How You Can Make Money With Your Property

If you own property, you also own an opportunity to make some extra money. Real estate is a great investment strategy because it allows you to earn a passive income while still retaining a physical asset. At the end of the day, you still have a property that has value.

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This means that, even if the property market loses value and it’s no longer profitable to sell, you can still earn by renting it out. Or, if you want to make some quick money, you can sell the property and make some, or all of your money back. Often, you will find that the value of the property has increased over time, so you can make a profit in addition to what you earned over time.

So, how can you take advantage of the property you own to make an income?

Buy to Rent Real Estate

One of the most popular ways that people make money from real estate is with a buy-to-rent strategy. As the name suggests, this involves purchasing a property with the express purpose of renting it out to tenants.

When buying a property, you need to think about your budget and the properties that are available to you. It helps to research the rental market in your local area, as some areas might have houses that are cheap to buy but still attractive to renters, meaning you can earn more money.

Don’t always jump at the first deal that comes along. You will need to provide a basic standard of living for your tenants, and, as a landlord, you also need to keep the place maintained. So while getting a cheap house that’s run-down might seem tempting, you should consider the costs of renovation and maintenance once you’re ready to rent it out.

Still, this can be a very effective way to put your money to good use. Unlike most investments, you also don’t need all the cash on hand. If you have enough for a deposit and a mortgage, you have enough to invest in real estate and potentially earn a profit through rent.

Renting Out Spare Rooms

What if the only property you own is the property you happen to live in? This doesn’t mean that you can’t make any money out of it, especially if you have spare rooms available.

In general, spare rooms can make a property more expensive. So, if your children have left home or you just happen to have a property that’s a bit too big for you, you might be tempted to try to downsize. But renting out the rooms can be a much better idea, as you can earn a regular income and, if you do want to grow your household, it’s easier to just take back the space you’ve been renting out.

Before you do this, it’s worth looking into what a legally binding room rental agreement involves. Whether you plan on going for short-term rentals, where someone might stay in the room for a few days or a week, or a longer-term rental, there might be different requirements that you need to fulfil.

Renting out a room or a part of your property is much more effective if you’re able to separate that area from the rest of your house. It’s ideal if you have a bedsit or another space that’s private. But even if all you have is a spare bedroom, you can make some cash out of it.

Commercial Property

Another form of rental agreement is a commercial rental. You might already own this property, or you might look into buying it, because it can be a very effective way to earn an income. However, there are often more caveats when it comes to renting out commercial property.

If someone is running a business out of your property, it might need to be appropriately zoned. This doesn’t necessarily apply to every business, but it definitely applies if people have customers coming to the property for trading. So you can’t just buy a house and convert it into a commercial property without getting the local authorities involved.

You might also need to ensure that the property is appropriate for the business that wants to set up there. For example, a restaurant business will need a different layout and features than a retail business.

So, do your homework before investing in commercial property. You also need to find a balance between a rent that will work for you and a rent that might drive businesses away. This is especially important if you own prime business real estate, where you might be able to charge higher rent.

With both commercial and residential properties, it helps to research the rental market of similar properties in the area so that you can make sure you have profitable and competitive rates.

Managing Multiple Rental Properties

For most people, getting onto the property market is the beginning of a journey. Over time, you may be able to add to your portfolio, which is great for ensuring that you can grow your income over time. Remember, you don’t need all of the money upfront, and when you already own a property, it can be easy to build up the capital for a deposit for another property.

The big downside to this is that more properties mean more work. While being a landlord is a relatively passive investment, you do still have to deal with tenants and, as mentioned before, you have to maintain the properties. If you want to keep your rental business as a strictly passive form of income, the best thing to do is to use a property management company.

Essentially, you outsource the labor of renting property to tenants to a third party. They will take some of the income, but they also make sure the tenants are happy and the properties are looked after. Even if you do have to get involved from time to time and make decisions, it is much easier to manage multiple properties this way.

Consult with a licensed real estate agent, an attorney, and a CPA as needed.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies, 1,001 Accounting Questions for Dummies and 34 Stories That Explain Personal Finance

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