The rise of Airbnb has taken renting to a whole new level. Extra income, real estate opportunities, and the luxury of travel is now all wrapped into the ease of a phone app. While the majority of real estate owners tend to rent out their entire property, renting a room, finished basement, or detached guest house can have the same financial rewards.
But how many homeowners actually rent out their space while still living in it?
According to a recent study by Homes.com, a whopping 74 percent of homeowners said they rented out their properties for some extra cash. A third said they were in it for help paying their mortgage and 22.4 percent rented to pay property taxes.
While most hosts rented out a spare bedroom, over a quarter of homeowners rented out their finished basement. Detached guesthouses and garage apartments were also up for grabs, but only 16.6 percent and 13.5 percent listed those spaces, respectively.
Rental apps and listing sites make the renting process look easy, but for the majority of hosts, it entailed much more than a simple post. Over 63 percent of homeowners said they had to do some home updates before they were ready to rent—the most common being painting. On average, updating the paint cost owners $615.81, but flooring updates—which 51 percent reported completing—cost an average of $1,062.
Home updates can get pricey, especially when more than one room needs some TLC or significant structural changes are necessary. However, minor, less expensive renovations can increase the value of a home, and for renters, the price tag of readying a rental seemed to pay off.
Long-term rentals earned hosts an average of over $1,000, while short-term rentals put over $800 in their pocket, on average. Considering their profit amounted to more than half of their mortgage, home modifications may be a worthy investment.
Renting Without Regrets
While renting can be financially beneficial and a relatively easy side hustle, there are risks homeowners should consider before taking the plunge. Any income made through renting is taxable, and if renters don’t consider the long-term hit, they may undercharge for rent.
In fact, the Homes.com study found that the most common regret among homeowners was charging too little—33.5 percent said they wished they charged more. On top of standard payments, homeowners take the chance of having their property damaged by renters—or worse, an unruly renter who doesn’t want to leave.
While homeowners seem to be aware of the risk, with nearly half finding tenants through friends or family and performing interviews, some still had regrets. Over 17 percent of homeowners said they wished they spent more time screening potential tenants, while 15.6 percent and 13.8 percent said they wished they formed better relationships with the tenants and conducted background checks, respectively.
Turning Your Home Into a Side Hustle
As with every other business, the risks are something that homeowners just have to take. Fortunately, less than one in four homeowners had regrets about renting their space and an impressive 80.5 percent had a positive experience doing so.
Turning an extra room or guest house into a money-earning asset seems to be worth it—and the growing industry is proof.
Are you considering renting some or all of your home on Airbnb or similar sites? Or have you done so already?
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.