This guest post from Mike Choi is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes.

Almost two years ago, J.D. shared an “ask the readers” column about how to rent out your spare room. In that post, Penny was renting a spare bedroom to her brother-in-law, but when he moved out, she regretted seeing the rental income go. To make up for the rental income, Penny was thinking about renting to strangers, and was asking for advice from GRS readers. I don’t know what kind of financial relief or savings it provided for Penny, but my story is about the result of what Penny planned to do.

I’ve been renting out my rooms for the past five years. This whole thing started out as way for me to pay for graduate school back in 2006. I already had about $18,000 worth of student loans from my undergraduate studies, and I didn’t want to take out more student loans. I figured I could get about $600 a month from rent, which could easily help pay for grad school tuition, which costs $1,600 per class. I placed an advertisement online and found a roommate.

After about ten months of renting my room, things were going well; my roommate and I were getting along, and I was taking grad classes. However, my graduate studies were going slow because I was only taking one class a semester. I wanted to take two classes a semester so that I could graduate sooner. I had the time to devote to the extra work load, but didn’t have the money for the extra class.

It was then I decided to finish my basement and move down there myself so that I could rent out the bedroom I was currently living in. This would allow me to bring in another roommate to make the additional money I needed to take a second graduate class during a semester. My plan worked: I found a second roommate and was able to collect a second rent check in addition to the first. This was more than enough to pay for two classes a semester.

Fast forward three years.

I finished my graduate degree without a single penny in debt! Had I taken out loans, I would now have an additional $32,000 of student loan debt.

Since I was able to avoid taking student loans for graduate school, I can say it was definitely worth it to rent out my spare rooms. To this day, I continue to rent out both rooms. Now instead of using the rental income to pay for graduate school, I use the rental income to pay down my mortgage.

Even though I can afford the mortgage payments on my salary, when I bought my property back in 2005, I took on a considerable amount of debt to buy my house. How much debt did I take? I currently have two mortgages, and my mortgage debt/situation is very similar to this blog post at Five Cent Nickel: I got caught up in the real-estate bubble hype and bought my place with no money down.

With my current mortgage situation, I can’t refinance because the value of my property is less than the value of my loan. To get out of this mess, I have to pay off the second mortgage with the higher interest rate and refinance the first mortgage. With the rental income, I have been paying additional principle to my second mortgage because it has the higher interest rate. By doing this, I was able to bring the balance on my second mortgage from $35,000 to $21,500. If all goes according to plan, I should have the second mortgage paid off in early 2012.

Renting out my spare rooms has been a fantastic example to show how rental income can provide financial relief. My story may be a bit extreme given that I am renting out half of my primary residence; nonetheless, it can provide motivation for homeowners to get out of consumer debt or perhaps pay for college tuition for a child who is no longer living at home.

If you’d like to learn more, you can read more about this subject at my blog, Renting Out Rooms!

Reminder: This is a story from one of your fellow readers. Please be nice. After more than a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are. Henceforth, unduly nasty comments on readers stories will be removed or edited.