How I Generate Extra Income by Letting Strangers Pay My Rent
Published on - April 7th, 2010 (by J.D. Roth) This is a guest post from Rebecca Rosenfelt, the founder of RealSavvyRealEstate.com, a website devoted to demystifying the home buying process for first-time home buyers.
I almost never pay the entirety of my rent. I don’t have roommates and I’ve never been evicted. In the four years I rented a one-bedroom New York City apartment, I paid the full rent only one month. I now own a condo in Portland, Oregon, and I almost never pay my mortgage.
I’m able to keep my condo and apartment because I let strangers pay my bills for me. I’ve created a situation where my home generates income.
Letting strangers pay my rent
Here’s how I did it in New York City for four years: I traveled nearly every week for my job as a management consultant. I was out of town Monday-Thursday most weeks. I reasoned that other people like me may have the opposite commute pattern, where work brings them to New York weekdays. I posted an ad on Craigslist for a “part-time roommate”, and sure enough, lots of people were interested in paying me for the privilege of staying in my cute, East Village apartment three nights a week while I was away.
With an aggressive savings plan and the money generated from my “roommates,” I was able to squirrel away enough money for a down payment on a condo in Portland, where property is much less expensive than in New York.
I purchased a reasonably-priced condo between the trendy Pearl District and Nob Hill areas. With permission from my company, I relocated to Portland for two months while working on a West Cost project. Living in Portland gave me the opportunity to decorate and fully outfit the condo. Before moving back to New York at the end of the project, I hired a local management company to handle advertising, tenant screening, and rent collection. The management company rents out my furnished condo to business people coming to Portland for 3-6 month stretches or people in town on extended vacations.
These are just a couple examples of ways people can turn their home into an income-generating asset. My circumstances are a little unusual, but the concept is nothing that can’t work for nearly everyone in some capacity. In my experience, there are four main ways nearly anyone can leverage their apartment or home to generate income:
- Vacation Rental. When you know you’ll be out of town for several days, post an ad for your home in the vacation rental section of Craigslist. Other great resources are AirBnB.com and SecondPorch (a Facebook application).
- Home Exchange. Consider doing a home exchange when you take vacations. If you have a home in Maine, you can potentially “swap” with a couple in Paris for a week or longer (fun fact: Europeans seem to love Maine). A great place to start is HomeExchange.com, a vacation swapping website.
- Room for Rent. If you have an extra bedroom in your home, consider listing it on a site like AirBnB.com, where travelers all over the world look for inexpensive accommodations.
- Part-Time Roommate. If you travel regularly for work, find someone with the opposite commute pattern who needs a place to stay in your home city. Craigslist and social media like Facebook and Twitter are great resources for this.
One potential scenario
To give a sense of the income potential of these arrangements, let’s take an example of a couple who lives in a 2-bedroom home in Portland, Oregon. Assume they live in a fairly desirable area and use their spare bedroom as a home office and guest room.
- They rent their spare room to vacationers four nights a month, charging $50/night. Annual income: $2,400.
- Once a year, they take a 10-day vacation in Europe. This year, they opt for a home exchange, saving $150/night in hotel costs. Annual cost avoidance: $1,350.
- They usually go camping a couple times over the summer. They rent out their home two weekends each summer, charging $150/night. Annual income: $600.
- During the holidays, they travel cross-country to visit family. They rent out their home over Thanksgiving (four nights) and Christmas/New Year’s (10 nights) at $150/night. Annual income: $2,100.
- Total annual income/cost avoidance: $6,450.
This is a fairly realistic scenario, with prices typical for Portland. Let’s assume this couple earns the local median income of $56,000 for a two-person household. With minimal work and a little flexibility, this Portland couple is able to boost their income by nearly 12% annually.
To take this a little further, let’s say they continue renting out their place, earning $6,450 annually for five years. They invest their income with an 8% annual return. At the end of five years they’ll have $37,800. Then they have a baby, so they stop renting out their space. They convert the second bedroom into a nursery and stop taking long vacations. They leave the $37,800 in the investment account, which continues to earn 8%. By the time their child is 18 years old and ready for college, the account will be worth over $150,000, which should cover their child’s Harvard education (assuming the kid is smart, like his parents). Not bad, right?
