Mike blogs over at rentingoutrooms.com, it’s his story and tips on making extra money from your home’s extra space. He’s been renting out his spare bedrooms for the past 5 years for extra income. He’s going to hit one of his financial goals this year in 2011 and be one step further from feeling financial poor. This is a great guest post for people wanting to make some extra money if your life situation can accommodate it.
When I bought my townhouse, I didn’t have much money; in fact, I had no money to put down. Ultimately, I ended up financing 100% of the purchase price of the property, which was a mistake on my part. After I bought my townhouse, my budget was tight for months. Meaning, I had to budget not only my groceries, gas, and utilities but also the tiny details such as a hair cut or going out to eat. As you can see, it left no wiggle room for fun.
A year after I bought my townhouse, I wanted to go back to grad school, but didn’t want to take out student loans in addition to the student loans I incurred from my undergraduate studies.
Spare Room equals Spare Cash
I definitely didn’t want to take out student loans especially because I didn’t know what kind of return I would get on them to avoid going into debt for graduate school. I told myself after I get accepted to a graduate program, I’m going to rent out my spare room to a roommate. I found my first roommate and charged him $600 bucks, which was an awesome feeling being able to collect rent that first month.
The rental income has allowed me to pay for graduate school (about $32,000) without falling a single penny into debt. If I took out loans, I would have been in repayment as I’m writing this article.
In addition, the rental income has allowed me to payback a significant portion of my mortgage debt. Specifically, I have been able to payback over 40% of my second mortgage (starting balance was $35,500). At this rate, my second mortgage will be paid off by 2012.
Renting Out a Room
The only regret I have about renting out my room is not starting it sooner. When I bought my townhouse in 2005. I lived in it by myself on tight budget. I wish I had started to rent out my rooms sooner. As with rental income, if your room goes vacant for months, that’s lost income that cannot be recouped in the future. With that in mind, I wish I had started earlier. The opportunity cost of the lost income is endless. It could have replaced my countertops in the kitchen, it could have put a small dent in my mortgage balance. I don’t want to think about what I could have done with the list rental income. I can only look forward and prevent the rooms from going unoccupied.