3 different ways to get rental income: pros and cons
In the not-too-distant past, your only likely option for getting a little extra income from renting was to become a landlord. While such an option remains a strong one for some, recent years have seen an explosion of new ways to make money off of what you own. Does one of the following 3 options make sense for you?
1. Becoming an independent landlord.
Of your options, this is likely the higher-cost, higher-commitment and (possibly) higher-reward choice. When you’re a landlord, the day-to-day responsibilities lie with you — it’s basically like running a small business. That means you’ll have to know local landlord-tenant laws, figure out how to collect rent, market your property, screen tenants, and more.
The upside? If you’re successful, being your own landlord can provide a steady stream of high income. Plus, commitment runs both ways — if you find a great tenant who wants to live at your property for a good amount of time, you have a relatively risk-free, stress-free, money-making operation.
Pros: the chance for more-consistent income, more-committed tenants and more take-home pay
Cons: generally speaking — higher costs, more responsibility, greater effort needed
2. Using a home-sharing service.
In the past several years, web-based home-sharing services have exploded in popularity among guests and hosts. From the host side of things, these services generally give you the opportunity to rent a room in your home, a condo, apartment or entire home itself.
Here’s how hosting through a home-sharing service typically works. You’ll sign up online and undergo a few checks before you can offer your property for guest stays. You can then list your property on the home-sharing site based on the availability and frequency you choose. Home-sharing sites tend to offer all kinds of information about potential host properties: dimensions, photos, ratings and the like, so you’ll want to spend a little bit of time uploading good pictures and other descriptive information.
Keep in mind, though, that each state/local government and owner/tenant organization may have its own legal and regulatory requirements when it comes to hosting through a home-sharing service. Make sure that you’re in compliance with all applicable laws, rules and regulations prior to use of these services.
Pros: Flexibility, ease of setup and use, minimal extra day-to-day effort or cost needed
Cons: Fees paid to the service, potentially less opportunity to screen guests, may lack the protection of local landlord-tenant laws because the guests aren’t necessarily considered “tenants”
3. Timeshare rentals.
This type of opportunity sits somewhere in between becoming a full-on landlord and signing up on a home-sharing site. Generally, the timeshare holder will either own a set amount of time at a particular unit (apartment, condo, house, etc.) or the entire unit itself. In either case, the owner would have the opportunity to use the property or rent it out. Typically, a management company would handle day-to-day responsibilities: scheduling, cleaning/upkeep and other maintenance.
Pros: consistent availability for yourself and the flexibility to rent, no/low hassle
Cons: management fees, lack of outright ownership/control, may not offer the best money-making opportunity
It’s important to remember that not everyone is in the position to rent their property out. But if you are, find an approach that works best for your specific situation, preferences and needs.