Handling finances in a large shared living situation (e.g. coliving)

A few people requested this, so figure I’d throw it up on the Mediums.

Who is this for?

This is a practical how-to guide on the finance mechanics for large shared living situations.

Target audience: Anyone who operates or is considering starting a shared living situation with 6+ people, e.g. intentional community / coliving / cohousing.

This covers a masterlease scenario, where the residents lease from an external landlord rather than own themselves. Finances for owned property are trickier.

Design principles: Practicality, simplicity, agency, and avoiding having to think about money.

Context / credentials

RGB is a 11-person intentional community in Hayes Valley, San Francisco. We live in a former gold rush era mansion on Haight St. We got started in late 2015. The first year was hard, but now all of the systems are in place and everything runs smoothly.

House colors

Credentials: We are totally solvent.

Base principles of finances at RGB

  1. 100% transparency: Every dime collected and spent is tracked and made available to all residents.
  2. No one profits: Any excess funds are pumped back into the house or distributed out to residents. Note: Other types of communities may be run for profit, e.g. commercial coliving. Because we are a group of friends, ours isn’t.
  3. Cost predictability and single transaction per month: Everyone pays fixed dues into the house pool every month (currently rent + $245 per month), which covers all shared expenses. No ad-hoc mid-month collections requests such as “can everyone Venmo Bob $7 for pizza?”
  4. Voluntary progressivism — The “AwesomeFund”: Some people have more financial resources than others. We give people the option of contributing additional money to fund extraordinary projects outside of the scope of normal house operations. This fund is called the AwesomeFund. Uses have included subsidizing rent for an “artist-in-residence.”
  5. Trust and “doocracy: We have a doocratic governing philosophy at RGB, meaning that we encourage people to just do stuff (and risk being wrong) rather than asking permission or calling votes. This creates a sense of agency by removing barriers and empowering people to take action.This doocratic philosophy extends to finances: No “permission” is needed to spend <$50 on behalf of house. We all trust each other to make the right decisions with communal funds. <$100 requires a heads up to hear objections, but no formal vote. We think are better uses of scarce gathering time than voting on small expenditures.
  6. Pain share for vacancies (but capped): Different houses handle room vacancy in different ways. Some put a cushion in everyone’s rent to account for vacancy. We prefer a transparent approach where everyone’s incentives are aligned. Our rule is that everyone in the house splits the cost of up to one vacant room from the previous month. Everyone is jointly responsible for recruiting new members and therefore everyone should feel the pinch if we didn’t collectively do our jobs. The mastertenants cover any vacancy beyond one room to cap members’ financial exposure.
  7. Rainy Day prep: Running a community is risky and liability is abound. Before anything bad happens, we collect a Rainy Day fund from residents so we have funds already on hand when the unexpected happens. This can also pay for eventual move-out expenses so you don’t need to track down people years later.

What we spend money on

Monthly house expenditure per person: Volatile, but roughly averages to $245

$245 may feel like a lot on top of rent, but members report this is actually a money saver for them. Abundant food, house events and bulk-purchased supplies means fewer restaurants, bars and convenience store toilet paper trips. Almost all of us spend less than we did before joining the community.

A few notes:

  • Food / supplies is the biggest bucket. We provide a base level of shared communal food (eggs, bread, veggies, sandwich supplies, salad greens, avocados!) and all basic supplies that make sense to buy in bulk (e.g. paper towels).
  • In year 1, we had a line item for contributions to the Rainy Day Fund, but it is now fully funded.
  • In year 1, we had a line item for paying back some upfront capital expenditure to get the house started (e.g. furniture), but that’s been paid back. You should expect this if starting a house.

House accounts:

  • The General House Fund: Where the routine monthly expenditures and income come and go. We try to run this break-even with a buffer of ~$1000+.
  • The AwesomeFund: Voluntary contributions from members and guests which get spent on Awesome stuff separate from the routine monthly house expenditure. Example: Charity or subsidizing rent for an artist.
  • The Rainy Day Fund: What happens when the chandelier gets knocked down and we owe an unexpected $2000 right away? The Rainy Day fund is pre-funded so we don’t need to do ad-hoc collection and negotiation when something bad happens. We collected $15 per member per month out of member dues — until the fund reached $3000 — then stopped. We will refill if it gets spent down.
  • Rent Fund: Keeping rent separate from General House Fund is good hygiene and will keep your accountant sane. The rent fund income and expenditure should net out to zero every month for houses that don’t make profit on rent.
Account for your house funds separately to know what is “safe to spend’ and what’s already spoken for

Process: Collecting and disbursing funds

  • Cozy is the best solution we’ve found for collecting rent and security deposits. It’s free and automatically pulls money from member’s accounts. No nagging required. Pretty much does exactly what you would want it to.
  • Venmo Groups is the best solution we’ve found for collecting monthly house dues. The key feature is the ability to “request funds.” The Minister of Finance can simply log payment requests with everyone each month and they can click “accept” the next time they log into Venmo.
  • Every month we do a single reconciliation with all members. They get a Venmo Groups payment or Venmo Groups request calculated as follows: (Previous month reimbursable expenses - this month’s house dues - share of any vacancies from previous month)

Setting rent:

  • We used a rough formula accounting for both public and private space. Your rent payment has two components: 1) Your share of the public space 2) Your private room. We calculated that ~30% of our square footage was shared communal space and 70% was private bedroom space. We take 30% of rent and divide by the number of people — that’s your share of the public space. We take the remaining 70% of the rent and split it by the square footage of the private bedrooms.
  • Couples living together pay a “couple’s premium” to reflect additional use of the shared space. We found is easier to tack this onto house dues than add onto rent (to avoid changing everyone’s rent all the time).

Things we screwed up (and then fixed):

  • We didn’t sufficiently account for paying back start-up costs when setting house dues
  • We had both a house PayPal and a house Venmo account. That got confusing to reconcile quickly. Force everyone onto one platform to make the Minister of Finance’s life easier.
  • [Fixing now] Dumping everything into one bank account can make tracking and reconciliation confusing. Simplify your life by having two bank accounts: One for your rent + security deposits and one for the other funds, including the house fund. This makes accounting straightforward and allows you to easily answer the question of “did everyone pay their rent this month?”

How does your community do it?

Let us know in the comments.

And I’m happy to share our spreadsheet that does the calculations above. Just PM me.