One of the sessions that Deacon covers in his debt free in 18 months is making more money and decreasing expenses. In another related post, he goes further and details a list of 10 ways to make more money. Some of them involve more time than others, some may earn more money than others, and some may not be applicable for certain folks.
I want to elaborate on #8 from Deacon’s list: Rent out your spare bedroom. I’ve been renting out two bedrooms for the past 7 years. I started renting out my spare rooms to pay my way through graduate school rather than taking on additional student loans.
Renting out rooms went well enough that after graduation, I still continued to rent out my spare room so that I can use the rental income to make accelerated mortgage payments. My main driver for making accelerated payments was to refinance my mortgage. I bought my house at the peak of the market and when the market crashed, my house value plummeted. Looking back on the situation, I was young and naive to just jump in the real estate market without any need for a house, which could make for another story.
In short, I was under water and the only way out was to pay down my mortgage and to get right side up.
So along the way of renting out rooms, I learned the benefits and disadvantages. I’m here to share them and how to get started if anyone has this in their game plan to be debt free in 18 months.
Let’s talk about the benefits…
- Unlike freelance work or getting a second job, where the work and the paycheck might not be steady, renting out a room will earn a flat fixed rate per month. For those that like to plan and calculate a payback period for your debt, renting out a room at a fixed rate will facilitate in budgeting your debt.
- Another benefit is that there’s very little time investment needed to earn the extra cash once you’ve done the initial work to find a suitable roommate. Everyone likes earning a whole lot of money for a whole lot of nothing. Renting out a room does involve time but it is mostly just answering e-mails, setting up appointments to show your house, and assisting with the move-in.
- The camaraderie. If you’re a young single homeowner, chances are, you’ll have more house than you need. So why not have some roommates to share living space with. Sharing your living spaces doesn’t mean that you have to be best buddies, where you’re cooking meals together and hanging out all the time. Living with someone makes it convenient during those times when you need a lift to work because your car is in the shop.
Life with roommates isn’t all glorious. Many loathe the fact of sharing space so let’s talk about the disadvantages as well…
- You lose a bit of privacy. When it comes to renting out a room, you’re not sharing a dorm room like you did in college, but sharing more of the common space such as the kitchen and bathroom(if you don’t have more than one). Besides sharing the space, you’re also sharing stuff like the T.V. So if you don’t agree upon a show to watch, guess what, you’re going to have to watch it later.
- Your house will exhibit more wear. This is not surprising though. The more people occupying the same space, the more wear you’ll see. This is especially noticeable on my carpets and floor. It looks like in another year or two I’ll have to replace the hallway and stairway carpet.
How to get started
The first step may appear as cleaning out the spare room and putting an advertisement online, but that’s not quite it. If you ask me, the first step is to set a financial goal. Why?
You want to allocate the extra income to a financial goal so that you’re not squandering it on material or behavioral items that elevate your lifestyle. Without a clear cut goal, it’s easy to spend that sudden influx of cash. Even worse, when your roommate moves out, you’ll be left feeling even poorer than you did before.
Secondly, with a goal in place, you’re more likely to keep your focus over little annoyances. There were many times when I had to do more than my fair share of household responsibilities such as taking out the trash. But by focusing on the fact that I’ll end up way ahead financially, it made taking out the trash tolerable to deal with. I simply think of it as making an extra $600 bucks a month to take out the trash several more times a month. That $600 bucks earned every month is chipping away at my debt and moving myself towards financial freedom.
How to know if you’re ready to rent out a room?
If you’re strapped for cash, you’ll have no choice, but to embrace your new roommate with open arms. But if you’re one of those folks that thinks renting out a room is a good idea, but not quite sure it’s for you. One thing you can do to try a provisional period with your potential roommate. Set expectations that you only need a roommate for 3 or 6 months so that at the end of the term, you’ll have your space back no matter how good or bad the experience is.
If the experience went well at the end of the term, try for a longer term and consider finding an additional roommate to bring in even more cash. And by this point, you’ll know what worked and what didn’t work so that you can make changes accordingly.
Happy Roommate Hunting!
About the Author:
Mike writes at rentingoutrooms.com where he shares his insights on the topic of renting out rooms. He was motived to start the blog with the lack of sites related to the topic when he started. He hopes to educate and inspire other that’s renting out your spare room is a great way to make extra cash.
Image Credit: Anna Tesar