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Passive Income | Make The Most Out Of Your Housing

Individuals overthink opportunities for supplemental income, when there are numerous ways for passive income at the foot of their home!

Why Invest in Your Living Situation?

Owning a home allows you to build equity over time. According to The Mortgage Reports, the average borrower gained an impressive $298,000 in home equity in 2023, which was a historical high!

Several strategies can turn your living space into an income stream. Renting out a spare room, a basement apartment, or even a parking space generates passive income. In turn, this offsets your housing costs or boost your savings. For example, Zillow Rental Market Report, 2023 reported that the median US rent price hit a record high of $2,029 in February 2023! Depending on various locations, your prices may be lower or higher.

Owning a home comes with tax benefits like deducting mortgage interest and property taxes, which largely reduces your taxable income. The National Association of Realtors estimated that the average homeowner saved $3,873 in federal income taxes in 2022 due to mortgage interest deductions.

Strategies For You

(For Renters)

  • House Hacking – “House hacking” is a situation where you live in a multi-unit property and rent out the remaining units to cover your own rent. While not always feasible, house hacking has potential to be a powerful strategy, especially in areas with high rental demand.

  • Negotiate Rent Increases – Don’t be afraid to negotiate rent increases with your landlord. 36% of renters were successful in negotiating a lower rent increase in 2023. Thus, negotiation may save you money over time.

  • Choose Strategic Locations – Areas with high rental demand and potential for appreciation should be prioritized. Through research, I would check out areas with growing job markets or upcoming development projects. Consequently, this might increase your property value if you decide to buy in the future.

(For Homeowners)

  • Maximize Your Space – Honestly, unused space is a waste of space. So, why not rent out a spare room, basement apartment, or unused space? This will generate income to help offset your mortgage payment.

  • Energy Efficiency Upgrades – Utility bills are ridiculously expensive nowadays. That being said, invest in energy-efficient upgrades like solar panels or smart thermostats. Consequently, such improvements can lower your utility bills and potentially increase your home’s value when you sell.

  • Smart Home Technology – Similarly, smart home technology can improve energy efficiency and even potentially lower your homeowner’s insurance costs.

  • Location, Location, Location! – Again, when you consider buying a home, prioritize a location with a strong track record of property value appreciation. School districts, proximity to amenities, and job markets all play a role in long-term value.

It’s Not All About Money…

Investing in your living situation isn’t just about financial gain. Psychological success includes…

  • Increased Stability – Owning a home or living in a rent-controlled situation provides increased stability and a sense of security.

  • Improved Quality of Life – Investing in upgrades that enhance comfort and functionality will improve your quality of life at home.

  • Sense of Community – Finally, life in a desirable area with strong relationships with your neighbors can foster a sense of belonging.

What Did You Learn?

There’s no one-size-fits-all approach. The best strategy depends on your financial goals, lifestyle preferences, and risk tolerance. Always consult a financial advisor first so you have help in determining the best path forward.

By being proactive and strategic about your living situation, you can turn your roof over your head into a valuable asset, contributing to long-term financial security and overall well-being.

So, what did you learn?

What was most valuable for you?

Let’s discuss below! Thank you!