Is this realistic?
Many people think that this story doesn’t apply to them. They think either that no one would pay to stay in their home, or that it would be too weird to have strangers around their stuff.
When I first had these doubts, I had to tell myself: I like my home, don’t I? Is it that far fetched a notion that someone else might, too? As for the aversion to having someone else around my stuff, I had to think through that reaction: Was I really willing to turn down hundreds or thousands of dollars of income because I wanted to protect my things from being near strangers? I had to discipline myself not to let my Stuff take over my life, limit my opportunities and cost me money.
After conquering my doubts, I forged ahead. Looking back, I have no regrets. My belief is there’s no harm in trying — all the listing services I mentioned (except HomeExchange.com) are free. If you’re curious to give this a try, spruce up your place, take some well-lit photos, and write a snappy ad. The more positive energy you put into your home and your ad, the more success you’ll have. You’ll likely be surprised at how many people are interested in paying to stay in your home, and you may even make some friends while you’re at it!
A final word of advice
Be sure to check your lease, zoning laws, or condo bylaws to ensure you’re not violating any rules. Also, check with your homeowner’s or renter’s insurance policy to ensure you’re covered for damage from renters and visitors.
This article is about Advanced, Entrepreneurship, House and Home, Real-Life
SEARCH FOR RECENT ARTICLES
Interesting story here. I think if you live in the right city and have the right location you can make this work for you. Or if you have extra money, you can invest in real estate much like she did in Portland.
My wife and I like the beach. We have thought of purchasing a condo so we could use it a couple of times a year and then lease it out when it is not being used. So far we have not done it yet.
loading....
What a smart, well written post!
loading....
Rebecca-
I’m a consultant who has often thought of doing the same thing. However, most of the client work I’ve done has been on a quarterly basis – at the end of each quarter I may or may not be extended. In this situation, would you simply tell your tenants they’re on a month-to-month contract, or what?
loading....
For your part time roommates in NY, did you have to do a bakground check or how did you select the right room-mate?
loading....
I know a person who did this. The third renter he had cleaned out every possession he owned.
loading....
Overall, I think this is an interesting idea, but I don’t really care for seeing “best case scenarios” to sell me on ideas.
This “income potential” scenario first of all does not address added costs that would be incurred in preparing a home for rental. I’m guessing the added liability insurance you will need to carry will eat into the income you are earning, as will any fees if you need to use an agent to fill the space. There may also be specific fixes that you need to make for safety reasons or cleaning services that need to be hired if you are gone for more than a weekend to keep your property prepared for rental. Secondly the “cost avoidance” is only actual money that would go into the bank if you save up the physical amount and deposit it. If you are just relying on the savings to be able to take the trip in the first place then you don’t come out on the other side with that amount in your bank account. And that income potential relies on 100% booking during the times that you are able to offer your house. I suspect the number of residences that are desirable enough to reliably get 100% booking is relatively small, even in “in demand” locations such as Manhattan.
I am not saying that this is a horrible idea, but I do think it’s much better to enter something like this with a realistic view of what you are likely to experience, rather than a glorified view of what the best case might potentially be.
loading....
Creative ideas for maximizing a living space, thanks!!
loading....
“let’s say they continue renting out their place, earning $6,450 annually for five years. They invest their income with an 8% annual return”
Great article, but don’t forget to mention that you have to pay tax on that income. It’s not just free money. You get $6,450 annually for 5 years, but you can’t invest it all – you have to pay income tax on it.
Rental income is still income, and is fully taxable. I’d be interested in seeing how your scenario changes after Uncle Sam gets his pound of flesh.
loading....
“Was I really willing to turn down hundreds or thousands of dollars of income because I wanted to protect my things from being near strangers?”
Yes.
Collectively, my electronics and wardrobe alone is worth several times the yearly income your potential scenario outlines.
This is a great idea for people who do not keep things of worth in their home. For those that do, there is a real potential to lose money by employing this idea.
loading....
