Do you want to make some extra money each month? Do you have extra space that you want to take advantage of? Renting out your home could be a great way of doing so. There are a wide variety of ways that you could go about renting out your home. If you feel like you are up to the task but are unsure where to start, keep reading and we can give you advice on the best approach for you.
Reasons to rent out your house
While renting out your home to a stranger can seem like a daunting risky task there are a lot of great reasons why millions of people choose to do so. A few of these reasons include:
- Inability to sell your home: The housing market can be very challenging for new people trying to enter it. Often times people cannot find a buyer for there homes simply because there simply aren’t enough of them. People are opting to rent homes instead of outright buying them. By renting your home you are far more likely to find someone.
- Make use of unused space: Homes are getting smaller and more efficient; many older homes seem massive by comparison. Often times homeowners find that their home is too big, and they don’t use all of the space. By renting out parts of your home you can properly utilise all of your space.
- You can make a lot of money: Depending on the size of the space you are renting, and it’s location, you can potentially earn a lot of money. As long as you have an occupant paying you rent every month then you are constantly earning money from your previously unused space.
- You will have access to Landlord specific tax deductions: You can potentially save a bunch of money on your taxes. This includes things like repair costs, which can be deducted in the year that they are acquired. Insurance premiums, mortgage interest, etc.
Preparations you need to make before renting
While renting out your home does have a lot of benefits there is also a lot of work involved. Here are some important steps that you need to take to ensure everything goes smoothly:
- Check your local laws: Depending on what area you are in you may have to tangle with a bunch of local laws, both beneficial and restrictive. You may find out about potential tax deductions or limitations that you must follow. This will be your best indicator of whether or not renting your home is a good idea.
- Research local rental properties: Find out what other people around you are doing, what policies do tenants have to follow, what do they charge for rent, etc. This will give you a solid foundation to work off of and also let you be more competitive within the marketplace.
- Sort your insurance out: Getting proper landlord insurance is vital to success. If something happens to your property, paying the necessary costs out of pocket can be devastating financially. If you have landlord insurance, you will be better prepared for the unexpected. You will be covered against property damage, contents damage, and theft, tenant compensation claims, etc. Do your research and find out what is available to you.
- Make your property suitable for renting: No one will want to rent an unkempt disorganised property. You will need to bring everything up to a standard that tenants will accept. Make sure everywhere is clean, all of the utilities work correctly, decorate the rooms, etc. The more that you want to charge, the more effort you will need to put in.
Ways of renting out your home
There are a variety of methods that you can use to rent out your home. If you have some worries about renting out your home, then you may find that one of these methods addresses those concerns. Here are a few methods of property rental for you to consider:
Renting your whole property
Renting out the entire house is a method that is commonly employed by homeowners who are moving home but are either unwilling/unable to sell their previous home. You can also buy a new property with the intention of renting it out. There are a lot of things to consider when taking this approach.
- You can make a lot more money: Renting out an entire property can be extremely lucrative. You can charge a lot more for rent then if you were simply renting out a few rooms. And if you were ambitious enough, you could acquire and rent out a lot more properties and build a rental empire. At a certain point, you could become a landlord full time and focus solely on your properties.
- You still own the property: Since you are simply renting the property rather than selling it, you have final say over what to do with it. You can evict your current tenants if you are unhappy with them and they do something wrong. Such as break terms in the contract or don’t pay rent.
- You benefit from rising property values: If the value of the home continues rising you will benefit from that growth. Eventually, you can decide to sell them off and gain a lot of money from doing so. Or you can simply sit on them and continue passively gaining money from them. As the value of the property rises you can gradually start charging more. Don’t go too far and make your tenants angry though.
- You have a lot of freedom with how far you go: You could build up an empire, or you can just rent out the one property. There is no rush to develop or expand, you can just passively earn a little extra money. The amount of control that you have over your investment cannot be understated.
- Renters are more common then buyers: Many people, especially younger people, cannot afford to purchase a home outright. These people resort to renting out a home instead. So, you are likely to find a tenant then a buyer.
