Rents Go Up: Which Side of the Equation Are You On?

Rent prices across the United States and the world will continue to rise. There is little we can do as the average consumer.

Once institutional investors, foreign interests, and the Airbnb crowd entered the real estate game, it changed the landscape forever.

So how do we become homeowners in today’s environment? Even better, how do we get rent paid into our accounts every single month? Let’s explore.

Five Takeaways from “Mastering Your Mystery”

Becoming homeowners. The first step to collecting rent is owning a home—it sounds simple, right? However, buying a home has never been more challenging than today.

Since housing is so expensive, saving a house down payment is tough. Even if you could save $100,000 for a house down payment in five years, the housing market would jump at least 10-20%.

You will constantly try to save money while prices continue to run away. There are a few ways to grow money, each requiring a different skill set.

1. Build a business. You can build a business in five years that will outpace housing prices. It can be a car rental, arcade, or dog-walking business. Think outside the box and work as hard as possible. It’s not uncommon for companies to double revenue year over year.
2. Create content. You can see great returns if you stick with creating content over five years. Your content portfolio starts slow, but you will see the compounding effect eventually. You should see a nice income stream in five years to complement your 9-5 job.
3. Work with family. There are many ways to work with family. You can move in with your parents or rent a room for your siblings. Do whatever it takes so you can save faster than housing price increases.
4. Dividend investing. Instead of putting your money in a savings account, you can invest in dividends. After five years, you will see massive growth in your dividend payments. At that point, your earned income and dividends can allow you to power save for your down payments.

A change in mindset. However you decide (use a combination of them all) to save for your house down payment, you’ll need to change your perspective.

Being Unique Sells: See a World of Abundance

We no longer DESERVE to own a home just because we work hard. Homeownership is now a luxury that will soon be only for the rich.

To become homeowners, we must think and move like the rich. This means we must follow the real estate market, mortgage prices, and the Federal Funds Rate.

This new market is a far cry from when I bought my first house in 2008. It was a relatively simple process then. It was so easy I bought a place that was way too expensive for my salary.

Your first house needs to be an investment in your future. You can no longer buy a house and hide from the world.

I Love Paycheck to Paycheck 3

The price of homeownership continues to rise. You will see rent increase yearly as a renter, but it’s the same on the homeowner side.

That’s right; as a homeowner, your costs will also increase yearly. Therefore, you will need to continue to run your business, rent rooms, and invest for dividends. Here is how prices increase.

1. Principal and interest. If you have a 30-year (or 40-year) fixed mortgage, your principal and interest should remain fixed.
2. Home insurance. Since I live in Florida, home insurance has been the main culprit in increasing housing costs. Last month, the mortgage on my primary residence went up $100/month purely from raising home insurance costs.
3. Property taxes. Some states have a homestead exemption that prevents property taxes from jumping wildly. Still, expect your property taxes to rise 3-5% annually.
4. Homeowner Association fees. If you have an HOA, you can be at risk of those costs rising over time. Your community must conduct maintenance and construct new amenities—and you’re paying for these expenses. 
5. Home maintenance. It is difficult to find handypersons, and when you do, they are expensive. Skilled labor is in high demand, and those costs move onto your balance sheet.

Getting rents in your favor. As you can see, saving for a house, making down payments, and maintaining your home, require the same resource—cash flow.

$1,000 Dividend Spending Spree

Working a 9-5 is not enough to carry you through 30 years of homeownership. And if it is, you’ll give up the chance to help your children through their lives.

The best way to combat high ownership costs is to start collecting rents. Sure, owning a rental property on the side is a great way to earn rental income.

However, your rental property will be subject to the exact rising homeownership costs as your primary residence. Because of these expenses, it may be five to ten years before you see your rental property bear fruit.

Owning rental property is still a great idea, especially if you can buy below cost and renovate yourself. Owning multiple properties is good because you can pass them on to your children in the future.

My Favorite Index Fund

The magic of renting rooms. But most of us can’t buy undervalued real estate and rehab our way to an HGTV show. We do not have the skill set or know the right people.

But we can rent rooms at a higher margin than renovated property. We can rent rooms to friends, family, and new tenants.

I am a huge advocate of renting rooms for the average person. Owning a single-family residence will soon only be for the rich.

The best way for the average household to keep up with rising costs is to rent rooms—the value of your rental space increases along with the housing market.

My wife and I first rented rooms for $500 in 2019. Today, our master suite rents for $1,100 (in 2023).

Start Your Debt Payoff Journey

We make enough from two rental rooms ($2,100) to fully cover the mortgage on our primary residence ($1,940). That is the magic of renting rooms.

Conclusion. You can look at real estate from three different time horizons: saving for a down payment, owning a home, and earning rent.

Buying and owning a home is no longer part of the American dream. It will be solely for rich people. What separates the rich from the poor? Passive income.

54 Takeaways from 54 Books

Luckily, we can access passive income via renting rooms, Airbnb, rental cars, dividends, content creation, etc.

We must move like the rich and buy, build, and create assets. These assets are like little helpers we can rely on throughout our lifetimes (and pass on to our children).

If you don’t understand how passive income works, read my children’s book here. It is helpful to see an illustration of how passive income can help you access the things you want. In this case, a home. Good Luck!

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