If you want to create income streams with little ongoing work and time involved then you need to find ways to make money passively. With passive income you can literally earn money while you sleep. There are many methods for generating passive income, one of them being through rental income. In this post we’ll take a closer look at how to make income from rent.
What Is Rental Income?
Rental income is income generated by allowing others to use something you own in exchange for a rental fee. This is probably most common with property, where tenants pay rent to their landlord in exchange for living in the property.
It is possible to produce passive income from rent. That is with no active work or time commitment involved in order to receive a financial return. And rental income accrues from such a wide variety of assets, especially thanks to modern technology. We’ll look at some methods for creating rental income streams below.
Advantages Of Rental Income
There are many advantages to rental income, which is why many people choose to create their own rental businesses. Firstly, it can provide a consistent and predictable stream of recurring income, which can be used to cover expenses and/or save for future goals. Additionally, rental income can be used to build equity in a property and generate a return on investment.
Rental income is also a great way to diversify one’s income portfolio, as it is not subject to the same volatility as stock markets or other investments. This makes it an ideal way to reduce risk and create stability in one’s financial life.
Finally, rental income can provide tax advantages. In many cases, rental income can be sheltered from taxes through deductions and other strategies. This can result in a lower overall tax bill, which leaves more money in the pockets of the rental business owner.
Downsides To Starting A Rental Business
There are a few disadvantages to rental income that you should be aware of before creating your own rental income streams. Firstly, rental income is often not as stable as other forms of income, as it can be affected by things like tenant turnover and maintenance costs.
Secondly, you may be responsible for paying taxes on your rental income, which can eat into your profits.
Finally, being a landlord comes with its own set of responsibilities, such as dealing with difficult tenants and maintaining the property and equipment.
How To Create Rental Income Streams
Almost any asset you own can be rented out to others in exchange for money – both digital and physical goods. Modern technology and apps have made it easier than ever to create rental income from the things you own.
Earnings from letting out property is one of the most common ways to produce rental incomes. This can include both residential properties like houses and apartments or commercial property like warehouses and office buildings.
Popular apps like Airbnb make it easy to let out anything from apartments, houses and spare rooms to unique spaces like campsites and treehouses. If you have any type of spare real estate then you could let this start generating you an income.
There are many advantages of rental income, but the three most common reasons people invest in rental properties are:
- To generate passive income – Rental income can provide a consistent stream of income that can help to supplement your other income sources.
- To build wealth – Over time, rental properties can appreciate in value, providing you with a valuable asset that can be sold for a profit in the future.
- To diversify your investment portfolio – By investing in rental properties, you can diversify your investment portfolio and reduce your overall risk.
Don’t have any property of your own to rent out? You can still make passive real estate rental income by investing in REITs. A REIT is a real estate investment trust. It is a company or fund that invests in income producing real estate assets. This could be either residential or commercial property. The rental income the real estate generates is paid to shareholders as a dividend.
Learn more about how REITs work.
Do you have any spare office space? This is also something you could consider renting out. Small teams and start-ups require office space without locking in to long term lease agreements.
Apps like Liquid Space solve this issue by allowing easy, flexible rental of office space. This can be desk space, conference rooms or an entire office. You choose what you want to share and for how long so you are not tied into any long term contracts.
We’ve already discussed renting out property but you can also monetize your storage space. This includes garages, parking spaces, warehouses and any other storage spaces.
Use apps like Neighbor to let out your spaces. They keep you protected by giving you insurance for the items you are storing. You also get to control what you store on your property.
Rental income is not just reserved for physical assets. You can even rent out your unused internet connection with apps like Honeygain. This is a true passive income stream as you simply install, choose how much you wish to share and leave to run in the background.
They use this internet connection for technical and research purposes such as data scientists and web security to improve processes.
For many people running their own car is expensive. Especially if they only require it for a few short journeys it might not be very cost effective. Car sharing services provide the convenience of short term car rentals at low costs for the customer.
Use apps like Getaround to create your own car sharing business. Whether you have one single car or a full fleet of vehicles you can list them here and get paid for sharing.
Do you have a bike sat in the garage gathering dust? Well this too is something you can rent out. Spinlister is a bike rental and sharing service connecting ride owners with borrowers around the world.
Whilst primarily a bike rental app, you can also list other things like skis, snowboards and surfboards. If you have these type of items sat around the house you aren’t using then put them to work earning you an income.
Baby equipment is another in demand area for rentals. There are many instances when families would prefer to borrow equipment such as travelling. It can save a lot of hassle and space not having to pack lots of extra items and makes sense to borrow for a short time period. You can set up your own baby equipment rental service using sites like BabyQuip.
Luxury goods include items such as high end clothing, handbags, watches, jewelry and accessories. These are exclusive items that are highly sought after but very expensive to own. This makes them the ideal products to create a rental subscription business from.
Subscription boxes are a good way to capture customers in this niche. The idea being they pay for a monthly subscription and receive one high quality designer item to wear. They then return it in exchange for a different item the following month.
This is a more active type of business but can prove quite lucrative. Learn how to start your own rental subscription business.
Create Your Own Rental Income App
Got an idea for starting a rental business? Why not create your own rental business based app? It’s easier than ever now thanks to no code app builders like AppyPie.
Other Ways To Make Money Passively
Rental income can form part of a diversified income portfolio in several ways. For example, an individual can own a rental property outright and receive rent income from tenants. Or, an individual can participate in a real estate investment trust (REIT) which owns and operates income-producing real estate and distributes a portion of the income to shareholders.
Other alternative types of income sources individuals can use to help further diversify their portfolios and make passive income include bonds, dividend-paying stocks, and peer-to-peer (P2P) lending. Each of these income sources has different risks and return potentials, so it’s important to consider how they fit into your overall investment strategy.
For example, bonds tend to be less volatile than stocks but may provide lower returns over time. Dividend-paying stocks can provide both income and the potential for capital gains, but their prices can fluctuate sharply. P2P lending can offer higher returns than some other investment options, but it also involves more risk.
Check out these 21 types of investment assets to grow wealth.
Rental Income Conclusion
Rental income is the fee you receive when you allow others to use something you own. This could include anything from property, vehicles, equipment and digital assets.
Renting assets out is a good way to produce an income from spare items you already have but don’t use. This could be anything from spare rooms, bikes, cars, parking spaces and even your internet. Many of these provide for a good source of passive rental income.
Rental income is just one of many different income methods you can use for passive income streams. Find more on our blog including the following articles;
- Why you need multiple sources of income
- 50 ideas for building online income streams
- 7 tips to help balance multiple streams of income
Please join our newsletter to keep up to date with all our latest helpful financial content.