Category Archives: Passive and Alternative Income

Home Office Series: Starter Supplies for Your Home Office

Last week, I created a list of supplies that I will start with when establishing my home office.  The funny thing is, I haven’t yet chosen a place to live.  Thus, I don’t yet have a home office. 

Nevertheless, my location is not important for purposes of the starter list.  Here are some basic items that you will need to establish a home office, at least initially, even if you don’t yet have a place to put them. 

Phone

For obvious reasons, you will need a phone in your office if you will be dealing with clients or making other business related calls.  It is wise to have a business line separate from your home line so that you will have the ability to separate work life from home life.  In addition, you will be able to establish work hours. After hours it is nice to let your business calls go to voicemail.  Establishing a balance between work and personal/family time becomes more difficult when you move work into your home.  Thus, it is important to do all you can to separate the two, starting with your phone line. 

Computer/Laptop

I will be keeping the laptop given to me by my firm. It is a Lenovo Think Pad, an IBM computer.  My laptop provides me with basic functions for word processing, spreadsheets, power point and Internet browsing. 

Obviously your choice of a home computer will depend on the nature of your work.  Some computers are better for word processing-type functions, while others are good for graphic production.  Macintosh computers, for example, have a reputation for excellent graphic quality and utility. 

I have a Macbook Pro as my personal computer, which I use for things like blogging and all of my other personal functions.  I could write a whole post on choosing the right personal computer.  But, I won’t expand this discussion here.  You should do your own research to determine which is the right computer for your home office. 

Desk

Your desk choice will also be a very personal choice.  It will depend on the size and layout of your office.  There are many different shapes, sizes and colors of desks to choose from. 

Lamp/Lighting

Consider the light sources already in the room.  There is usually a central overhead light source as well as a window, which will provide light during the day.  Add additional lighting as necessary using lamps.  Also consider computer glare and the position of your desk or working space. 

Bookshelves/Bookcases

If you will have books and other references in your office, consider installing bookshelves or having one or more bookcases in your office. If you are working in a compact office, bookshelves installed on the wall are a space saver.  If your space is larger, or if you have a large supply of books, adding a bookcase will create more storage space.  Bookshelves and bookcases allow you to organize books and other reference materials.  For me, they avoid the inevitable piles of books on the floor and on the desk. 

You can also use bookends for small reference books.  In my current office, I have a very large L-shaped desk.  I use bookends to keep small reference books such as dictionaries and writing guides.

File Cabinet

File cabinets provide additional storage for important files and other documents.  While documents might also be kept on bookshelves or in bookcases, papers don’t stack uniformly, so papers on a bookshelf or bookcase can look quite messy.  In a file cabinet, papers are out of sight and can be organized more readily.  Some desks have drawers that can keep files.  This allows you to keep your files nearby.

Printer/Scanner/Fax

A combination printer/scanner/fax machine is probably the most practical and economic solution to have in a home-office.  First, having one machine will save space for a small home office.  Depending on your production levels and use of each feature, a combination printer/scanner/fax machine should be sufficient for your office. 

As of April 2009, CNET gave 4 our of 5 stars to the HP Photosmart Premium Fax All-In-One received.  According to its review, the HP Photosmart is “designed with the casual photographer and work-at-home professional in mind.”  Although CNET boasts on its high-quality prints, it notes that this product has a higher-than-average cost for black ink cartridges.  But, overall, it has a rating of ‘excellent.’ 

I plan to have an all-in-one printer/scanner/fax, but since my office will purchase this item for me, I don’t yet know which brand I will have.  Perhaps I will recommend for the HP Photosmart. 

 Computer Monitor

 I currently use a 13” computer monitor in conjunction with my laptop.  It creates an expanded view of my laptop and allows me to have two documents in view at one time.  I can also use it to view a document in one window while having an Internet browser window open in the other view.  It makes multitasking a lot easier when it is necessary. 

 In a small home office, or on a small office desk, using a laptop computer with a flat-panel LCD computer monitor will provide an expanded computer work area while saving space.     

 Other Items

 Other items that I will have initially in my home office include an external hard drive for storing and archiving electronic files, a large white board and markers for temporary diagrams and notes, and a large cork board to post important items in full view. 

 I will also have a broadband connection, a business fax line, a business phone line and a wireless card for remote Internet connection.   

 If you are transitioning to a home office within your present place of employment, work out with your employer prior to the transition, which items will be covered by your employer.  For me, my employer will cover such items as the computer monitor, external hard drive and printer, but they will not cover items such as the furniture.  At some later time, I will be looking into the extent to which I can make a tax deduction for the purchase of items used for my home office.  But, that is a discussion for another day.