I find your statement “I don’t have roommates” to be VERY misleading. That is exactly what you are doing! Sure, you are not there when they are staying in your place, but you are just renting out your space to temporary roommates. You even identified them as such later in the post.
I like the idea you are sharing. It’s great that you have that system worked out. I am just not a fan of being mislead by catchy intro statements.
loading....
It’s an interesting idea to be sure, but the author really traded out a permanent roommate for temporary renters. As I have a basement apartment that I rent, I don’t see the difference except that my tenant is under contract and doesn’t vary by the week. I’m all about getting other people to pay your mortgage, but this feels quite risky. I can imagine the extra liability insurance payment is at least somewhat sizeable.
loading....
My Aunt and Uncle do this, they retired to a vacation destination (summer) when they renovated their home from a vacation home to their permanent home they did so with an eye to house swapping/renting. They built in more owner storage areas so they could put things away (think fine china/family photos) and finished the basement so they could also use that for storage for some of their fine furniture.
Now they rent out their home, to people who use to rent it when it was a vacation home, for July, August and a good part of September, they collect between $25,000-$30,000 a summer. During this time they sail on their boat, travel themselves and visit their kids. They haven’t tried house swapping yet but they are looking into that presently.
loading....
I don’t doubt that the practice of taking in boarders is going to increase as the economic woes continue.
loading....
Upbeat post. Although, I think the biggest hurdle many of face is that we have too much Stuff and we find ourselves deep in the trenches. But if I were in a mobile position and acted a bit more like a minimalist…this would be a very good plan. I like it… even though I can’t do it myself at this point in my life.
loading....
Interesting idea. I don’t think I’d ever be okay with complete strangers in my personal space, though. For me, the risk is just not worth the extra money, and I don’t just mean the risk of having my stuff stolen.
I’d probably be okay with it if I knew the renters personally and they didn’t come from a Craigslist ad.
loading....
I really enjoyed reading this post, but I agree with some of the criticism in the comments that it’s a little too much of a polished sales pitch and not quite an honest and straightforward discussion. Of course, it’s from a consultant, so that’s to be expected.
I don’t think I’m interested in doing this. I really don’t care to have boarders living at my house either while I’m there or for the limited amounts of time while I’m not.
Where Rebecca and I are in perfect agreement, however, is that there is significant economic efficiency to gain by utilizing residential space during times when its owners will not need it. The difference is that she prefers to be the owner, and I prefer to be the renter, but we’re both gaining over the alternative (empty space for her, expensive hotel for me). What’s changed is that the Internet has facilitated a far more efficient marketplace for this type of exchange.
We, personally, are fortunate to be in a situation where, demographically speaking, we could be the traditional buyers of a vacation home. But now that I see how easy and relatively inexpensive it is to rent a very luxurious one, wherever I want on short notice, quickly, easily, and cheaply, I choose to stay on the buyer end of this equation. In my opinion, that’s where the economic advantage lies, because the owner is essentially paying for the right to tell his friends “I own a beach house” whereas I’m just the lowly renter. For that reason, I would never buy a vacation home with the intention that it will serve as a good investment, because I think too much cost goes to pay that intangible “I own a beach house” feeling. Thus, in the marketplace more people are willing to buy vacation homes and accept lower returns (rental rates) proportionate to the risk and carrying costs than they would demand from a comparable but less sexy investment.
To each his own.
loading....
I have a roommate. My mortgage is $600 a month but I only pay $300 a month and my roommate pays me the other half. I live in a small cheap house but its not bad for 2 people
loading....
Having had some experience from my parents who rent out a couple of investment properties, even in a hot vacation area (think, exclusive beach and golf resort), you will have problems. Over the years, we have had TVs/furniture/china/kitchenwares stolen. We have had ‘management’ companies that ‘clean’ on a weekly basis but leave dirt throughout the house. We have had unauthorized ‘repairs’ made to the house and over the last few years, our rent has barely (or, not) paid the property taxes.
So far, this person has been lucky, but just wait … things will go wrong and, at times, they will cost you an arm and a leg. So, I would never rent out my primary residence because it has a value beyond the monetary one.
Cheers!
loading....