- The initial investment is enormous: Not everyone has enough money lying around to afford two houses. You cannot use this method to get rich quick due to the initial costs required. It’s more appropriate as a means of earning extra money after you’ve reached financial stability. In addition to owning 2 or more homes, you also need to worry about utilities, cleaning, decorating, insurance and other setup costs. Collecting that much of your wealth into one area simply isn’t realistic for a majority of people.
- The housing market is risky: Committing the necessary investments into the housing market is a colossal risk. It’s already very difficult for new buyers to enter the market so the value of properties is gradually becoming less sustainable. If your local housing market were to experience a crash, then you would be in a lot of trouble. Diversifying your assets is always safer and smarter than putting all your eggs in one basket. If you have strong financial stability and can comfortably afford the risks, then this may still be worth your consideration.
- Tenant risks: Relying on other people (especially strangers) is always a risky proposition. And this situation is no different. There are a lot of things that could go wrong with tenants. Things like property damage, theft, not paying rent on time, or even not having a tenant at all.
- It takes time to recuperate your investment: Your earnings from renting comes from your tenant’s rent. Because of this, you will have to wait for several rent payments before your investment pays for itself. Once you have passed the threshold it becomes a real money maker. But reaching that point will take quite a long time. You may even have long periods without tenants, and it’ll take even longer.
Renting out rooms within your property
This option is much easier and cheaper than renting out an entire building. This is a far more realistic way to rent out your property. The options for expansion are greatly reduced but you can still earn a significant amount of money.
- Less hassle: You don’t have to worry about your whole property when you only rent a part of. Various issues that you would have to worry about as a full-time landlord aren’t present with this method. The amount of preparation to do to ensure that your home is set up for tenants is far lower. You don’t have to sort out a contract, or redecorate your entire house, or have to worry as much about utilities.
- You can still use your house: One of the major pitfalls with renting out an entire property is having to relinquish it. If you instead opt to rent out a few rooms or a floor to a tenant, you have use of the rest of the building. This is great for many reasons, you only need to own one home, you can keep a close eye on your tenant(s), you will be made immediately aware of any issues that arise, etc.
- You know your tenant more closely: Living with someone is a fantastic way to get to know them. You can potentially become quite close friends with them and expand your life experiences. Additionally, you could also negotiate deals with them, such as asking for assistance with various tasks in exchange for a reduction in rent. It’ll also be much harder for them to hide things from you. If you are skeptical about letting tenants stay, then being able to closely keep an eye on them should give you peace of mind. You might even feel safer with an extra person around the house.
- You won’t earn as much money: This is a direct consequence of the lower investment. You are renting out less property to your tenant so you can’t charge as much rent. If you can safely stomach the initial investment of letting a whole property out, then that method will net you a lot more money. It may take a lot longer to recuperate your initial investment.
- You might not get along with them: While there is a possibility that you could become friends with your tenant, the opposite possibility also exists. The two of you could get on each other’s nerves and life together would become very annoying. This is why a screening/interview process is important when selecting your tenant. The situation could turn out even worse if you let out space to someone you are already friends with.
- You have less privacy: Sharing your property will have a variety of knock-on effects on your daily life. One of these is that you won’t have the same amount of privacy anymore. This can be alleviated somewhat if your tenant has their own bathroom or facilities, but even so, there will be awkward moments. This could lead to moments of tension or conflict. Ultimately you may decide that the rent money isn’t worth the headache if you have a particularly bad experience.
- You may need to offer additional services: If you are having a lot of trouble finding a tenant at all you might need to offer more. You may feel an obligation to gain back your investment and offer extra services to entice tenants. Services like laundry and meals, or things like cleaning and making the bed, kind of like a hotel.
This is a more unconventional method that is less common than the others we’ve discussed. Basically, subletting refers to renting out part of a property to a subtenant. If you don’t own your own home and are a tenant in someone else’s property, then you can go down this path. There are some complications with this method, but this is one of your best choices for leasing if you aren’t a homeowner yourself and you want a tenant. This can be used to gain a subtenant who will help out with various bills and tasks, or you can simply have someone else watch your place while you are away.
