The pinch is real. Do you feel a little lighter in the wallet as you walk out of the store? If you are a budget hawk, you already know what is going on. Some people may think that their invisible budget has ballooned out of control, but that is not the case. Inflation is upon us.
We have to do everything in our power to fight back the claws of inflation. Inflation is too much money chasing after too few goods. We are covering how mailbox money can help us to fight back inflation with cash flow. We have already covered dividends and royalties; next up is rents or rental income.
Rents come from owning real estate, renting rooms or storage space, and other unique ways to earn income from real estate. To increase rents, you will have to be creative beyond the standard ways to make money. Let’s look at the standard and non-standard ways to make a ton of cash from rental income.
Before we get into standard and non-standard ways to increase rents, let’s first look at how real estate, in general, is a hedge against inflation. Right now, the prices of housing are shooting through the roof. The housing market across the United States is up over 10% in a year, easily.
If you own real estate (we own three homes), you are the winner. If you are on the outside, you are having a tough time getting into a home. Do whatever it takes to get into a home. It is expensive but using creative financing, maximum leverage, and mortgage zero; you should be able to get into a home and find ways to reduce your monthly mortgage and expenses to zero dollars out-of-pocket.
Standard ways to increase rents. There are two traditional ways to improve your rent: increasing the rent payments from your tenants and reducing your rental property mortgage. My wife and I have conducted both methods over the last year, and this has allowed us to get our monthly rental income to $2,500/month passively. This level of control is the magic of rents.
Let’s take a look at one of these scenarios. My wife and I bought our third house in Florida in March 2020 (I know, right?). The mortgage payment was $1,750 at the time of purchase. We have two roommates because the house is so big it gave us this option. They pay $800/each for a total of $1,600/month passive income.
Now, that leaves us out-of-pocket $150/month for our primary residence, which is impressive. However, we can do better. Because of historic low interest rates, we refinanced our home to a new low cost of $1,540/month. With roommates, we are MAKING $60/month on our primary residence. How cool is that? How can you NOT get rich by doing this?
Also, rents across the board have gone up. We are good landlords, so we haven’t raised the rent on our roommates and have no intention of doing so. However, if they leave, the rents are probably going to go up to $900/month. That is utterly insane and would put our profit margin up to $260/month—from our primary residence. Insane!
Non-Standard ways to increase rents. Non-standard ways to increase rents come in all shapes and sizes. Each property has ways to increase income by using intelligent techniques that most people do not know about.
A good resource is the book “40 Ways to Increase the Net Income of Your Rental Property.” It has some genuinely unique ideas like harvesting beneficial insects, parking, on-site storage, a fitness center, or a park bench (for advertising).
An example could be of renting your garage space to your roommate. Say you have a roommate paying you $600/month for a room. Almost all of our roommates had some form of storage space they were renting from somewhere else. Rents at storage units go up every year like clockwork. You could offer them a locked-in space, on-site, in the garage for, say, $100/month.
They would be overjoyed, and you just increased your net rental income by 16% by doing absolutely nothing. This is how you beat inflation by using tips and tricks to squeeze out more revenue and provide value to someone else.
There are other ways to squeeze value from real estate. One of my favorites and one I am looking into is creating a dog park on your premises. We have three acres of land, so why not open the rest of this land up for others to let their dogs run around? Oh, and get paid to do so.
We can also use real estate to hedge against the highest inflationary source outside of healthcare—college. Indeed, if we plan and get into real estate early, we can use real estate to fund our kids’ college expenses.
How do you get started with real estate? Real estate is the most difficult to get started with because of the sheer amount of money you need to buy a house. Not to fear, start by reading this article or book, “Financial Independence through Real Estate (book).”
Once you get a better grasp of real estate, you will understand that it is like a game. Each house you buy is like a Jenga game; you are just trying to get the blocks to fit together. There is no right way or perfect way to get into real estate. Just know that you need to get in.
Once you get in, this is where people lose all of their money. As Robert Kiyosaki wrote in “Rich Dad, Poor Dad,”—“Your house is not an asset.” This quote means that your house will drain all of your resources and become a liability if you let it. My house is an asset because it MAKES me $60/month.
Some people buy large, expensive houses in expensive cities and don’t do anything to mitigate the mortgage costs. They have four little people living in a six-bedroom, four-bathroom, 4,000 sq ft house and paying $7,000/month in mortgage costs.
With the right mindset, they could quickly be bringing in $3,000/month in income from roommates. How about you rent a second room to the same roommate for office space? Most people would love to have an office and a room that are separate.
Thinking outside the box are ways to not only increase rental income but beat inflation. Inflation is coming, no matter if we are prepared or not. If you want to sit in an expensive house and think it won’t get you, that’s cool.
I read somewhere that the price of HVAC filters has almost doubled since a year ago. I can believe that. I am sure HVAC services, plumbing, and electrical maintenance are slowly going up as well. Make no mistake about it; inflation will touch you.
Key Takeaways. Get into real estate as soon as possible, the best way that you know how. You may have to borrow money from your parents or sell your car or Pokemon cards. Do whatever it takes to get into a house.
Once you are in a house, maximize your space to create rental spaces or events like a dog park. Do not let your home go to waste—this is how you use rents to beat inflation. 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.
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