 Which items would you start with when establishing a home office?

MAKE MONEY MONDAYS is a forum to discuss ways in which you can create additional sources of income. I try to focus on particular ideas and steps you can take to create alternative income and passive income sources. I have also begun a series of posts called “Rental Property Conversion.” This series follows my husband and I as we turn our property into a rental property. I will also research and post other useful information in this category. If you like what you see here, please use the orange icon at the top right to receive my content updates by email or RSS reader.

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From Employer to Employee?

For the past couple of years, I have become very interested in following the stories of entrepreneurs and other people who create alternative income sources to make a living.  My own aspirations involve eventually starting my own ventures to produce alternative income streams to supplement my career income source. 

I began following others online that were moving in the same direction in which I wanted to be moving.  I first began following Madison Dupaix over at My Dollar Plan.  I found her at a time soon after I was married and very interested in straightening out my own financial situation for the benefit of my husband and I.  Her path into early retirement, as well as her adoption of alternative income sources, including entrepreneurship and real estate investment, has also been an inspiration to me. 

One of my most pointed discoveries has been Pat on The Smart Passive Income Blog.  He is one of my favorites because he is so frank and personal about the things that he is doing to create alternative income sources.  His discussions are straightforward and very educational because he speaks about the things that he is doing, his successes and what he has learned along the way. 

In addition to my online resources, there are a few entrepreneurial individuals in my life offline that have given me inspiration.  Each of these individuals started their own businesses and has had relative successes in creating self-sustaining livelihoods.  In recent times, however, I have discovered that two of these individuals are considering re-entering the workforce.

One individual is a close friend of mine that I met while in law school.  After working for others a few years out of school, he and a partner started a law firm. Now, several years later, he is thinking about leaving his venture and transitioning from employer to employee.  

The second individual is the husband of a friend. Many years ago, he started a wireless retail establishment that was successful for many years.  My friend, his wife, who I met and befriended through an industry event, managed one of his stores.  A few years ago, he sold his business and now, he is thinking of returning to the workforce as an employee.    

These kinds of entrepreneurial stories have always inspired me.  While I am not ready to give up my career to start my own business, I’ve always relied on these types of stories as guidance for my own ambitions.  These individuals would provide a resource and a lot of education when and if I ever decided to take the plunge. 

Upon learning that these individuals were contemplating returning to the workforce, however, I couldn’t help but feel a little disappointed.  I have always envisioned successful entrepreneurship as the greatest freedom. Their stories have fueled my own grandeur aspirations that, even if a little naïve, would always cause me to aim a little higher than I could actually land. 

I questioned how one could return to working for someone else after having complete autonomy in your own business.

I have spoken with both of these individuals about their decision to consider returning to the workforce.  Based on these conversations, I have learned that despite running your own business for many years, there may still be the desire to be a part of something bigger.  Besides, even if one has been successful in selling his business at a rather young age, life goes on and eventually this individual will need to make an income again. 

I’ve also learned that owning and managing your own business can fall short of the utopia that I have imagined.  Many times, when working with a partner, you discover that you have very different philosophies about how to maintain and grow your business.  If you are not seeing eye to eye with your partner, it can shatter your imagined potential, which can be a momentum killer.  At some point, when the question of where will this business be in five years does not have a promising answer, the next option may very well be to preserve your professional worth and reenter the workforce. 

I also understand now in talking with these individuals considering the return to the workforce, that having run your own business and having managed staff in that business almost certainly makes you a much better employee because now you have the perspective of the employer.  Now, you know what it takes to run a business.  Now, you know what is required of staff to sustain a business.  And now, you know how to promote the interest of the business in everything you do. 

In all honesty, I still feel a little disappointment.  Something in me needs to believe that once you venture out on your own and make your own way that you will not desire or need to return to being dependent on an employer.  Once you have been completely autonomous in the decision-making process for a business, that you would not return to having someone else make those decisions.  My aspirations depend on this view.  You may call me naïve, or even a dreamer.  But, if I have a nice high place to launch from then I can be confident of higher landing. 

MAKE MONEY MONDAYS is a forum to discuss ways in which you can create additional sources of income.  I try to focus on particular ideas and steps you can take to create alternative income and passive income sources.  I have also begun a series of posts called “Rental Property Conversion.”  This series follows my husband and I as we turn our property into a rental property.  I will also research and post other useful information in this category. If you like what you see here, please use the orange icon at the top right to receive my content updates by email or RSS reader.   