- Your residency won’t be empty while you are gone: Usually, subtenants are brought in by people who are leaving their home for a long time. During this time, they will seek out a subtenant who can keep the place in order while they are away and keep the bills in check.
- Can ease financial burdens: If you are already renting someone else’s property then you are probably on a low income. Most of your budget will be going to necessities and you won’t have a lot of money to spend on frivolous things. By getting a subtenant you can get rent payments from them which can go a long way to helping your budget. Extra financial security and income is always a good thing.
- If something happens while you are away, they can be fixed while you are gone: If you are gone from your property and something breaks or goes wrong, you may find your place in quite a state when you return. If you have a subtenant staying, however, they can catch the early signs of potential issues and alert you and the landlord. Any potential disasters can be caught out early and dealt with before they cause considerable damage.
- You can avoid breaking your lease on an apartment: If a situation arises that requires you to move such as a new job you don’t want to break your lease. Breaking your lease can negatively affect your credit score and have other effects. By subletting in this instance, you can avoid breaking your lease.
- Your subtenant can be unpredictable: You need to take extreme care in finding a good subtenant that won’t cause any damage or problems. The last thing that you want to return to is a hefty repair bill or an eviction notice. If you have an unreliable or deliberately destructive subtenant, then they can cause a whole host of headaches for you.
- Subletting may not be an option in your lease agreement: Whether you are even allowed to sublet at all is up to your landlord and lease agreement. Make sure that you aren’t breaking your agreement otherwise you will be in a lot of trouble.
- Your subtenant may try to take over the apartment: This may sound like a really paranoid statement but it’s true. You are taking a considerable risk when deciding to leave your home in the hands of someone else. If they decide to try and get you evicted it will not only ruin your trip but also cause innumerable problems for you when you return.
- You might get robbed by your subtenant: This is a much less extreme risk but it’s just as real. You may be forced to take them to court for their wrongdoings against you. Your property may also get robbed by someone else on their watch if they aren’t very vigilant.
- Your subtenant may get along poorly with your landlord: You can do as many interviews and checks as you want, but you can’t tell if they will get along with other people you associate with. If they annoy your landlord or other tenants, then your relationship with them may become strained.
Renting through a website
This method is very different from all of the previous methods. It is far more modern and requires very little effort on your end. Rather than leases or contracts, you simply use a website to handle the details for you. You rent out the property for short periods of time and your tenants change constantly. This is probably the easiest method for the majority of people.
- It’s incredibly easy: The websites can you can rent your property through handle a lot of the annoying details for you. You don’t have to worry about interviewing potential tenants, you don’t have to run background checks, you don’t need to write a contract etc. You just sign up for the website, add in your address and details of your property and you’re set up. People then come to you with offers and you can freely accept or deny them.
- Tenants only stay for brief periods of time: You don’t have to worry about whether or not you’ll get along with your tenant because they don’t stay for very long. You get your one-time payment from their stay and then leave them to their devices. Since you can potentially get a lot of tenants per year, you can make a lot of money off of them.
- You can keep using your property: With these sites, you only rent out a few rooms for your tenant. You can continue using the rest of your home to your heart’s content just like a regular tenant.
- They are more trustworthy: Sites have dedicated and detailed review pages on all of their users. Tenants will be more likely to be on their best behaviour as they do not want negative reviews. So, you won’t have to worry about theft or damage.
- You get to meet a wide range of people: You can meet a lot of people through these websites. You may potentially learn about a wide assortment of cultures and expand your world view. Maybe you will even make a few friends this way.
- You don’t keep all the money: Depending on what site you choose to go with you could potentially have steep fees. Usually, you will be charged a percentage of what you earn from each tenant or sometimes you pay a fixed rate per year. If you were to find a tenant independently you would keep all of the rent money for yourself.
