For most homeowners, it’s fair to say that most of their worth is tied up in their homes. It’s a significant asset, usually the biggest that we own, and while house prices are rising, our assets are growing. This is great. It means we are worth more. We’ve got great security, more to leave behind and cash to access if we need to. But, it’s usually tied up in our homes.
Our homes also cost us money. You might still have mortgage repayments to make (most of us have), but even without these, there’s property taxes, utilities, insurance, maintenance and repairs. Just owning a home can cost you a fortune. Even more if something breaks and needs repairing or replacing. Being a homeowner means that you are worth more, but you can’t easily access your worth, and at the same time it costs you a lot of money.
To tap the cash, we need to look at loan to value ratios, remortgage our homes, cash out or, sell. Owning a house with a rising value means that these options are available to us. But, they certainly aren’t the only ways to make money from our homes. You’ve put a lot of money and time into your house, so why not make it work for you? Turn your home into an income stream, either as a long-term money-making solution, to build a retirement fund or just to increase cash flow when money is tight.
Rent it Out
When it comes to renting your home out, there are a few different options. Depending on what time scale you are looking for, any other property you own, where you will be, and how much money you want to make.
When house prices were lower many people looked at buying a second home to turn into a rental. This can be hugely profitable, a great way to pay your mortgage off and an easy way to earn a mostly passive income long-term. But, now house prices are much higher, it’s perhaps not the best option. However, rising house prices, also mean rising rent prices. So, now that your home is worth more, it will fetch more rent.
If you’ve got another property, perhaps from an inheritance, you may want to consider renting either that or your current home out. You might also want to consider renting out your home and going to live in a cheaper rental or downsizing to a smaller property. This can mean that the rent that you are receiving is higher than what you need to pay out. Giving you greater financial freedom. However, being a landlord incurs associated costs. So, this is only ever worth doing if your house is likely to fetch a substantial rent and in excellent condition. Even then, long-term renting isn’t often desirable. It’s your home, after all, you might not like the idea of another family living in it.
The better option is perhaps short term. The popularity of apps like Airbnb just goes to show how successful this can be. If you are planning on being out of town for a while, on business or holiday, why not rent your house out? If you are away every weekend or work away Monday to Friday, you could make this a regular arrangement, perhaps even with the same tenant. Airbnb is fantastic and very easy to use. But, because of its popularity, it attracts a broad audience. If your home is in excellent condition and in a desirable location, look at listing it on more executive rental and house swap sites. This is a great way to make money, even if it’s just to pay for your own holiday.
Of course, you don’t have to rent the whole house. You can stay living in it as usual, and just rent a bit of it out. If you have a spare room that you don’t use, you could rent it out to a lodger. Just make sure you set clear house rules and that you find the right person to share your space. If you haven’t got a spare room, you might want to consider adding one.
An attic or basement conversion is an easy way to add an extra room to your house, but you can also convert a garage or add an extension. This can be expensive, however, so make sure you research room rental prices in the area to see how much you are likely to make. It might not be worth your time or money. You should also be sure to look into regulations in your area. For example, in some locations, rental suites must have their own entrance, and not be only accessible through the main house. Are you able to offer this? Do plenty of research before starting what could be an expensive conversion.
Sell Storage Space
If renting out your whole house, or even a room isn’t an option, you can still make money from rent. If you’ve got a spare room, attic or basement that you don’t want to, or cannot rent out to a person, how about renting it out as a storage space? Many people need extra storage.
Perhaps while they are away at school or working out of town. Maybe because they are downsizing and haven’t yet figured out what to do with their possessions. Storage facilities are available, but they can be expensive and have strict rules. You may be able to offer your spare space to someone as storage. Just make sure you enter a formal agreement with them. Considering their access rights, what area they are allowed to use, and for how long.
Sell a Parking Space
Another rental option is offering a parking space. If you’ve got a secure garage, driveway or other off-road parking that you don’t use, or don’t need while you are at work or at weekends, someone else might be willing to pay for it.
If you live in a busy city, where many people come to work, parking might be expensive and hard to come by. Renting out a private space for a year can be ridiculously expensive, and many commuters prefer to use public transport and leave their cars at home. Offer them an alternative. If you can rent your spot to the same person for months, or even years, you could both get a fantastic deal.
Alternately, if you live out of town, in a popular tourist destination, you might be able to rent your space out at weekends and during school holidays if you don’t need it. These would more likely be short-term arrangements, but perhaps still worth it. List your space on parking space rental sites or apps to simplify things if you can’t reach a private agreement.
Start a B&B
If you’ve got a few spare rooms, or the ability to convert rooms like an unused office into bedrooms, you could maximize your income by opening your own B&B. These rooms are rented out short-term, so not subject to the same rental regulations. But, you will need to put work in and offer excellent facilities if you want to make a lot of money. Rooms will need facilities like TVs and hair dryers as well as easy access to a bathroom. You’ll need the facilities to cater for breakfast, and the ability to turn over rooms quickly, ready for new guests to arrive.
You’ll also have to be willing to give up a large portion of your home. Even when the rooms aren’t in use, they’ll be set up as bedrooms. You’ll no longer be able to use them as a part of your family home. Do you have enough space to offer guests bedrooms, bathrooms and their own dining area, while still keeping private rooms for your family? Are you willing to work for the money? Running a B&B isn’t passive. You need to be friendly and approachable, cook and clean and be there if your guests need anything. To be successful, your rooms need to be of a high standard, and it can take a lot of work. If you live in a popular area, perhaps near a beach or in a famous town, then it can be well worth it. You’ll have bookings all year around and be able to charge high rates. Take a look at other B&B’s in the area. What are they charging? Are they often fully booked? You might even want to check in yourself to get an idea of what they offer and how much work they have to put in to earn it.
Before turning your home into an income stream of any kind, consider what this means. It will almost certainly affect your insurance policy. Especially if you’ve got someone else living in your home. If you’re starting a B&B or any other kind of home-based business, you’ll also need to add liability insurance to your policy. But, it’ll also affect your life. Your home will no longer be yours alone. You’ll have to share it in some sense, and you might also have to put in a lot of work and perhaps make financial investments. Don’t take on more than you can manage, or anything that affects your own home life in a negative way. If you need extra cash, a re-mortgage option could be a better alternative. Just make sure you know what you are letting yourself in for either way.