When Jule Zacher, a 48-year-old software consultant, decided to take a new job in Silicon Valley last September, she was both elated and torn. The new position was terrific, but it meant leaving behind “a quintessential Toronto home, a beautiful house and yard that I had redone from top to bottom.”
At first, she thought about selling, but quickly realized she could make more money by renting it. “I can save that as a retirement investment, and defer any tax implication,” she says. She found CHBO, or Corporate Housing By Owner, a website that charges property owners a $279 fee to advertise to corporate relocaters. Within two weeks, she had a six-month lease with a tenant paying $5,000 per month, covering her expenses while she builds her new life in California.
Add Zacher to the growing list of accidental landlords. Some rent their homes outright, or just their basement; others are taking in boarders. What they have in common is that they’re suddenly sizing up their abodes as a source of cash, not just a place to put their feet up and watch Dancing with the Stars.
Renting Your House
For many, offering a home as a furnished corporate rental is ideal, says Kimberly Smith, founder of CHBO:
There are plenty of takers. “People don’t understand how big a need there is for this kind of housing,” she says. “There are 100,000 travelling nurses at any given time, for example, while the Department of Defense moves 600,000 people around per year. There are divorces. Lots of people need short-term rentals.”
You don’t have to get rid of your stuff. Since these rentals are furnished, you eliminate the hassle of storage. (Many owners lock their valuables and knickknacks up in an owner’s room or closet.)
You get good tenants. Renters in this category are typically low maintenance. A traveling executive in town for a two-month project isn’t likely to care what color your dining room is, or throw noisy parties.
You get your house back whenever you want. While these short leases mean more work (since you’ll be screening new tenants frequently), they also add flexibility. “If you land a job and get back on your feet, there’s no need to wait months or years to get your property back from renters,” Smith says. The average length of stay is about 100 days.
Once you’ve begun screening tenants, “do background checks, and go through a very formal application process,” she says. “Google them. Ask for their driver’s license. Run credit and background checks. And do walkthroughs, including video inspections.”
(CHBO doesn’t do any screening, but it provides DIY guidelines on such details as insurance, accepting credit cards and researching tenants.)
Another option, if you’re willing to invest in renovations, is renting out part of your home. When Peggy Northrop, editor-in-chief of Work Reimagined, left a high-profile job at Reader’s Digest, she and her husband found themselves struggling with too much real estate. “For years, we had lived in the top three floors of a house in Brooklyn, and rented out the basement apartment. We had also bought, fixed up and furnished a home in Connecticut. Plus, we are helping my husband’s son with his apartment, as well as our daughter, who is in college now.”
At first, she says, “I kept thinking, `I can’t afford all these houses. I have to find a job that pays exactly as much as my last one.’” But what she really wanted, she decided, was more freedom—to consult, to travel, to start her own business. “And with my daughter gone, I realized we didn’t need to live in our house the way we had been.” The result? She and her husband are renovating the basement and moving downstairs, and leasing out the triplex. “By renting out just part of one house, I’ve found a way to afford them all.”
Bring on the boarders
Even simpler? Become one of the millions of Americans who are realizing that roommates aren’t just for college kids. The U.S. Census Bureau reports that, thanks to the economic downturn, “shared households” increased 11.4 percent between 2007 and 2010, the latest figures available. And while that includes adult children moving back home, it also covers non-related boarders. Among women 45 and older, for example, 1 million now have a roommate.
And don’t assume they are living in low-end properties. As foreclosure rates have climbed, you’ll find plenty of McMansion owners renting out rooms, often getting $600 to $800 per month.
“It’s one of the best ways to make money in a tight situation,” says Annamarie Pluhar, author of Sharing Housing, A Guidebook for Finding and Keeping Good Housemates. “Not only can you breathe a sigh of relief about paying the mortgage and utilities, you get company. And many people find they like that.”
It’s easy to find prospective roommates through such sources as Craigslist and Roommates, but Pluhar says family members and acquaintances are good bets, too. And be open-minded: “I know a woman in her 60s who thought she’d hate having a 20-something live with her, and she loves it. Besides, younger people usually have less stuff.”
Suddenly sharing is a big adjustment, though. “If you have to listen to opera when you cook dinner or someone leaving dishes in the sink irritates you, that needs to be communicated.”
And no matter whom you rent to, do thorough background checks “and keep reminding yourself that this is a business decision,” Pluhar says. You’re not adopting someone, helping them out or looking for a new best friend.
Check with your tax pro to see what expenses might be deductible. Read up on your area’s zoning and tenant-rights’ laws. And be mindful of the risks, including deadbeats, slobs or destructive renters. “Even if you do everything right, things still can go wrong,” Smith says.
Northrop, meanwhile, can’t wait to move into her newly-done pied-à-terre. “By nature, I am the kind of person who likes to have as much as flexibility as possible,” she says. “And this preserves all our options.”