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Update on Writing an eHow Article

Last week I wrote a post about Making Money with eHow.  I talked about what I did to set up my account and the things that needed to be done in order to begin making money.  During the week last week and this past weekend, I wrote and published my first article on eHow.  This is my follow-up to last week’s post.    

In case you are not already familiar with eHow, it is an article directory on which you publish ‘how to’ articles.  You may also have an opportunity to be paid for your work under certain conditions.  You must be a legal resident of the United States.  Your article must be viewed and favored among readers.  Your compensation, according to eHow depends on many different things, including popularity, usefulness and the topic of your article.  But eHow is pretty vague on how articles are rated in these categories. 

Writing an Article

Writing an eHow article is pretty easy because it is basically a bullet-point list of the steps you would take to accomplish a certain task. 

After you have set up your account and when you are ready to begin writing, find the prompt on the home page entitled “Write an Article.”  From there eHow will prompt you to enter the title of your article. Since the title of the article will always begin with ‘how to,’ which is already there, your title should complete that sentence. 

Once you have entered the title, you may upload an image that will provide visual stimulus for your audience.  For example, if you are writing an article called “How to Make Apple Pie,” you might want to upload a picture of an apple pie, or of someone preparing the ingredients for an apple pie.  Providing such an image gives your article immediate context once someone arrives on the page.  Readers will recognize your topic before they have read the title.  Be sure that you have the authority to publish the photo and always provide due credit.  eHow provides fields for you to fill in a caption and provide a photo credit.

At the end of the first page, eHow asks you to rank the difficulty of accomplishing the task in your article, to provide an introduction and a list of items that someone would need to complete the task.  Once you have finished with this page, click the “save & continue” button to proceed to the next page.  This is where you will publish your article. 

You will write your article directly on the eHow website as opposed to uploading content from a file.  There are fields for each step in your process.  The eHow page gives you about 4 or 5 steps and after that, you click on the “add a step” button to continue.  I am not sure there is a limit to the number of steps.  My article had 8 steps.

Once you are finished writing in the content, eHow asks you to list any helpful tips or cautionary points to anyone following the instructions in your article.  So, for example, if you are writing about how to do a particular exercise, you might state a warning that anyone with a back injury should be cautious.

Lastly, eHow will prompt you to add tags to your article and choose a category for filing the article.  Article tags help to optimize your article for search engines.  Choose tags that are directly relevant to your subject-matter.  For example, if you are writing about how to groom a Yorkshire Terrier, your tags might be: dog grooming, pets, pet grooming, and Yorkshire Terrier. There are many other keywords that you can use as well. 

In categorizing your article, eHow lets you choose up to 5 categories.  It is a good idea to list your article in as many relevant categories as possible.  People searching for your topic might arrive at the subject in a number of different ways. 

After these final steps toward publishing your article, eHow lets you go one step further to publish your article to Facebook.  I liked this feature because it added another level of marketing the article I published. 

MAKE MONEY MONDAYS is a forum to discuss ways in which you can create additional sources of income.  I try to focus on particular ideas and steps you can take to create alternative income and passive income sources.  I have also begun a series of posts called “Rental Property Conversion.”  This series follows my husband and I as we turn our property into a rental property.  I will also research and post other useful information in this category. If you like what you see here, please use the orange icon at the top right to receive my content updates by email or RSS reader.  

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Making Money with eHow

This week, I am preparing to try my hand at writing an article for eHow.  I planned to write my first article this past weekend but got tied up with completing the painting of a room in my house.  I will work on writing my first article this week and let you know when I get it posted. 

So, instead, I only managed to set up my eHow account.  Here are the things I observed while setting up my profile.

Setting Up a Profile

I had created an eHow account a while ago but had never set up my profile.  I completed the setup this past Saturday. 

I started with the avatar for my profile.  An avatar is the image that you will use to identify yourself.  I am using this animated avatar, which I got from my account with Yahoo! Answers. 

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I did a brief search online for an interesting avatar, but soon grew bored.  I didn’t want to use an actual photo, so I cheated and took the avatar that I made for my Yahoo account and pulled it over to eHow.  I simply saved the avatar as a file in my iPhoto library on my Mac and uploaded it to eHow.  Fast and simple. 

There was a time where I didn’t place much stock in animated avatars, but they have grown on me.  I think it is important to have an image that identifies you and provides a consistent visual reference for your audience.  I’m not sure at this stage whether a photo is better for building creditability on a site such as eHow.  I wouldn’t have a problem with using a real photo, I just don’t have one suitable for this forum at this time.  I may change my avatar later. 