This is an interesting idea, but since I live in a far-flung DC suburb, have 2 kids and 3 dogs, I just don’t see how it could ever work for me.
loading....
I see the common sense in it and I applaud creativity and thriftiness. But I am not sure this would be fair to the fellow tenants of my building. They did not sign up to live in a rooming house. I also see a lot of risk in this and I think I have less risky alternatives. I could see some benefit here for homeowners who find longer-term renters and who do background checks. Thanks for sharing.
loading....
“Was I really willing to turn down hundreds or thousands of dollars of income because I wanted to protect my things from being near strangers?”
You might never know what strangers do to your “Stuff” that you come in contact with through out your stay.
loading....
This is not a new idea. It was done in my grandparents generation, except it was usually family members that moved in. At this time I have converted two bedrooms into an eating area and a bedroom with a bath in between. There is a separate entrance and I have a locked door in the hallway so that there is no access to the main part of the house. There is no stove in the bedroom, but they do have a microwave and a mini fridge. I am renting it out for $570.00 a month, which has helped since my husband has been unemployed for over a year. It does help during tough times.
loading....
Nice idea-and I might have considered it before my condo was burglarized 2 months ago. Everything easily moveable that I owned, of any value, was stolen. There is now no way I would EVER do this, even if it means I look like a slave to my stuff (which I am not)- I will never feel comfortable knowing strangers are in my place-I’m sorry-I meant to say “home”.
Another thing: having a demanding high-stress job-my home is my sanctuary-quite apart from that role being compromised by burglars, it would be worse knowing there would always be a stranger there when I was away-it would defeat the purpose of home owning for me personally. It is more than just about the money. I dont need a vacation home in Portland, and I loathe Maine….
Further, in this economy, given that crime and fraud seem to be increasing, in my opinion, this advice borders on the irresponsible/dangerous.
loading....
This reminded me a bit of a past post on how to travel on the cheap by Couch Surfing. http://www.getrichslowly.org/blog/2009/08/03/how-to-use-couchsurfing-to-see-the-world/
Both ideas are compelling and in the best scenarios could be really rewarding both financially and culturally. Personally, as a woman, I’m a bit nervous to do either of them. Having an unknown person have access to my home (how do you ensure they don’t make a copy of your key?) or staying in theirs just makes me a bit nervous. The personal safety concerns actually worry me far more than my material ones.
That said, there is a chance I could be laid off soon and if that happens my husband and I will considered taking in a roommate in our guest room to help us defray the cost of rent.
Overall, I liked this post as it’s helpful to occasionally re-imagine our lifestyle. While I sometimes think – there’s not much left we could cut out to save money – if we were willing to have less privacy, we could save a lot of money.
loading....
i wonder how many co-op boards in nyc would allow this. most of the ones i’ve dealt with have frustratingly strict rules.
loading....
Another idea to consider is “renting” out a room to exchange students that are in town for a semester.
We’ve done it before, and although it’s not exactly “renting”, we’ve had a great time with it!
The local universities and language academies are always looking for people to board their exchange students so they get a more “home-like” experience in the country they’re studying in.
It’s a great way to meet people from different cultures, and the money doesn’t hurt either. The last one we did, we were paid 720/month to host a student.
It’s also nice because it’s only on a per-semester (or sometimes per-month) basis, so if it doesn’t work out or our circumstances change, we have flexibility.
loading....
I’m glad to see the discussion generated around this concept, and I’m grateful to JD for offering the chance for me to write about my experience.
It seems this post has gotten the wheels turning for some of you, and that’s great! As commenter Coley (#16) said, it’s all about efficient use of space. We’ve all got underutilized space to some degree, and my goal is to get people thinking about how they can maximize their space to achieve their financial goals.
A couple commenters (#6, #8) asked about taxes and insurance. Since I own a condo, I have a contents policy. My original insurance cost about $200/year when the condo was owner-occupied and was scheduled to rise to $260; my premium increased to $290/year when I switched it to a landlord’s policy. So the insurance increase isn’t bad at all, at least for condos. To further protect myself, I’m considering starting an LLC which would own the condo. Setting this up will cost a couple hundred dollars.
