When you buy a home, you are not just purchasing a place to stay. On the contrary, as your life changes, the way you use your home should change as well. These days, people tend to stay put a lot less than they used to. So, while it was normal for Texans to live in the same house for decades in the past, things have changed.
2020 has been one wild ride, and difficult on landlords in particular, with people having to make the choice of whether to give up on significant income or evict tenants during a pandemic (or both!). However, most of the time, renting out property in Texas is an excellent and stable way of making money.
Many Texas cities offer more affordable housing than the rest of America. Although that means you cannot charge as much as landlords in New York might, you probably have much lower mortgage payments and a cheaper cost of living. Rather than limiting your earning potential, this ensures you are better able to keep up a relationship of positivity and fairness with your tenants.
There are a number of opportunities when it comes to making your home into a business. You can rent out a cottage on your property, rent out your entire place while living elsewhere, or simply list a room in your home on Airbnb.
Whatever choice you make, there are some things you need to know before turning your home into a business. Take into account all of the following.
Be ready for work
Renting out a home is generally called passive income. However, this makes it sound like you won’t have to do anything once you have tenants. This couldn’t be further from the truth.
While you won’t be working full or even part time to keep your tenants happy, you will need to be on the ball at all times. There is always a chance that something will go wrong, and there will be things that go wrong no matter how well you’ve prepared your home. This is especially true in a state like Texas — the particular climate of many cities has specific implications for maintenance.
It is up to you to take care of these issues. You will need to see to maintenance and repairs, as well as security problems. You will also need to be aware of your tenants’ behavior, to ensure you keep your property safe.
Renting out your home is a great way of making money, but it will require work and you will need to be available.
Consider Texas-based renters insurance
You no doubt have insurance on your property. Without it, you are putting your finances at significant risk. However, you should consider requiring your tenants to take out renters insurance.
Renters insurance covers a tenant’s possessions. When your tenant gets renters insurance Texas, they will remain financially stable even if they incur sudden and significant losses. Accidents won’t derail their ability to pay rent and your income remains secure.
That said, even if you have insurance and your tenant has renters insurance, you should still have cash on hand at all times. If something goes wrong on your property, you need to take care of it promptly. If you have no disposable income, you may not be able to meet your responsibilities.
You must make sure you hold onto the tenant’s security deposit. It can be tempting to see it as available income, but it is there for a purpose and should only be used for that purpose.
Scaling up as a Texas property owner
There are people who earn a lot of money from renting out property. However, if you want to be one of these people, you will need to scale up. Property that you own can become your main form of income, if you are able to spend on a range of properties. While one person’s rent is not going to make you rich, especially in an affordable Texan city, a building full of tenants can.
Is it worth renting out your home if it’s not going to make you rich? That depends. It is a great way to pay off your mortgage if you already have a place to stay (or if you are only renting out a room). On the other hand, if you are renting another property to live in, your net income will likely be negligible.
Scaling up is how you get rich, but that does not mean you won’t make money renting out just one property. The key is to be savvy, calculating what expenses renting will create.
Your own home can become a source of income. Do your due diligence and ensure that you have what it takes to make extra money in the Texas property market without it causing more strain than it’s worth.
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