My generation (40s) didn’t honestly know about inflation a few years ago because we had never felt it. However, 2022 changed that for all of us.
Suddenly, food, gas, and housing costs rose faster than our wages. Those who had locked in 2-3% mortgages on lower-priced homes were sitting pretty.
Those in the market who want to buy a home in 2023 face higher prices and massive interest rates. It is still a challenging time to purchase a home.
How to Start Dividend Investing 101
Welcome back to the Pros & Cons of Homeownership series (Part #1, Part #2), where we examine why we should buy a home in today’s market.
What is inflation? Inflation is the cost of things going up or the value of your dollar going down—you decide how you view it.
There are really only two ways to beat inflation: keep making more money at your job or purchase assets that allow you to outpace inflation.
You would most likely need to earn 10% more every year from your job to keep pace with inflation. That could be possible, but it would take a lot of work on your part.
The Magic of a Military Pension
You would either need to upskill every year or change jobs every two to three years. Either way, it would be a significant hassle to depend on your job to help you stay ahead of inflation.
Assets are the better option. The better way to beat inflation is by owning assets, particularly your primary residence.
Once you lock in your 30-year fixed mortgage (not 40 years), you will have prevented inflation from affecting your principal and interest payments.
If you continue to increase your pay, your mortgage payment will become a smaller portion of your overall income. This will allow you to spend the additional income on saving and investing.
The average mortgage in America is over $2,000 in 2023, significantly higher than in the past. It’s higher because this means it is a higher percentage of Americans’ take-home pay.
Standard Employee by Day: Passive Income Hero by Night
Because I bought all of my homes before 2023 (2008, 2017, 2020), they are all under $2,000 ($1700, $1350, $1900). This allows me to beat inflation from all angles because my housing costs are a lower portion of my overall income.
Owning vs. renting. There is always a debate between owning and renting your home. I am firmly on the side of owning.
As a landlord, I must raise the rent every year to beat property tax and insurance costs. I pass these higher costs along to my tenants and then some.
If you rent, you are highly susceptible to inflation because the rent in your neighborhood can rise. You have no control over the situation.
Seven Great Work-From-Home Strategies
If you are serious about getting ahead of inflation, you will need to find a way to purchase a home, even in today’s market.
Although interest rates and prices are high, you’ll look back in 10-15 years and still believe it is a good deal. Eventually, you’ll be able to refinance and get a lower mortgage payment.
When we bought our first home in 2008, it had a 6% interest rate. At one point, my mortgage was $1,900 in 2011.
But over the years, we refinanced twice, with one being a cash-out refinance. Even with a large cash-out, our mortgage is still only $1,700 today.
Create an eBook Series for Passive Income
More ways to beat inflation. Perhaps the best way to beat inflation is by renting rooms in your home. Yes, I know it is not ideal; however, it’s the simplest way to start making passive income.
The goal of renting rooms is to pay down debt and build an income-investing portfolio. Eventually, your dividend portfolio will pay you more than your roommates.
At this point, you can forego having roommates and enjoy the passive income from dividends instead. Does this method work? Absolutely. My wife and I performed this mission over 4.5 years and now have an extraordinary Happy Cash Flow Retirement.
The best roommates you can have are family and friends. Yes, it may strain your relationship for a while, but the financial benefits will outweigh that for both parties.
Pay for College with Real Estate 101
If you both have clear-cut financial goals, it makes the arrangement that much better. Trust me; bringing in an extra $1,000 to $2,000 per month is life-changing.
Help your kids beat inflation. The best reason to own a home is the inflation protection you can roll over to your kids.
For example, the mortgage on my second home is $1,350. The GI Bill (college fund) will pay me $2,400 monthly to attend college here in Florida.
Therefore, if my son joins the military and does four years, he can use the GI Bill to pay for this house entirely.
Don’t Gamble with Retirement 3
He won’t have to seek an apartment costing him $2,500 in a few years. Owning a home gives him a chance to take control of his financial freedom.
Sadly, if we don’t purchase a home for our kids, they will work until their 70s and 80s. It is simply a mathematical impossibility for the average person to pay for college, buy a home, and save for retirement over 40 years.
Owning rental properties. The longer you own rental properties, the more you can use them to beat inflation.
However, you must do the research and work to raise rental costs along with inflation. Don’t expect your property manager to help you raise prices.
The Magic of Passive Income
Instead, be a fair and concerned landlord. Raise rates to beat your costs, but add a little extra for your time and service. Remember, who is a better steward of your resources?
Many people have a hard time raising rent, but I do not. If I give my tenants a break on rent, I am telling the universe that they are better stewards of the resources than me.
I once had a tenant for whom I kept the rent lower than the market rate. Soon, this tenant had a new truck in his driveway while I was losing money on the property.
That showed me that my kindness was a weakness. Being a landlord is about being fair and consistent and taking immediate action. It’s not about giving handouts at the expense of your family and household income.
The Magic of Royalties
To beat inflation with a rental property, understand everything about property management. I recommend reading “The Book on Managing Rental Properties” to ensure you get off on the right foot.
Conclusion. Real estate is a formidable asset to own and control. Sometimes, you are at the mercy of unforeseen circumstances.
However, if you can keep your costs down, you’ll have the chance to set your family up to beat inflation year over year.
Happiness Isn’t Free
As long as you own real estate and keep increasing your income, your family will reap the benefits of lowering your housing cost as a percentage of total income.
In time, you will pay off your mortgage, and you can wipe housing costs from your family tree. It’s a good life, but you must research to ensure you stay ahead of maintenance and renovation schedules.
Owning real estate has helped my wife and me retire in our 40s. I can control most of the costs and prepare for property tax and insurance increases.
As long as I continue finding ways to increase my income, I can count on my properties to boost my free cash flow. Good Luck!
- PDF of the Month: Don’t Gamble with Retirement 11 (Free 410-Page PDF)
- Free PDF Downloads: Download FREE PDF LIST here
- Financial Mindset: Become CEO of Yourself 2 (Free 196-Page PDF)
- Retirement Planning: Your Retirement Planning Guide 2 (Free 255-Page PDF)
- Investing: How We Plan to Retire on Dividends 4 (Free 139-Page PDF)
- Cryptocurrencies: Counting on Crypto 2 (Free 159-Page PDF)
- Real Estate: Financial Independence through Real Estate 4 (Free 112-Page PDF)
- Business: Retire Rich, Retire Comfortable with a Business 4 (Free 149-Page PDF)
- Latest DGWR: Don’t Gamble with Retirement 11 (Free 410-Page PDF)
- Everything!: The Biggest Book on Passive Income Ever 3! (book)(Web Edition)(Art Edition)
- Writer’s Comparison: M1 Macbook Air vs. GalaxyBook3 Pro 360
- Read My Books for Free: Free Kindle Books Schedule
- Book Design: Design Tips on YouTube
- Kindle Unlimited: Why I Finally Subscribed Kindle Unlimited (learn more)
- Book Reviews: 505 Takeaways from 101 Books (pdf)
- Writing: The Publishing Chronicles (Part 1, Part 2, Part 3, Part 4, Part 5)
- Best REIT- Fundrise: Fundrise vs. US Treasuries (Join Fundrise)
- Follow us: On our Facebook Page and Join our Facebook Group
- Support the Channel on Cash App: $Kingmarine1981
- For more detailed analysis, join my Youtube: MFI YouTube Channel
PDF of the Month: Don’t Gamble with Retirement 11 (Free 410-Page PDF)
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
Leave a Reply