Co-living: how to split expenses

Co-living: how to split expenses

Private Property South Africa
Kerry Dimmer

The growing appeal of co-living whether it’s multigenerational families, among friends or colleagues, or a couple in a partnership - is more than just a way to share or spread financial commitments towards housing. Co-living builds on a society that is becoming much more community-focused, collaborative and is thus part of the shared economy concept.

What is co-living all about?

Co-living is not to be confused with co-housing, which is usually relative to university or hostel-like dormitories that share spaces. Instead, it defines an environment where residents have a private space, like a bedroom/bathroom, but share communal areas like a kitchen and lounge. This is becoming increasingly more popular in areas where housing rentals are steep and ideally suit digital nomads, students, and young professionals. In the latter case, yuppies are most keen to have their living space reflecting their aspirational career, yet may not be in a position to afford the number of add-on facilities they would prefer, such as an apartment with a lobby, gym, swimming pool, and views.

Buying a home is also often out of reach of new job candidates, who may have no choice but to accept a position far from their home base and which will impact transport costs. Couples, who live apart, may find that sharing a rental is the start of building a life together or being able to better save for a property purchase. Multigenerational families are also finding that buying or renting a bigger space offers other financial savings such as cleaning, babysitting, security and, if the property is owned, as a solid family investment asset.

The challenge of co-living is how to split the costs fairly. If a couple is sharing a bedroom, it is obvious that the costs of running such a household are split equally. It is far more complicated, however, when the co-living experience is among friends, colleagues and even two or more family members, and more so when the rooms allocated for private use are larger - such as one person using the main en-suite bedroom.

Rental payments in co-living circumstances have three components: the share of the public space, the share of private space, and the share of services and/or consumables. One of the easiest ways to cover these costs is to divide the entire rental and service fees between all roommates. However, an objection may be that one or more persons have a larger private room or space, which will mean working out square meterage, converting that into a percentage and dividing that into the rent. Splitting the rent by meterage ensures that everyone makes a fair contribution.

When it comes to utilities and services, such as cleaning, electricity and water consumption, fibre and television subscriptions, security, gardening and similar, it is far better to split these costs equally because it is nearly impossible to work out how much each individual uses. It might be, however, that one person working from home would use more of one service than another who may spend two weeks of the month travelling. Even in a case like this, and unless the difference in usage is significant, it is not worth the haggling.

Food consumption is somewhat more complicated, given individual choices and diets. If all parties agree on the types of menus and share the cooking, yet again, those costs should be split equally, which will certainly apply to the acquisition of basic staples like flour, sugar, tea/coffee, toilet rolls, cleaning liquids etc. A separate budget for food is a good way to manage consumption costs.

Some roommates, however, may choose to buy their own groceries or eat at a specific time, meaning they will still need to contribute to the basic staples and cleaning goods. Splitting costs in unequal measures can become quite difficult to manage financially and requires strict control of what belongs to whom.

All parties must agree

Developing a roommate agreement is essential to avoid any relationship breakups. All expenses should be accounted for, including possible rental increases and utilities provided by external service providers such as power and Wi-Fi. Unfortunately, it usually falls on one person to ensure all bills are paid, which can be quite a responsibility if one roommate in a rental property fails to pay their agreed-to contribution.

In a rental scenario, there is usually one leaseholder, and it is recommended that this person establishes a separate fund to pay for unknown circumstances and cover any potential shortfall in rent by any of the other co-living residents. This must be a transparent account, which all parties should be able to view regularly to ensure the leaseholder is meeting obligations and managing the finances. Service fees for such an account must also be shared equitably.

It may be that the leaseholder may request that in lieu of managing the account and ensuring payment of bills, they do not pay extra for the right to use a larger private space, such as the main, bigger bedroom, or another similar arrangement put in place.

The agreement will always be a term of reference for potential disasters. Should a roommate break a fixture or a piece of furniture that does not belong to them and is considered solely responsible for the repair or replacement, this too should be included, as should any penalties in terms of failure to pay rental or agreed-to costs. The agreement must be signed by all parties, and the leaseholder should have a copy of their IDs.

Always ensure that a landlord knows that the property being rented is for co-living and has a copy of the co-living agreement. Although the leaseholder is answerable to the landlord on all matters related to the property, in situations where the leaseholder is away, the landlord may choose to terminate a rental contract between the leaseholder and himself/herself should the terms of the rental agreement be contravened. This can put accommodation at risk for all those living on the property, and in the best interests of transparency, the leaseholder should also share that rental agreement with roommates.

Use the guidelines provided above to have a secure co-living arrangement.

Writer: Kerry Dimmer

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