You’d be surprised how you can generate rental income from your primary home. Many new and existing homeowners with a mortgage in Canada are facing a historic market correction that will cripple the market.
Today I wanted to discuss ways to generate extra money using your home. There are both pros and cons to generating rental income, which I want to discuss today.
When this happens, homeowners who overpaid for a house due to a seller’s market will owe more than the home is worth. Over the past two years, there was no shortage of ridiculous home prices in Canada, but people bought into it.
Some homeowners took the money and ran or poured their equity into a bigger overpriced home. Doing so will likely lose some or all of the money when the market correction happens.
Couple this with rising food costs, utility and transportation costs and Canadians will feel a financial tug. It is massive for some and not so much for those who own a home without a mortgage.
Even so, everyone still has to pay for increased prices on just about everything in Canada due to inflation.
Late Mortgage Payments
Being house poor is not something anyone signs up for; however, not all buyers consider the costs of owning a home. There’s more than a mortgage to pay when you buy a house, so don’t walk in blindly to the biggest purchase of your life.
Plop new or existing debt on a mortgage, and you’ve done a banana split.The ice cream might melt faster than you can eat it, and before you know it, you’ve wasted time and money.
If you’re unable to meet your monthly mortgage payment, you have options.One of those options laid out in your mortgage agreement could be one missed mortgage payment allowance. Let your bank or mortgage lender know you’ll need to use your lifeline as you are short on money.
Don’t wait until the day your mortgage payment is due to find out if your policy covers a missed cost. You’ll need to get to figuring out how to increase your net income or face potential mortgage default. Nobody wants that to happen and have their mortgage company take possession of their home.
Types Of Insurance For Homeowners
If a homeowner does not put in a 20% downpayment, then mortgage loan insurance is necessary by the Canadian Housing and Mortgage Corporation (CHMC). However, if a homeowner defaults on a payment, the mortgage insurance is for the lender and not the homeowner.
Mortgage life insurance, on the hand, is optional and will pay down a mortgage or what remains in the event the homeowner dies. Term life insurance is the option we chose when we bought our first home, which pays the beneficiary the total amount of the house.
Home insurance covers you and your family; however, if you rent a room, basement apartment, or other parts of your property, you must inform your insurance company. Every insurance company is different, as are their policies, so it’s best to shop around.
Your home insurance company may deem your home a business while using parts of it as a rental. If the homeowner is generating income from the home or property, you need upgraded protection with a different insurance policy.
The downfall for homeowners is that their insurance company will have a potential price increase.
Rental Income Could Be Your Answer
The good news is that you may generate more rental income than increased insurance premium costs. In the situations below, before jumping in and listing your property for rent, it’s best to talk to your insurance company first.
If you are a tenant who rents a room or apartment in a home again, it’s best to talk to an insurance company. Although tenant’s insurance is not mandatory, I encourage anyone who rents to buy this insurance in the event something happens while living in the home.
Ways To Generate Rental Income With Your Home
Now to the fun part, where I discuss some cool ways to earn rental income with your home. As mentioned above, before you engage in any of the ideas below, you must talk to your home insurance company.
It pays to be truthful with your insurance company because if someone is hurt or dies on your property, your policy may not cover it. You can also get sued if something of this nature happens, whether you have the proper home insurance or not.
I’ve discussed over the years that we did rent rooms in our house, which in hindsight was great for the money but not the bother. Having someone in your house means putting a lock on your bedroom doors and valuables in a fireproof safe.
The most lucrative room rental was the one-month homestay from Red Leaf Canada, which has students who come from overseas. Although the money was tax-free, we still needed to inform our insurance company, so they were aware.
It was an educational experience for the child and our family and was a fun time for all. A room rental can fetch up to $1000 a month or more, depending on where you live in Canada.
If you have the space in your garage to accommodate a vehicle, you could capitalize on the space to earn rental income. Most vehicle owners looking for garage storage do so because the car they own is vintage or valuable.
Be sure to consider the costs of your home insurance and vehicle insurance company. Consider if a vehicle renting space in your garage is stolen from your and the owner sues you.
If your insurance company is not aware of the arrangement they won’t cover it. When this happens you may have to pay out of pocket based on the court ruling. Some homeowners own farmland and allow RV storage over the winter for a fee.
It’s a great way to earn rental income from a large property or farmland, provided your insurance company allows it.
During the winter months, when cities need vehicles to be parked in a driveway so the snowplow can come through is a great time to rent your driveway. You’ll find no shortage of people who need a driveway to park their vehicle, mainly when city by-law officers will issue a fine.
The downside is that you will have an extra vehicle in your driveway. How much should you charge to rent a space on your driveway? It depends on how it will impact your house insurance, but typically I’ve seen $100 a month as reasonable.
If you’re fortunate to have a large kitchen with lots of space to bake or cook, you can rent your kitchen. Selling food from home is another way that people can earn money on the side.
In our area, you can buy spring rolls, roti, and kimchi from an array of cultural cuisine. How much money should you rent for your kitchen space?Again, talk to your house insurance agent to see policy and price changes if allowed.
Ensure you’re still covered if your kitchen renters burn your house down that. Always ensure that you have a fire extinguisher and smoke alarms in working order in the space.
For homeowners with a more oversized backyard, why not rent it to someone who wants to host a party. The type of party I’m talking about is a bridal shower, retirement party, baptism party, birthday party etc.
Keep your neighbours in mind if you plan to earn rental income this way, so you aren’t disturbing them.
A pool party is a tricky way to earn rental income, especially with the odds of potential drowning or slipping. Your insurance company can give you the go-ahead to earn rental income on a seasonal basis.
Mrs. CBB and I were at a pool party last month, a rental pool in the back of someone’s yard. The renovations to the yard cost the owners $250,000, and they rent their entire yard and pool by the hour.
Out front is a portable washroom, so nobody needs to go into the home, a first-aid kit, floatation devices, and life jackets. Most people who rent the pool do so for private swimming lessons and pay $65 an hour plus the cost of the trainer.
The downside is that it’s not your home.
Gardening Space Rental
We participate in a community garden on city property where the water is free, but we still have to pay for the plot of land. For one plot, buyers pay $40, which includes the city water and free compost. With any extra money, the volunteer who organizes the garden purchases soil and other plants such as flowers and berries.
These community garden plots get taken very fast each year, so if you don’t get a space, you’ll have to source another. Homeowners with big backyards that are not used for a garden may want to earn rental income.
When doing so, things are the increased water cost, grass removal for a garden, privacy, and higher home insurance costs. If you have a rain barrel to offset water costs, you may want to keep that for personal use.
Overall Thoughts On Rental Income
If it were us and we were struggling to pay the mortgage, bills, debt and other essential needs, I’d consider it.It may seem more hassle than it’s worth and you’re right it can be a pain in the backside.
What it would boil down to for us is how bad we are in trouble financially. Also, if our house insurance does not cover what we plan to earn rental income from then, it’s a bust.
It’s important to consider all aspects of earning rental income with your home and insurance company.
Article By: Mo CanadianBudgetBinder