How to Create Multiple Streams of Income From Real Estate
Now may not be the best time to think about flipping homes to make a quick buck, even if you know what you’re doing, but that doesn’t mean you can’t find a multitude of ways to mine the earning potential from any property you purchase. As you probably know, real estate is an excellent investment, and now is a great time to buy a first home to use as your personal residence. With rock-bottom prices you can get a truly magnificent property that would have been well out of your price range a few short years ago. You’ll get to write off the interest you pay and down the line, when the housing market recovers, you’ll make a killing on resale. That said, there are tons of ways to make money off your real estate in the interim. Here are a few streams of income you might not have considered.
- Rental unit or property. If the house you currently own has a granny flat, which is to say a totally independent dwelling unit (with separate entrance and amenities like a kitchen) in your basement or as a stand-alone structure on your property, there’s no reason you shouldn’t be earning some passive income by renting out the space. Or if you’ve got the cash and credit available to purchase a rental home in addition to your primary residence, you could make enough to pay the mortgage on the second property and then some. Of course, you won’t get the same tax breaks on additional properties, but your renters will virtually buy them for you.
- Bed and breakfast. Another option, and a good one for empty-nesters or retirees looking to earn some additional income from the many empty rooms in their homes, is to open a bed and breakfast, or simply list rooms for rent on a site like Airbnb. If you’re not committed to the idea of having full-time renters, just let rooms on the weekends. You can charge a fair amount, provide breakfast, and have your house to yourself again by Monday. The only hitch is that you may have to check with your zoning board in order to procure any necessary permits to operate.
- REITs. You may be understandably hesitant to allow strangers into your home, even if it means a little more cash in your coffers. But don’t fret; you can still invest in real estate, albeit in a more hands-off manner, by joining a real estate investment trust (REIT). These funds pool money from investors and use it to purchase real estate, either private or commercial (or both). Properties are then rented or sold and dividends go to investors. The best part is that such trusts are required by law to funnel the majority of earnings back to investors annually, so you stand to see solid returns on a well-managed real estate investment trust.
- Farming. The structures on a property are not the only thing of value; the land itself has inherent worth, especially if it is suitable for farming purposes. Those who have acres of land to spare can earn some money renting it out to local ranchers looking for a place to grow feed for their livestock, just for example. And depending on where you live and how much of your land is allocated for farming, you could just nab a major tax break in the process. Even if all you have is a half-acre lot, you might put it to good use growing an organic veggie garden and selling fresh produce (or canned and jammed items) at the local farmers market.
- Commercial property. There are all types of investment property that you can look into, but owning commercial property could be a great way to earn a hefty passive income. If you get a good location you can charge top dollar to lease space to local businesses.