starting point. Apartment rents tend to decrease with longer rental periods (renting for 3 months is generally more expensive on a monthly basis than a 1 year or 2-year lease). While life can be unpredictable, getting everybody’s ‘best guess plan’ on how long you will be living together is an important starting point. For college-age roommates, this is often on a yearly or semester-wise basis.
Another question to ask early-on in the case of college roommates is how to handle shared expenses in the summer. Some roommates will want to move out in May or June after the semester ends, which will leave the summer months to be covered by the roommates that stay.
Step 2: Who gets which room?
If you sit down with your new roommates and listen to what everyone is thinking, it may turn out that you're all on the same page. Everyone has different priorities. If you really want the bigger room and your roommate really wants to save money, no problem. If you're single and your roommates are a couple, they should probably have the larger room with the private bath and walk-in closet.
Other factors include the number of windows, soundproofing and general noise-level, temperature level (in hot climates, East and West-facing rooms can be a lot warmer in the summer). These factors along with personal preference come into play when choosing who gets which room. Have a walk-through together and recognize that not all bedrooms are the same in terms of size, amenities, closet space, and livability. Better rooms will often command a slightly higher share of rent.
Step 3: Splitting Bills
While some apartments have utility payments included in the rent, in many cases, roommates should expect to pitch in as a group to cover regular expenses such as electricity, water, trash, gas, cable TV, and Internet streaming services.
However you decide to split your bills, it's important they're paid on time. Depending on your household, it may make sense to put one person in charge of collecting all payments and then paying each bill, or each roommate can be in charge of a specific bill. However you manage this, you are going to want to track payments carefully. Some people use accounting software... but many of us just use shared Google Sheets or a dry-erase board.
Step 4: Furnishings and Appliances
Shared space furnishings like tables, chairs, couches, area rugs, television, stereo speakers, a desktop computer, and (importantly) a washer and dryer are important to figure out. Will any of these things need to be rented? Will one of the roommates be able to provide these items? Will they need to be purchased? If a roommate is willing to provide the furniture and appliances, it can make sense for them to get a discount on their share of the rent.
Step 5: Parking and Storage
Most rentals come with parking, but in some cases, the number of reserved parking spaces for an apartment may be limited. If the number of vehicles amongst your roommates is more than the allotted number of parking spaces, it may be necessary to purchase additional parking. It this case, it may make sense to divide the cost of the additional space amongst all of you. Additionally, roommates may have larger items they want to bring to the space, some of which may require dedicated closet space, patio space, or group agreement of where the items can be stored. Mountain bikes, ski equipment, golf clubs, and such items are part of roommate life, so discussing where they will go is essential to getting settled into a new place.
Some apartment communities offer locker and storage space for an extra fee that can be added on to your rent, and paid for by the group, or picked up by individual roommates when they have extra items that won’t fit in the apartment gracefully. It may be worth agreeing up-front to share the cost of additional storage space in order to keep bikes and scooters out of the living room!
Step 6: How to Handle the Security Deposit
The security deposit has two money-related questions to ask when renting with roommates: How to divide up the deposit on payment, and how to give it back once the lease is over, or an individual roommate moves out. It usually makes sense to evenly divide the security deposit upon executing a lease. That is relatively straightforward. However, it may be less straightforward when roommates do not move out at the same time, and when damage assessments are incurred, and the full deposit is not returned. For purposes of dividing up recurring rent, these questions are not so important, but for the overall financial picture of sharing a space with roommates, these questions are worth considering early-on and including in your roommate agreement.
Step 7: Formalize Your Agreement
Create a memo or informal contract with all the details written down. It can be an email, a form downloaded from online, or something written on a piece of paper. Write down all the details you can agree upon and have everybody sign it. Take a photo and send it to each other or print multiple copies and keep them in a safe place. Deciding how to manage shared finances and documenting it clearly can save you headaches later.
Note: This calculator is designed as a starting point for discussion. We're specifically not giving definitions for room sizes (a "large" bedroom in Manhattan is probably smaller than an "extra-small" bedroom in Boise), defining "private bath" as a half-bath, three-quarter bath, or full-bath, etc.