Many people feel more secure when they have several streams of income. In the event of a job loss, illness or other life event that keeps one away from traditional work, a second form of income is a good way to continue to bring in money, even if it's less than usual.
One good way to do this is by owning rental property. Owning a home and renting it out can be a regular source of income, with the added benefit of having a secure investment.
Renting out a home has benefited many people from many different backgrounds. According to Forbes, parents benefit from buying a house in a college town because they end up saving money if their child lives in the house rather than the dorms. U.S. News & World Report explains retirees enjoy owning rental properties because it creates some revenue for them during retirement.
There are several ways to handle a rental property, each of which has its own unique benefits. However, for nearly every argument for owning a rental property, there is an argument against it. Different types of rental property have different pros and cons.
Renting a vacation property provides a cheap way to get away when no one is renting the house, according to U.S News & World Report. Owning the home means there is a permanent place waiting for its owners any time they want to visit their favorite vacation spot. When they aren't there, they simply rent it out to other travelers who want to experience the area without spending their time in a hotel.
However, there are added sources of stress that accompany vacation rentals. If the owner does not live nearby, it is difficult to stop by to check on the house and do repairs. According to U.S. News & World Report, owners of the property will have to build relationships with people who can respond to emergencies or repair needs quickly and correctly. Or, owners can hire a management company or resort rental program, which will charge a fee for its services.
There is also the issue of renting in the offseason. Certain areas are popular during specific times of the year; Colorado attracts skiers during the winter, while beach side rentals bring in vacationers throughout the summer. During the months tourists aren't drawn to the town the home is in, it can be difficult to maintain the revenue stream. Even if it does get rented, it will likely be for a lower cost. However, the costs of the house don't end when vacationers stop traveling.
Most people looking for a vacation rental check two main sources to find a place: Airbnb and VRBO - Vacation Rentals by Owners. Both services collect fees for their advertising.
College students are one segment of the population known for renting houses and rooms. According to Forbes, some parents buy homes near Ivy League schools years before their child is planning on attending college.
"Their goal is to eventually move into the home once the child has graduated," Ed Feijo, a sales associate with Coldwell Banker Residential Brokerage in Massachusetts, told Forbes. "We also see buyers who are thinking of the properties as long-term investments, with plans to rent out the property once their child is finished with college."
During the years the child isn't attending college, the parents can fix up the house and rent it out to current students. According to Rent Jungle, a two-bedroom apartment in Cambridge costs an average of $2,688 a month. That is revenue that can be counted on during those years. Then, when the student begins to attend school, the parents saves the money they would have otherwise spent on housing.
Dan Gooder Richard, a real estate industry expert and author of several books on the topic, told Forbes there are three things parents should keep in mind when investing in property in a college town. The house or building should have several extra bedrooms to rent out, off-campus housing should be popular in the area to drive rent prices up, and owners can count on needing to do repair work.
Of course, there are downsides to renting out a house in a college town. If parents live in the town itself, they can probably maintain the home and find tenants themselves. But if they live out of town, they may need to either give some of the responsibilities to their child living in the house or hire a management company.
Renting out a property, whether it is full-time, like in a college town, or part-time in a popular vacation spot, can be a lucrative and rewarding investment. However, before buying a second home, buyers should look at the pros and cons of being a landlord. If the cons don't seem so bad and the additional stress is manageable, renting out a home could be a good way to bring in additional income.