As more people are exposed to the business world, the idea of becoming an entrepreneur and working towards your own business has become more appealing. You find yourself working your 9-to-5 but would like more, maybe even just another income stream. Your home could become a business venture by becoming a rental property.
Investing in rental property has become a new starting place for entrepreneurs. If you find yourself interested in pursuing this opportunity there are several options. Purchasing a property for the sole purpose of renting it out, participating in house hacking, or by investing in alternative real estate: each of these options could be great starting points but will depend on the needs of you as the investor.
Purchase a Rental Property
If you decide to purchase a rental property, the assumption is that you currently own the home you live in. As a homeowner you’ve likely been through the process of purchasing a home before. Purchasing a rental property is similar to your initial homebuying process. You must consider the type of structure you’d want and could afford for a rental. First time homebuyers get a lot of opportunities with loan options and lower down payments, this would no longer be available to you. With less loan opportunities, you would have to assess whether you could handle two mortgages in the event the property is vacant for an extensive time.
Once you’ve established your ability to handle financing the rental, you need to consider a location and property type that would be attractive to renters. When thinking about future tenants, evaluate whether you’d like a property management company to maintain the property or if you’d prefer to do all the vetting and rent management yourself.
No matter your decision to use or not use a property management company, it is important to confirm the recent financial and criminal background of your tenants. It doesn’t matter how much rent you expect to receive from tenants if they aren’t reliable. Unreliable tenants could make your rental a burden instead of a passive income stream.
Become a House Hacker
House hacking is similar to purchasing a rental property, but differs in the fact that you would be living in part of the property. There are multiple ways people decide to go about this. It can be done by purchasing a multiplex or duplex to live in one unit while renting the remaining units out. Another way this could be done is by purchasing a single-family home and getting roommates to pay you rent. Either way, you could have your tenants paying your mortgage, lowering your own monthly expenses.
If you’re interested in having a multiplex, consider the amount of initial capital you would like to spend. Also research what would be best for your location. This is key since some states and cities have better opportunities for this type of house hacking than others.
House hacking would require you to go through a more strategic homebuying process which deters some. However, if you are a first-time homebuyer you could benefit from this real estate strategy with preferential loan and down payment options. As long as you don’t mind tenants being your roommates or neighbors, this could be a potentially cost-effective step for growing a real estate business.
Invest in Alternative Real Estate
Not ready to make a big investment into an entire property? You can research opportunities to invest smaller amounts of capital while receiving a portion of the profit. A great way to do this would be through alternative real estate investments. There are various sites to begin your alternative real estate journey. Whether you currently own a home or not, sites like YieldStreet and Fundrise make real estate ownership as easy as stock ownership.
Depending on your level of comfortability, your upfront costs can be as little as $1,000. Fundrise allows an investor to choose between four different account types ranging from $1,000 to $100,000 minimum investment. Whether you pick the basic or more advanced level, you can pick the types of properties you invest in. From your investment you’ll receive a portion of the monthly rental income like a dividend. Alternative real estate is a newer avenue, but with the ability to control your level of investment it could be a great opportunity.
Whether through full or partial homeownership you can turn a piece of real estate into passive income or a profitable business.
Have any experience with real estate and rental properties? Share your experience in the comments below.
This article originally published on GREY Journal.https://greyjournal.net/hustle/grow/how-your-home-could-become-a-business/