Move Closer to Work? Commute Cost Savings & Rental Income Potential

Even though I just refinanced my house and I am pretty comfortable where I’m at, I have thought a lot about moving closer to where I work, effectively moving me into “town.” I’d be closer to libraries, grocery stores, and other amenities that I am currently not close enough to bike to every day.

It is easy to list the many practical upsides of this hypothetical scenario, including how awesome it would be to start bike commuting a majority of the time, but I want to work out the math as well. As with most places, getting closer to the epicenter of town increases housing costs significantly. This post is an analysis of the cost increase & potential savings of making a move.

Vehicle Fuel & Maintenance

If I buy a more expensive house closer to work and in return have shorter driving distances and bike more often, I’d very likely drive about 1/3 of the miles I do now.


  • 666 miles/month x $0.25/mile = $166/month

Estimated new cost:

  • 222 miles/month x $0.25/mile = $55.50/month

Savings of $110/month

Utility Savings

I estimate that my total utilities cost would be 2/3 of what I pay now. My current house is all electric, and I would likely move to a house with a natural gas heating system and hot water heater.


  • Electric: $150/month

Estimated new cost:

  • Electric & Gas: $100/month

Savings of $50/month

Rental House

I am not yet sure that it would be a great investment, and I haven’t done any hardcore research or math, but I would like to keep my current house as my first rental property if I ever move. I would be adding “part-time landlord” to my list of responsibilities, but I would also be adding a little extra revenue to my income every month that could help offset the higher mortgage:


  • Mortgage, taxes, & insurance: $8,040/year
  • Repairs, maintenance: $1,200/year

Rental estimates:

  • Rental income: $14,400/year
  • Vacancy: $2,400/year (2 months)
  • Repairs, maintenance: $1,800/year
  • Mortgage, taxes, & insurance: $8,040/year

Effective income: $2,160/year

By adding all of the savings and new income together I would have an additional $340 per month to offset a higher mortgage without changing my current outlay of expenses.

New House

I am confident that I could find a house close enough to work & amenities, but cheap enough so that my new mortgage isn’t higher than $180,000 (with 20% down). With an interest rate of 3.5%, a $180,000 mortgage would cost me about:

  • Mortgage: $800/month
  • Taxes: $100/month
  • Insurance: $100/month

Total: $1,000/month

So it seems, if I’ve done my math correctly, the cost savings and rental income would be just enough to make this move budget-neutral. Given that it would take me at least a year to save the 20% down payment, I probably won’t be making this move any time soon, but it’s good to know the rough math! What potential hidden costs or savings have I missed? Did you turn your first home into a rental when you moved? What was the result? I’d love to hear your thoughts in the comments below!

[featured image author: Editor B]

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  • A few things in your numbers that caught my eyes –
    1 – your insurance rates will probably increase a bit when you change the house to a rental, though this depends on how much coverage for contents you currently purchase as you’ll want the renters to cover their own through renter’s insurance. Your insurance agent should be able to get you ballpark quotes.
    2 – The effective income from your rental will be taxed at your highest marginal tax bracket, so that’ll affect your bottom line slightly.
    3 – you don’t account for repairs/maintenance on the new house at all to complete your apples to apples comparison…

    While we plan to turn our current (and first) home into a rental property if/when we move someday, we do currently own a rental duplex that has been a great investment for us, too!

    • Thanks for finding a few flaws in my numbers! I figured that my insurance would change somewhat, but since I am not ready to actually move foward with this plan, I haven’t asked for any quotes. I guess I am hoping that it will at least be close to a wash.

      Taxes are another great consideration that I haven’t figured out – with the deductions allowed, hopefully it won’t increase my tax burden too greatly, but I should do some more detailed calculations!

      Yes, I certainly did forget maint. on the new house… that changes things a bit.

      I think my numbers are so rough that this could all still equal out to be a budget nuetral plan, but I am glad to have another set of eyes help me audit my calculations :)