On the tax side, as many have noted, you will have to pay taxes – I didn’t get too much into that, since everyone’s tax picture is different and I’m not a tax expert. Given my deductions as a homeowner, depreciation on my home, and the fact that I can deduct many expenses related to maintaining my condo as a rental, I have not been hit hard at all with taxes. I’ve gotten money back each year at tax time. This isn’t to say you will, too, since each person has a different picture. I’d recommend hiring a good accountant.
loading....
Check your local laws about tenets and boarders rights. Many times you have to serve formal eviction notices, and possibly involve the courts to get them out despite their arranged term being up. Its not just your stuff that you have to worry about.
Also I’m kinda assuming this means that while renting your home you don’t have any priceless (to you) items in there. A safe won’t do, a week is plenty of time to break in. You would have to keep all your records and whatnot somewhere else for the time being. Also think about your locks, should you change them every year or so? Its plenty of time for someone to copy a key or two. Make sure your lease terms let you sublet or that your insurance covers them. If on vacation would you legally have to make it short because the heat went out? Do you have to answer voice mails every 24 hours? Many can do this informally and have it work out. But even if I had an empty house that I was given, I still wouldn’t do this.
loading....
This is a very interesting article. I have had exchange teachers from Japan live in my house twice before, but received no compensation. In fact, it cost my family a fair amount of money as we had to heat the house much higher than normal and pay for dinners out with the family, etc. However, it was not a monetary decision and was thusly a rich one.
My mother owns two different “guest cottages” that she rents out fully furnished and she’s had few problems through the years with dishonesty or theft. This is partially because the rent is quite high, which weeds out a lot of people, and partially because her main clientele are grandparents visiting without having to stay with the kids. An honest bunch, to be sure.
I live in a nicely furnished big house in a desirable neighborhood, and will probably do homeexchange.com at some point. My husband is skeptical, but I think I can sell the idea.
This column falls under the category of being creative in order to carve out extra income, which I’m a big fan of.
Thank you Rebecca!
Katy Wolk-Stanley
“Use it up, wear it out, make it do or do without.”
loading....
the thought of letting strangers live in my house when i am not there totally creeps me out. that is my home where I am raising my family – not a business opportunity!
loading....
I used to think this was a great idea, and I did home exchanges regularly. They all went really well — until one didn’t. Tenants who had come well recommended trashed the house. Now it gives me hives to think about ever doing it again. I think the author of this article has been lucky with tenants.
loading....
I can see having rental cottages like Katy’s mom does, but the idea of having someone rent out my own house while I’m not there does make me kind of nervous. I’d hate to have to secure all my belongings whenever I left.
Of course, being a stay-at-home, work-at-home mom with four kids, this scenario isn’t even faintly possible for me personally!
loading....
I found this truly inspiring.
We live in a city that hosts a week long sporting event each year. Hotels are generally booked 6 months in advance and a lot of people in the area rent out their home for 3-7 days and make thousands of dollars doing this.
A friend of mine who lives in a simple town home minutes from the event makes enough money in 3 days of renting out his home that, after taxes, he can pay for all his utilities for the rest of the year.
I think our home could generate a large amount of money if we rent it out too – I believe there is a local organization that helps home owners in the area connect with people that want to rent and, from my understanding, you are required to use them.
They require brand new sheets for each bed, a tv in each room and brand new towels for the guests.
If you hit up yard sales the weekend after this sporting event most people have the towels and sheets that were used for one week out for $1!!
I have been nervous about doing this because of the thought of having strangers in my home, but this has inspired me! Maybe next year we will do this
loading....
I like the idea of sharing an apartment you’re only using part of the week. If I was in a situation where I needed to be “in the city” or whatnot 2 to 5 days a week, I would definitely seek that out.
I don’t think I will be renting out my main home though. Well, maybe it would be an excuse to clean… but it seems to me like a lot of work and risk for not all that much income in the end.
loading....
Very interesting. This is something I’ve considered, but not for times when we are away. We have a large apartment with a sizable master suite (big bedroom, three closets, en-suite full bath) which is both our home office and guest room, when it’s not buried in clutter like right now.