- May cause conflicts with local laws: Depending on where you live you may have different local laws in place that makes taking in a tenant difficult. Always check your local laws and government sites like GOV to find out what is allowed in your area.
- Potentially more effort required to improve your property: Using this method you are effectively competing with hotels and hostels. You will need to ensure that the property is in tip top condition so that people want to stay there. Additionally, you will need to provide amenities like clean towels and soap. It may be the case that the effort isn’t worth it on your part.
- You need to be competitive on the platform: When users search on a site, they will look for the best deal they can get in whatever area they are visiting. You will be competing with everyone else in your area in order to secure tenants. To succeed, you will need to be vigilant of what others are doing, what they’re charging, services offered, etc. Again, this can result in a lot of extra effort being required on your part.
Best Websites To Rent Property
If you decide to go with the route of website rental there are a few great sites that you can consider using. Here are a few websites that we recommend checking out.
Airbnb is one of the more established and larger sites in this field. They handle hundreds of thousands of trips per year and have millions of users. They have a lot to offer users so they may be a great choice for you if you are new to letting out property. If you do choose to use them, you will reap their various benefits. They offer:
- Up to one million dollars of damage protection: As long as you are within one of the eligible countries then your property is safe. Even though damages are less likely to occur through sites like Airbnb, the added security is great for those unsure about property letting.
- Free listings: If nobody wants to stay at your place, then you don’t lose out on anything. It is completely risk-free to list your property on the platform. You won’t pay a single penny until you start earning money from tenants.
- Some areas will be in high demand: If you live in a popular holiday location you might be able to get a lot of business. Some locations as really expensive due to how popular they are, people rarely want to live in these areas, but they do want to visit. If you live in one of these areas, you may have more luck getting tenants on Airbnb.
- You set your own prices: You don’t have to worry about the website selling you short. While it is smarter to have a more competitive rate for your area, nothing is explicitly stopping you from charging as much as you want.
Openrent is a fairly new site set up in 2012. They are a platform focused on helping aspiring landlords find tenants for their properties. They offer a lot of helpful features that will help you become a successful landlord even with little prior experience. These features include:
- The first listing is free: The first time that you use the service you do not have to worry about listing fees. There is no risk of losing money from not finding a tenant, which makes this a great starting point for inexperienced landlords.
- Your listings are displayed on several different platforms: Openrent shows your vacant property to as many potential tenants as possible. They will show your listing on sites like Gumtree, Rightmove, Zoopla and more. Other online services may only show your listing on their own website which reduces your odds of being seen.
- Multiple types of service to choose from: Openrent provides a decent selection of choice for advertising your property. There is a free service which just advertises on Openrent. An ultimate advertising service which advertises on all major property sites, this also comes with a free trial option. Lastly, there is a service that also includes Rent Now which is a service that passes a lot of the work onto Openrent. Services like contract drafting and rent collection.
- Much cheaper than other agencies: If you were to use a traditional property agency to let your property you would have to deal with larger bills for all the services. Openrents affordable (and sometimes free) services make them a much more reasonable option for new aspiring landlords.
HomeToGo is a very large rental platform. It is a site focused on holiday rentals. So it is more appealing if you live in a popular tourist area. With millions of holidays booked through the platform every year you have access to a large audience of potential tenants. There are a lot of reasons to consider using HomeToGo including:
- You can make a lot of money: HomeToGo users are looking for great holidays and great lodging for those holidays. Since they are travelling for fun rather than looking for somewhere to live long term, they are willing to spend more money. You can get multiple rich tenants staying with you each holiday season and really rake in the profits.
- It is easy to get started: HomeToGo has an easy to navigate user interface and listing your property on the platform is very easy. All you have to do is list your property and provide some information and you are set. Depending on your location you could receive offers very quickly after signing up.
- They are partnered with many different online rental platforms: Hundreds of different sites like TripAdvisor, Booking.com, and Homestay.com are partnered with HomeToGo. This means that anyone that looks for a holiday home through these platforms will be funnelled into HomeToGo. Your property will be seen by millions of people coming through these sites, drastically increasing the visibility.