The Moneyist: I rented a 3-bedroom apartment for $1,500 and charged my roommates $800 per room. I got a $100 cut each month. Was I wrong?
I rented a three-bedroom apartment from the owner.
He got inconsistent rents via room rentals. Empty rooms paid $0. His rent was $500 per room. I took the entire rent upon myself: $1,500 a month plus utilities. Room rentals in the area were $700. I repainted. I furnished the place. I maintained it.
I took a room myself and rented the other two rooms for $800, with each paying one-third of the utilities. I did the work to get the roommates. They paid for themselves. If they left, the financial burden was on me. I risked the investment. My logic: I should be paid for my work.
In my opinion, they didn’t earn the right to pay $500 a month. The market rent was $800 for the amenities and the location, and it was furnished. My rent was one-third of the utilities and I earned $100 every month. The landlord got $1,500 a month on time.
Eight years later, the gig ended with the house sold.
Was I wrong?
You can email The Moneyist with any financial and ethical questions related to coronavirus at email@example.com, and follow Quentin Fottrell on Twitter.
Skimming vs. Scamming. There’s a fine line between the two.
Are you an enterprising subletter who knows how to hustle, or the roommate from hell? Or somewhere in between? You put your name on the lease, and took a relatively low financial risk, something that should not be used to justify charging them each $300 extra every month. A perfect ruse for someone new in town.
Here’s the murky part: It’s not transparent. You did not tell the people you were living with for eight years that they were effectively covering your rent. Nor did you tell the landlord that you secretly upped the agreed rent, and skimmed off the top, breaking the “no subletting” rule standard in landlord-tenant contracts.
There is one other person whom you would also be required to tell: Uncle Sam. If you believed you were acting 100% correctly, then you should follow that exacting logic through to the finish line and declare the money as income. It’s double-dealing if you suddenly stop short when it’s disadvantageous to you.
I do take issue with the following inhospitable — possibly even hostile — sentiment in your letter: “They didn’t earn the right to pay $500 a month.” Wrong. They had every right to pay the rent set by the building owner. They did not own the furniture you provided, and they likely covered the paint job in the first month.
“I take issue with the inhospitable — possibly even hostile — sentiment: ‘They didn’t earn the right to pay $500 a month.'”
But those tit-for-tat details are hardly the point. From what you say in your letter, you kept the actual rent for the house under wraps. Try the “do unto others” test: If the situation were reversed and you learned that the person subletting the rooms was making a profit from them, how would that make you feel?
So why is it OK for someone who owns a property to charge rent and make a profit? A landlord, who already openly holds more power than the tenant, is transparent about his/her objective to make a profit, and is ultimately be responsible for any liability, including fire or damage to the property. As a non-owner, you are not.
You were a fellow tenant who was — as far as your co-renters were aware — on equal footing economically and socially. You held the lease, but you were roomies. There is a pervasive element of subterfuge, especially if you know that there would be trouble and broken trust if they found out.
“‘You were a fellow tenant who was — as far as your co-renters were aware — on equal footing economically and socially.'”
Your question is similar to the difference between the letter of the law and the spirit of the law. Even if you were not breaking subletting rules with your landlord or laws with Uncle Sam — a scenario that seems highly unlikely — it does not necessarily mean that you were abiding by a social norm or moral code.
The Italian-American philosopher Cristina Bicchieri talks of social norms as “the language a society speaks, the embodiment of its values and collective desires, the secure guide in the uncertain lands we all traverse, the common practices that hold human groups together.”
A social norm is established when boundaries are set around behavior and decisions so they reduce the prospect of injury or hurt. It teaches us to respect each other’s personal space, and not take advantage of each other. The best and worst of that: It’s up to each of us to set the moral thermostat for our own lives.
But your actions result in three wronged parties: Your tenants for the reasons I state above, Uncle Sam because you used your roommates as income, and the building owner, who is ultimately responsible for the well-being of his or her tenants, and has no knowledge of your arrangement with these people.
Breaking the contract with your landlord and the social contract with your roommates is not showing entrepreneurial skills and showcasing capitalism at its best, it’s using other people’s assets to make extra money on the side without their permission or knowledge. It’s bad form, I’m afraid, and sharp practice.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
More from Quentin Fottrell:
o My married sister is helping herself to our parents’ most treasured possessions. How do I stop her from plundering their home?
o My mom had my grandfather sign a trust leaving millions of dollars to two grandkids, shunning everyone else
o My brother’s soon-to-be ex-wife is embezzling money from their business. How do we find hidden accounts?
o ‘Grandma recently passed away, leaving behind a 7-figure estate. Needless to say, things are getting messy’