These days, homeowners are considering all kinds of options when it comes to making their home investment work harder for them. Whether it is the ever-changing real estate market demands or simply looking for creative ways to put your dollars to work, turning your home into an income-generating property may just be easier than you think. Below are two distinct scenarios for using one of your biggest assets as a money multiplier.
Long-term Rental Property
Probably one of the most common ways many military service families use their homes to generate an income is by living in it during a duty assignment and then renting it out as long-distance landlords. Some own multiple homes in multiple locations, and either self-manage or hire out the property management and maintenance.
While this can be a great way to let renters pay down your mortgage, be sure you are aware of all of the costs and risks before making up your mind. As mentioned above, will you logistically be able to manage the property if it is a considerable distance from your current assignment? If not, how might management fees eat into your profits?
Consider expenses like maintaining homeowners insurance, homeowners association fees, repairs, and replacements for items that you may not have “eyes on.” What kind of emergency reserves would you need to keep on hand to meet a deductible or remedy an expensive problem in a home you don’t live in?
Speaking of profits, for many who own rental property, it is wise to scrutinize the financial numbers to determine if this endeavor is more of a long-term investment versus a month-to-month moneymaker. Some homeowners quickly realize that after all of their average costs per month to maintain the home, taxes, insurance, and mortgage payment, the rent they collect from tenants just barely covers their own expenses. Determine if you will break even, see a loss, or make a profit month to month. What is your level of comfortability with each of these scenarios?
If barely breaking even or taking a loss each year is doable in the short term because you are in a position to wait and let your tenants chip away at the mortgage and build equity then turning your home into rental property might just be the way to go. Years or even decades later you can sell the house for a profit or let it continue to bring in monthly revenue with a paid-off mortgage.
Another option for using your home as an income-generating asset is quickly gaining popularity. House hacking is when you live in a part of your property as your primary residence, and have renters pay your mortgage and expenses in another part. For example, perhaps you purchase a duplex and live in one half and rent out the other. Or, perhaps you purchase a single-family home with a finished basement or “in-law” suite and rent that out either long-term or short-term like an Airbnb.
Many military duty stations are highly desirable travel destinations and turning your spare rooms into a weekend rental for travelers or visitors can be a great source of extra income. In either case, the idea is that you are allowing someone else to help pay your mortgage in order to decrease your own living expenses.
No matter which approach you are considering for renting out your home, the truth of the matter is that you can use your investment to generate income for yourself. Whether you are playing the long game or the short game, consider yourself a marathoner or a sprinter, there are many creative ways to put your home to work for you and your financial interest.