The investment in a second home can be a very big one. Many people buy a second home as a way to have another place to spend the weekend or to get away a few times a year to a luxurious location. For those who are looking for a way to turn this investment into a true moneymaker, there are a few strategies that can work. Each area has different potential, and not every area is going to provide for each scenario. Yet, for those who own a second home – whether it is a single-family structure, a loft, or a condo – there are various ways to increase income from it.
Rent Out a Second Home
One of the most commonly used methods for pulling income from a second home is through rentals. Property owners can rent out their property to another person who wishes to live in it long term. For those who live in a community where rentals are common, this is an easy investment decision to make.
Rental properties can produce a steady stream of income month after month. The property owner needs to determine the proper rent that balances both the needs of the local rental market but also enough to cover the costs of ownership of that second property. This may include:
- Property taxes
- Mortgage payments
- Utility costs to be covered
- Maintenance and upkeep of the property
- Insurance on the property
Rental second homes do require some level of work and effort. Some property owners will elect to do this work themselves, handling everything from cutting the grass to fixing plumbing issues that arise. It is important to realize second homes can be a time investment in this case, and a person may need to be available 24-hours a day to handle these concerns.
A second option is to hire a property management company to manage every aspect of the process. They can also work with the property owner to handle finding tenants for the property, collecting rent, and managing all of the maintenance and upkeep associated with the home. Though this has some cost to it, it allows the property owner to be more hands-off in their management.
Second home rental is ideal for those who want to earn an income and live in an area where the property is desirable. Some markets will have a higher rental rate than others. The key is to ensure the property’s rental cost – what the market will pay for the renting of that home – is enough to cover the costs of ownership and maintenance.
Use the Second Home as a Destination Rental
Another avenue for building rental income from a second home is through a short-term rental scenario. For those who live in a popular tourism area, allowing their property to serve as a rental for visitors is an easy way to turn the home into a profitable investment. Not all areas will have this type of demand, of course. However, destination rentals can be more expansive than many would think. They may include:
- Tourism areas (well-known areas with routine visitors)
- Locations near business districts
- Locations near big cities
- Locations close to oceans, lakes, or other waterfront properties
- Remote areas ideal for camping or hunting
- Destinations near popular conventions or trade shows
In many ways, these types of properties can work well because they provide people with more space and flexibility than the average hotel. In areas where there are many hotels, offering a second home as a short-term rental can be a good idea. It is important to get to know the market well to ensure it provides the type of opportunity desired.
Learning about the rental potential in the community may mean researching those who visit the area. In a small town with fewer visitors, this can prove to be a difficult way to earn a steady income. In larger areas, it can prove to be very easy to do. There are a few things to consider.
For those who are renting their second homes for short term use, there are several options. First, it is possible to market the property and rent it out without any help or support from a third party. This option is likely to be the larger profit producer, but it requires more hands-on attention by the property owner. It is also possible to use a property management company to do this type of work as well.
Another consideration is in finding potential rentals. Some people have taken to using services such as Airbnb. This service allows a property owner to list his or her property for short-term rental (the length can range from one night to months depending on needs). The property owner still is responsible for upkeep and management, but Airbnb (and similar services) do most of the work finding those who need the rental. They also collect payment and handle most concerns.
In areas where a rental property is desirable for short-term needs, second homeowners are uniquely poised to benefit from this. They can pull the property off the rental market any time they desire to use it. More so, they can choose how often to rent. In some areas, where views and location matters, this is a good way to make a sizable amount of money on a routine basis, if there are steady visitors.
Renting for College Dorms
An interesting opportunity for some property owners is to rent out their second home for college dorm use. Many colleges throughout the U.S. need housing for their students. Most often, students stay in onsite dorms, managed and maintained by the college itself. In some communities, there just is not enough college-managed locations. In others, none exists. These are opportunities for second homeowners to produce an income from their property.
For those who own property within a mile of a college or university, especially one that attracts a lot of out-of-state students, setting up the house to meet the needs of a college student can be somewhat challenging. The process starts by understanding any type of local laws regarding student living quarters.
