How do you become rich? To become rich, you must ensure your income far exceeds your expenses. Then, you invest the additional cash flow into income-producing assets like dividend stocks.
Most people need help figuring out how to increase their income enough to save and invest. They are stuck in the endless loop of living paycheck to paycheck.
The only way to increase your income without doubling your work hours is to make money in your sleep. Here are a few ways to make money in your sleep (passive income). You will see they all require some form of overhead.
- Dividend-paying stocks require lots of capital upfront.
- Options trading requires capital and skill.
- Creative royalties take time to form an audience.
- Residual business income takes time, money, and effort to build a business.
We can all do one thing without much overall skill or time—rent rooms. Renting rooms is the key for the average middle-class family to get ahead and start building generational wealth. Let me share my story.
Don’t Gamble with Retirement 12
Here’s my room rental story. In 2019, my family of four was struggling. We had food on the table and clothes on our backs, but we did not have money in our accounts.
My wife and I had finally had enough and decided something had to change. We were $77,000 in debt, and we had no clear plan for escaping it.
We started renting rooms and immediately felt financial relief. It felt so good that I became obsessed with earning passive income.
Within a couple of years, we had no debt. Our rental income went directly into dividend-paying stocks. Eventually, we made enough from dividends to stop renting rooms.
We went 18 months without renting rooms, but we realized that our 2,500-square-foot house was too big for a family of four. We had the space to rent a room and continue to maximize our income.
Dividend Stocks vs. Income Stocks
We opened our doors again to a roommate in June 2024. My wife and I are retired, and this extra money will help us continue to build passive income reserves and generational wealth.
The math of renting rooms. Renting rooms is financial math at its finest. It may seem like you are only receiving an additional $1,000 per month, but there is far more to it. You are actually reducing your cost of living expenses.
My family moved into our third primary residence in 2020. The mortgage was $1,500 at the time. We rented two rooms for $800 apiece, allowing us to live for free.
Today, our mortgage on the same house is $1,700, and we rent one room for $1,000. Therefore, we live in an amazing 2,500-square-foot home on three acres for $700 per month.
Happy Cash Flow Retirement 11
My military pension pays me $9,000 per month. It’s easy to retire when only $700 of that income goes to mortgage payments. Combining room rental income with a tight budget gives you a great passive income living experience.
Another reason renting rooms is so powerful is that you earn money in the background. You continue your life as normal but accumulate passive income at all times—even when you sleep.
The disadvantages of renting rooms. The worst part of renting rooms is also the best part—having tenants. When you have a bad tenant, your world stops. Everything becomes miserable because your tenant is miserable.
Conversely, when you have a good tenant, every single day is full of rays of joy. You are earning money for free, without any conflict.
Royalties to the Rescue
The key to renting rooms successfully is finding an amazing roommate. My wife and I went through the paces to determine how to find a good roommate. Here are some notes.
- Set some guidelines before you start renting rooms. Some things to consider are our kitchen habits, refrigerator space, cabinet space, music volume, and washer schedules.
- The more organized you are, the better organized your roommate will be. If you are a slob, you will attract a slob.
- Know your schedule, and be upfront. My wife and I wake up at 4 am every day and go to bed early. We let our tenants know our schedule.
- If you smoke, drink, or do drugs, you’ll attract that kind of roommate. You’ll get no judgment from me, but the more you indulge, the more your roommate will as well.
The main thing you are looking for is that the person is gainfully active or employed. They do not need to have a job, but they need to serve a purpose on this Earth.
Our worst roommates had passive income from a divorce or social security, but they added no value to the planet. They were literally just absorbing air. That kind of negative attitude and lifestyle will rub off on your household.
Use the GI Bill as an Income Stream
However, good roommates will make you happier than you could imagine. Think about paying all of your bills first and leaving some money in your budget for family entertainment.
Then, you receive ANOTHER $1,000 directly to your account. You can use this money for anything you want—that is the magic of house hacking.
Why don’t we share? Americans have become obsessed with being independent and living independently. I say Americans because I have lived overseas for over ten years and have seen how other cultures embrace one another.
The sharing economy is alive and well, and it’s the only way to live extraordinary lifestyles that rival those of the rich and famous.
Options Trading for the Everyday Person
Rich people have cooks, maids, cleaners, gardeners, and nannies. Imagine what would happen if two middle-class families moved in together. They could cover all these things and help each other become upper-middle-class.
Renting rooms is good for both homeowners and tenants. Imagine a family of four that makes $10,000 per month getting a roommate who makes $4,000 per month.
The family will get $1,000 to put toward their future, and the tenant is only paying 25% of their income toward rent and utilities (which is unheard of). It’s a win for everyone!
Finding the right roommate. Finding a roommate is like finding a business partner—you’ll want to start with family first. Start with a family member who would like to reduce their expenses.
I Love Being Bored; It Means I’m Becoming Wealthier
Family members will be hesitant because they feel living together will destroy their relationship. In my experience, the effect is quite the opposite. People become much happier and healthier once they arrive on solid financial footing.
Look to see if a family member’s child is going to college or working nearby. Sometimes, young people want to leave their homes but can live with someone they know.
If you can’t find family members, then go to friends. Ensure they have similar core values (work ethic, cleanliness, drugs, pets). You should already know how they live.
Finally, open it up to strangers. You’ll get the hang of running ads and texting prospective tenants. You’ll be able to learn about someone very quickly, even before you meet them.
One trick I learned is to put a small response prompt in your ad. For example, tell them to write “factory” in the response. This will keep you from responding to robots and people who cannot “read and understand.”
Dividend Investing with a Splash of Options Trading
Conclusion. Most people will never have a roommate because they feel living independently is the only way to be free. However, these same people will work until their 70s and never achieve financial independence.
I lived overseas and saw how families and friends work together to ensure they all succeed. The key to winning in life isn’t becoming a powerful individual in the workforce.
The key to life is using powerful financial techniques to increase your wealth. Learning to rent rooms is a tool that we can pass down to our children.
Imagine we give our kids a paid-off home. They can rent a couple of rooms, pay all of their housing expenses, and have some extra cash flow.
Now, they can do whatever they like in this life. They can choose a career or lifestyle where they can benefit society greatly without worrying about money. That’s a powerful concept to pass down. Good Luck!
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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
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