Have you ever wanted to start a side hustle, but you’re just not sure where to start? When considering what it is you want to do, many people look towards something they are passionate about. From there, they will work toward opening a business, and what was once an idea of a side hustle, becomes what their life revolves around.
Maybe you want to earn an extra income throughout the year, but you don’t exactly have the time for it. If this sounds like something you’ve been thinking about, start looking into earning passive income through real estate.
No, this does not mean becoming a real estate agent. This could be as simple as renting out a property you already own, or maybe it will require you to start looking into investing in a new property for this reason. Let’s dive into a few ways rental properties can earn you some passive income.
What is Passive Income?
You may have heard the term before, but if not, passive income can be defined as income received on a regular basis, with little effort required to maintain it. In other words, you can earn money without trading your time, as you do at a day job where you might work 40 or 50 hours per week.
There are different ways to earn passive income through real estate, such as acquiring hunters to hunt on your land, investing in a piece of land to turn into a neighborhood and many more. Although there are other great options when it comes to earning passive income, we are going to narrow our focus on rental properties.
Where Do You Start?
There are many ways you could begin your journey of earning passive income through rental properties. You’ll want to start by taking a step back and figuring out if you currently have a piece of property that you are willing to rent out. If you already own a second home that you only use during a certain season, this would be a great place to start. If you only have one home that you own and you currently live in it, you could also consider moving out without selling it and instead renting it out.
If neither of these is an option for you, start researching where you’d want to purchase a rental home. Look into popular cities or some of the best places to visit that bring people in. Do some more thinking on whether you’d like to purchase a house that is fairly updated or if you’d prefer to buy a fixer-upper and make it your own.
The Difference Between Long-Term vs Seasonal Renters
Once you have an idea of where you will be starting your rental house, start researching different companies that help you rent out your home. Each one might differ per renter. If this is your first time renting out a home, you may want to pick a house close to your current home to ensure stability and profitability.
One example of how people start earning passive income is by renting out a section of their home that they currently reside in, in order to fill a room, all while making extra money. This could be a great option for a college student that needs a roommate but isn’t sure where to find one.
If you’re focusing more on renting out an entire house, you should familiarize yourself with the difference between acquiring long-term renters versus seasonal ones. If you have a property that is a little far from a main city or a tourist location, you might consider renting for long-term renters. Think about renters who will sign a month-to-month or an annual contract to live in your home. That way, you ensure that you won’t have a vacant house without income for extended periods of time.
If you find a house in an area that would attract more people, such as one that is near a popular tourist area or a beach, you might start looking into how to become a host on a rental platform. This will allow you to rent out by price per night. You can take steps to figure out how much to list your house per night for and begin hosting different renters each week.
How Can You Make Your Property Stand Out From the Others?
Making your home one that stands out is important in bringing in the amount of money that will ultimately make you a profit. Consider what it costs to furnish a home, as well as the financial investment it would take to clean up the curb appeal and work those numbers into your budget.
When renting to long-term renters, you would most likely only stock the house with the necessities such as a refrigerator or a washer and dryer. This isn’t something you are required to do, but it could help your house stand out against competitors nearby.
Since you won’t have to furnish a house made for long-term renters, put your focus on the exterior of your home. Touch up the paint, install new windows and doors, and clean up the yard to be more presentable. A little bit of TLC can go a long way when it comes to the curb appeal of your rental.
As far as a seasonal rental would go, it is common for the owners to furnish the home fully. When doing so, take into account the area that the house is in. If you are renting out a house near the beach, you don’t want to decorate the house with a northwoods theme. If possible, you can really go all out in decorating your home.
Some rental platforms have different filters to use for travelers to pick a specific vacation spot or style of home. Find a theme that best suits your home and the area your home is in, and start making it unique.
Put All of Your Focus Into This Property
Once you’ve made a decision on whether or not to build, rent out a home you own, or purchase a fixer-upper, and you know who your target market is going to be; start to make your plan come to life.
Let’s say you have a house, and it is currently full of your personal furniture and belongings. Begin by deciding what fits into your theme for the house, and get rid of the other stuff by either selling it or bringing it home. Next, start to paint the walls and touch up any damage in the home.
Once your home is ready, put it up for rent. Use the next couple of months to a year to really get a feel of what goes into renting your property out. You are likely to come across some hurdles with renters damaging your space or equipment needing to be repaired or replaced. You’ll also start to experience a new cash flow.
Start to Consider Your Next Investment
After a while, as your new venture continues, you might be interested in expanding your business. Maybe your first rental property was for long-term renters, and now you’re interested in creating a house for seasonal renters.
Whatever the case may be, begin planning your next purchase. Calculate the passive income you’ve received from your first house and decide what it is you plan to change or keep the same. You may find yourself in a position to purchase multiple properties and prepare them using the same steps you used for your first one.
Create a Plan For Your Future
If you haven’t already, make sure any properties you acquired are covered by insurance. If you are renting it out to long-term renters, it is important that you require them to have renters insurance in case of any accidents occurring. If you are renting it out as a vacation home, the insurance will fall on you. Either way, make sure you and the renters are aware of the insurance that is needed. This way, in case of a natural disaster or a fire starting, your house and everything in it is covered.
As your life continues, and especially now that you have acquired new properties, you should make a plan to ensure your assets are taken care of at the time of your passing. Though it is not an exciting thing to plan for, it is necessary to protect all of your properties and investments. If you’re not exactly sure where to start, look into an estate planning checklist to make it a little easier and ensure all of your hard work has a concrete plan in place, no matter what the future holds.
Once your properties are covered for any unexpected happenings, try to sit back and appreciate the work you’ve put into them. If you decide to rent out a vacation home, block off some days for you and your family to enjoy the house as well.
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