A common scenario is to convert the home’s bedrooms into individual spaces for students to rent. They then have access to common spaces to share with others in the space such as bathrooms, kitchens, and living spaces. There are some concerns about liability risks, and property owners need to establish specific rules for the types of activities and use of the property to ensure they maintain the best relationship with the college.
This type of scenario can produce a routine income during the school year. Some colleges have become more year-round, meaning students attend most times of the year. Others are strictly fall through spring years, which can limit income during the summer months.
For those with a second home who want to use it as a college dorm, it is critical to establish rental contracts and payment agreements in advance. Additionally, these rentals need to be priced properly to remain attractive to those looking to avoid the higher cost of on-campus living, but also take into account a higher risk for damage, cleaning, and liability risks.
Bed and Breakfast Concepts
Another way to produce an income from a second home can be the bed and breakfast concept. This is a more hands-on type of experience (though it is possible to find property managers to handle some aspects of the process). Bed and breakfasts are locations, usually in desirable tourism areas, where a person will spend time at the home while visiting the area. Most often, the home is set up traditionally, breakfast is served to guests, and there are onsite opportunities for socializing, meals, and gatherings.
Bed and breakfast concepts work well when the property owner is committed to providing this type of service to their guests. It can be somewhat challenging, though, for those who just want to be hands-off in earning income. Location is another factor. While it is possible to have a bed and breakfast tucked into a more remote area, it is still critical to have a way to encourage visitors to come into that space. Marketing makes this type of concept possible.
Some people who own a second home may be able to turn that space into an event location. This is often an ideal opportunity for those who have a large swath of land or a farm. It allows for people to visit and conduct onsite training or group retreats on the property. A good example would be to turn a simple home on a large amount of wooded land into an adult camp where businesses can create team-building activities.
There are many other concepts to consider here, as well.
- A farm can become a destination during the fall months for those who want to go on hayrides.
- Tours can be used to explore the wooded lots or the farm itself.
- Haunted destinations can prove to be a tourism-draw.
- Properties with workshops or other interesting features can become a tourist destination.
- Demonstrations can be held on the property.
These are just a few examples. It is important to consider what the property itself offers to provide for some type of attraction in this manner. Location plays a big role, too. Whether the property is just available to those who wish to use it or the property owner runs and manages these events is another important decision to make when choosing to use private property in this type of manner. It is also important to understand local codes and limitations that may be in place.
Run a Business from the Home
Another way to turn a second home into an income earner is to use it for one or more business opportunities. Like with hosting events, there is a wide range of opportunities here, depending on what the property owner wants to explore. Here are some key considerations:
- Run a farm by growing crops and selling them to the community or businesses.
- Provide a professional service (if licensed and legally allowed to do so) to the community.
- For those who are handy, a repair shop can prove to be a good way to earn money from the property.
- Use it as a craft workshop to create interesting and desirable products to sell to others.
- Run a daycare center out of the property after converting it to a usable space.
It is very important to work with local government agencies to ensure this is done properly. Many people will find home-based businesses rely on talent and hard work to be successful, but there are many routes of potential opportunity to consider here.
Turn It Into a Storage Space
Not all properties are in a desirable condition to rent out. Or, the property owner may not be interested in really managing a large group of people coming into and out of the home. That is where this option can play a role.
Turning a second home into a storage space allows the owner to rent space to those who need it and earn an income from doing so. Often, homeowners want to have a safe place to store their belongings, but they are unable to keep those items within their own homes. This provides an income-earning opportunity.
For those who want to earn more, it may be possible to build larger outbuildings to store larger items, such as RVs, boats, or other high-end items for others. There is a need to secure permits for this type of work. Having liability insurance for this type of business model is also important.
With a wide range of opportunities available, many people with a second home can turn it into a profitable investment. It is always important to consider local laws and proper insurance for any type of property based on how it will be used. Yet, for most people, there are many ways to take a simple second home and turn it into an income earner producing routine income.