I wouldn’t want to hand the place over to strangers when we’re not home. We have some pretty expensive and not easily replaceable stuff, and pets. But I’ve often thought – especially last year, when I was out of work for nearly six months – we could pick up some dollars fairly easily by renting it occasionally to travelers who want a non-hotel place to stay when visiting our area.
Fortunately (?), I’m now fully employed again and so the guest room continues to be primarily a repository for junk. Hmmm.
loading....
I guess it doesn’t apply to me because I rent! Its stated in the rental agreement that I shall never do anything like this. Would be nice, but it seems like its only for homeowners.
loading....
Nope… I would never do this. Maybe if it wasn’t my primary residence. I wouldn’t take the risk of someone spilling a beer on my record collection, much less stealing my things or killing my plants. That stress (plus the stress of listing, screening, negotiating, managing, cleaning) would totally not be worth the money to me.
If it’s the type of thing you find fun, then great. But I’d be curious to know if the mortgage you pay minus the rental income (plus taxes, fees, costs) is really less than you’d spend to rent a place for just the time you’re there.
loading....
Material, safety, and pet concerns aside, my boyfriend and I have decided we never want to own property. Too risky. And isn’t owning a house the biggest reliance on “Stuff” you can possibly have?
loading....
The wife and I own and live in a double in New Orleans and we did something similar the other year when we traveled to Europe for several months to regain sanity post-Katrina. Fortunately we had an attic and installed a lock on it to protect our more valuable stuff and just left out furniture and basics like kitchenware and a TV. When the non-profit group moved out after the summer we posted it on the short-term and vacation sections on Craisglist and were able to get a couple of lodgers in there for about half the time, but I still wasn’t entirely comfortable with the idea of having complete strangers in there without much of a deposit having just spent a year and a half to rebuild and renovate it. But being physically so far removed made it mentally easier.
At that time I hadn’t heard about the AirBnB and other sites mentioned. I don’t know if those sites offer some sort of protection, but if someone causes serious damage whether intentionally or not what sort of recourse, if any, do you have without a deposit? I’m not convinced a HO policy would pay for damages caused by a short-term boarder and am fairly confident that is probably excluded from most policies, especially if you haven’t notified the insurance company. If you intend on doing this regularly make sure to notify your insurance company (they’ll pron increase your rates) or set yourself up to take a large damage deposit on PayPal.
Fortunately, it worked out for us because our traditional tenants were still living next door and were able to keep an eye on things and the boarders were all upstanding people coming into the city then to help out or work. Now, most of the people I’ve interviewed from CL to rent the other side out to for vacation or short-term just seem to sketchy and not worth the potential risk. We may try the Air BnB, does anyone have any experience with that?
loading....
Creative idea. I love how you think outside the box to generate income. Too often we think of saving or being frugal to decrease expenses, instead of devising a plan to increase income.
loading....
This is definitely not for me- I’m a private person and would not be comfortable with strangers in my house while I’m not there.
loading....
@Honey (#38):
“My boyfriend and I have decided we never want to own property. Too risky.”
How is owning property “risky?” Historically, real estate is one of the lowest-risk investments out there.
Perhaps you meant to say carrying a big mortgage on real estate is risky, because if the market contracts you can get upside-down? Leveraging for investments is a very different (and riskier) beast than simply owning the investments outright. But you said “owning” property was risky, so I was wondering if you could clarify. If you consider property risky, then what the heck do you invest in? Do you have 100% of your retirement savings in TIPS? CD’s? Cash?
loading....
@Kevin (#42) – I suppose I was using it as a bit of a catch-all. A primary residence is not an investment in any case, so that’s not really what I meant. But – the risk your home will decrease in value. The risk your home will require repairs you can’t afford. The risk you will lose your job and be unable to downsize. The risk you will want to move to another city and be unable to sell your home according to the timeline of your move.
We are not having kids, so most homes are way too big for us. With that in mind, it is a waste to pay for space we aren’t using and I’ve also determined that 2 bedrooms is the maximum we can keep reasonably clean without devoting our lives to it. We also can’t imagine living in the same city for more than 5 years at a time, so we’d never ever get equity even if our home did appreciate at “normal” levels.
