I got a reader email today that was such a great topic I had to share with everyone. In the interest of keeping him anonymous, let’s call him Homeowner Hank. Here is Homeowner Hank’s email:
My sister showed me your blog recently and I have learned a lot from reading it. I have a long way to go to get better at managing my finances and am not the most organized person in general. My current situation is I have a house that is paid off but no job. It is still expensive to live and I don’t like having a negative cash flow. Should I perhaps rent it out, or even sell it? Thanks, any thoughts are appreciated.
First thing’s first. This guy has an awesome sister. Second of all, he has great taste in personal finance blogs.
More importantly, he’s honest about his organizational and financial shortcomings, and wants to improve his current situation. Way to go Hank!
Remember, I’m not a financial planner, lawyer, advisor, or anything else official; I’m just a guy with a website. I’m happy to share my opinion but the real decision is up to YOU Homeowner Hank!
Don’t Sell The House
If you want to generate positive cash flow, selling your house isn’t going to help you do that.
It will give you a big sum of money, but your cash flow problem will get even worse when you start paying rent or a mortgage for a place to live. I’d recommend keeping the house as long as you can, and only consider selling if you find yourself in a financial situation where you can’t pay your bills and don’t have other options.
Get More Information Before Renting Your House
You’ll want to determine how much income you can get from renting your house, how much it will cost you to live elsewhere, and how much time/money it will cost to become a landlord.
I’ve never owned a property in my life so I honestly don’t know enough about how it works to give you good advice one way or the other. If you want to explore doing this further I’d recommend you talk to someone who has done it before, like Paula at Afford Anything.
Consider Renting a Room
If you want to generate positive cash flow but don’t want to find a new place to live, your best bet might be renting out a spare bedroom. This is the first option I would explore.
If you have a friend or family member you wouldn’t mind living with, ask them if they want to rent out your spare bedroom. If you don’t know anyone who needs a place (or would prefer not to mix family/friends with business), you could find someone on a site like http://www.easyroommate.
This option allows you to keep your house and still generate income from it. It all just depends on if you are comfortable living with a roommate.
Find a Job
I’m sure you’re already looking and I don’t want to insult your intelligence by offering such an obvious solution. However, I don’t think any one of the options above (renting out the entire house or renting a single room) is going to give you enough money to generate positive cash flow.
Either finding a job or starting your own business is the most likely long term solution to your money problem.
Good luck Homeowner Hank!
Readers: Do you have any advice for Homeowner Hank? What would you do in his situation?
Carnival Links
Canadian Finance Carnival at Canadian Finance Blog
Carnival of Financial Planning at Frugal Zeitgeist
Yakezie Carnival at 20 and Engaged
Carnival of MoneyPros at Sweating The Big Stuff
Carnival of Retirement at Money Q & A
Financial Carnival for Young Adults at 20’s Finances
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
Renting your home is always an option, but not everyone is cut out to be a landlord. There are a lot of factors to consider before jumping into the deep end.
I would sit down and figure out all your “fixed” costs (water, gas, electric, insurance, etc). Then while looking for a full time job I would do my best to find a part time job(s) to cover those expenses. While this may not be cash flow positive, it may keep you from being negative.
This time of year there are going to be plenty of seasonal choices. You could do taxes (which will help you learn about how taxes for rental properties work), do yard work.
I know things probably don’t look great right now, but I know having no housing payment makes things a lot easier for the old lady and I. It allows flexibility.
I know this all sounds overly simple, but you have to start somewhere. Good Luck!
Afford Anything link is busted.
Thanks JP. It’s fixed now.
I rented out my house when I decided to downsize. I talked to a realtor friend who could tell me the appropriate rental for my home. I rented my home to a really nice family for two years. During that time I bought a townhouse and cut my expenses in half.
I would suggest getting a job first. While doing this, determine whether or not he enjoys his living situation or wants a roommate. If he doesn’t want a roommate, then consider looking at renting out the house. In order to do this, you need to see what your expenses are and what you can rent the house for. For me, I’ve just started renting my house out. I’m renting it out above market rate simply because it is in such nice condition.But, you have to be OK with the renter possibly destroying your house. While the horror stories only happen 10% of the time, you need to spend the money to get yourself protected (a solid lease agreement, umbrella insurance, etc) i case something happens. Also realize that a lease won’t allow you to simply kick out a renter if they miss a payment. It helps to get them out faster, but the renter is the one with the rights – even with a lease agreement.
Thanks for recommending me! The “real estate” button on my site has tons of info, personal stories, numbers, etc. on renting out a home, so I’d encourage people to check it out. Like you, Kevin, I’m not a “certified” anything, I’m just a girl who buys houses and then rents them out to tenants, and I’ve made a nice bit of money doing that. It’s nothing too extravagant, but it pays my basic costs and allows me the freedom to be self-employed without worrying about my bills.
I like the idea of renting out a room. If you own the house in full, then why not use that luxury to help generate income. An extra $400 to $600 a month would be awesome, and would help to quickly cover housing costs, and other cash flow issues.