Right now my boyfriend and I are paying off $100K in student loans apiece, plus some credit cards (he’s an attorney only a couple years out of law school, I have a PhD). So we’re not doing much saving for retirement – I have a 403(b) and he has a 401(k) both with employee match through our jobs, but nothing beyond that until we at least pay off the credit cards.
loading....
Like Kate (26), I rented a room to an exchange student last year. Language was sometimes a problem (we both used our second language to understand each other), but it was a fantastic experience and I’ll do it again.
My local university is always looking for people interested in hosting an exchange student.
I also think it is safer than posting an ad on Craigslist because if there is a problem, you can go see the people responsible of exchange students at the university.
loading....
I have done this once a few years ago when I wanted to travel to France for a few weeks. I found a really nice couple with a baby, conducted a basic background check (Megan’s Law, etc) and everything checked out. I even “hired” a local friend to manage everything while I was away.
During the first two weeks, everything seemed to be going well. During the middle of the third week, my friend frantically called and told me that they cleaned me out. I rushed home to find out they took everything that wasn’t built it including my food and toiletries. It looked like I moved.
Never, ever again.
loading....
You have to find quality tenants. A thousand times yes.
I have been lucky to find amazing, interesting, people to rent my space, but there are a few things you can do to (as my mom says) make your own luck.
Posting well-lit, attractive photos, is important. Write a grammatically correct, informative ad. Simply presenting your property as a warm, high-quality place will weed out a lot of sketchballs.
When you do receive inquiries, pay attention to the way a potential tenant writes and speaks–it’s amazing how you can get a sense of someone by the way they communicate. If someone is difficult, demanding, or just unlikeable in your initial interactions, move on. This sort of person will be a headache. My rule of thumb is to always rent to people that I like on a personal level. People that I could see myself being friends with make great tenants, and honestly, the preference seems to go both ways. I tend to receive inquiries almost exclusively from people that I immediately like.
(Quick aside about legal issues: Owner-tenant laws do not apply to vacation rentals in most areas. Check your state law to see what regulations, if any, you have to follow.)
I mostly rely on my gut, but I do do a little background screening. For the vacation and “part time” roommates, I ask where the person works, what their situation is, and why they are seeking to rent from me. I then do a little research to verify their story. My management company does a full background check for longer term corporate renters. I draw up a short contract for short-term renters to sign listing the terms, and the circumstances under which they will lose their deposit.
Which brings me to this (in response to Wilson, #39): a security deposit is an important tool. First, it establishes a relationship of mutual trust. The renter is trusting you with their cash, and you’re trusting the renter with your space. Plus, the deposit acts as an extra insurance policy in case anything goes wrong.
Bottom line: Communication is crucial. Go with your gut. Put terms in writing, and get a deposit.
loading....
Absolutely loved this post! Great well-written and very informational article! I have friends who use home exchange and know and use VRBOs but this really summarized the income potential ability that can come from even just a simple normal primary residence. Loved this post Rebecca! On my way to your website now.
For those worried about stuff or privacy. Consider putting exterior locks on interior doors with a different key than the main home. Say on your bedroom and office, or in a 2-story situation put a door on the landing to the second floor. This way you can still keep documents and personal items “un-snooped” but leave access to the part of the house need. Kitchen, bathroom, guest bedroom… It really is liberating to not have to worry about your ‘stuff’.
@ Kevin – good point on taxes.
loading....
To Katie (#45) and the others who’ve had bad experience with renters, I’m wondering if you pursued legal action. I assume you have the names and contact info of the people you rented to, so it seems easy enough to simply call the police.
Also: Did your homeowners insurance cover the theft? Had you collected a security deposit?
loading....
#48 Rebecca
Since I am a renter, I had renters insurance and it did cover the theft. I only collected a non-refundable cleaning deposit of $100. I filed a police report, but their contact info didn’t check out of course after the fact (they wasn’t going to stick around!). Not much was done after that.
loading....
Typo fixed
loading....