I also enabled Twitter in my profile.  eHow will notify Twitter whenever I publish or comment on an article.  I will set this up initially.  Once I publish a few articles and/or comment on other articles, I will be able to gauge what, if any, value there is in having Twitter enabled on eHow.  If it looks too spammy then I will disable the Twitter notifier.  Although I am very interested in marketing my works eHow and on here, I am very sensitive to things that might be perceived as spam.  So, I will play this by ear. 

Lastly, I completed the remaining fields in the profile builder, which include inputting Interests, Expertise, Education, and Favorites.

Earning Compensation for Writing

In order to earn compensation for writing articles on eHow, you must enroll in the Writer Compensation Program.  Only legal residents of the United States are permitted to enroll or the opportunity to earn money for articles.  When setting up a payment account with eHow, the site asks for your taxpayer name and ID.  So, if you are like me and write under a pen name, you will be required to enter your real name and social security number or employer ID number under which you pay your taxes.  eHow indicates that all such information is kept confidential.   

The Supplemental Terms of Use applicable to your Writer Compensation Program include the considerations used to determine whether and how much the author will be paid for an article.  The criterion is rather subjective and is in the sole discretion of eHow.  They are:

  • Popularity of the article;
  • Number and quality of inbound links to the article;
  • Topicality and newsworthiness of the article content;
  • Usefulness and applicability of the article content;
  • User response to your articles, such as positive reviews and comments;
  • Degree of specialization of the article content; and
  • Quality of the writing.

I would imagine that things like ‘quality of inbound links’ and ‘usefulness and applicability’ could be pretty nebulous as applied to your work.  In addition, eHow also does not disclose the percentage of your earnings that they are taking, which is a negative in my opinion.  That being said, there is some earning potential here.  Since eHow articles tend to be basic how-to references on subjects in which the author may be an expert or at least very knowledgeable, there may not need to be a lot of research and other preparatory work that goes into writing articles for eHow.  In that case, the somewhat small effort that may go into writing an eHow article may offset the negatives of nebulous criterion and vague percentage breakdowns. 

Arbitrary Termination Provisions

Although this may not be a deal-breaker, every author publishing an article on eHow should be aware of the biting arbitrariness of eHow’s discretion to terminate your account “for any reason or no reason.” 

So, technically, eHow could just decide one day, for example, that it does not like that you spell your username, Marianne, with an ‘i’ and not a ‘y’ and terminate your account while blocking your access to the site.  Once your account is closed, eHow may continue to publish the article(s) that you have written, subject to its own terms for the removal or modification of content by you. 

It is not clear from the terms whether eHow will continue to compensate you for content you have published on the site once your account is terminated or whether you are able to get a distribution of monies already accumulated to your eHow account. 

It is important to have at least a marginal understanding of eHow’s terms and conditions before using the site to avoid surprises later on and to better leverage your awareness of the existing terms against your participation on the site. 

I may write a follow up post once I publish an article to eHow if I make any additional interesting observations.  Have you published any articles on eHow?  What have you observed about using the site?

MAKE MONEY MONDAYS is a forum to discuss ways in which you can create additional sources of income.  I try to focus on particular ideas and steps you can take to create alternative income and passive income sources.  I have also begun a series of posts called “Rental Property Conversion.”  This series follows my husband and I as we turn our property into a rental property.  I will also research and post other useful information in this category. If you like what you see here, please use the orange icon at the top right to receive my content updates by email or RSS reader.  

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Rental Property Conversion Series: Real Estate Management Walk-Thru

My next step in converting our primary residential property to a rental property is to hire a property manager.  The management agent that I expect to use is with Long & Foster and came highly recommended by a friend.  

Although Long & Foster’s management division is on the higher end of management fees, they offer a comprehensive service.  Since my husband and I will not be in the same state as our rental property when all is said and done, I may be willing to pay a little more for the peace of mind in knowing that proper care will be given my property and my tenants. 

With Long & Foster, I would pay the first month’s rent as commission, with a monthly management fee of 10% of the monthly rent.  The management fee is in addition to other fees for actual services or repairs procured by Long & Foster for the benefit of my property. 

On Friday, the L&F management agent came by and provided a walk-thru of my property wherein she noted things that I am required to do by law in DC in order to rent my property. 

Security Gates

I have three doors on the house, which provide access to the outside.  All three doors have security gates that require a key to lock and unlock the gate.  Pursuant to DC law, this is a fire hazard.  Therefore, I am required to replace the locks on these doors with single cylinder locks – locks which can be locked and unlocked by hand, without a key.  Since it may defeat the security function of the gate if someone can just reach around and unlock the gate with their hands, I could also add a welding component to the lock to hinder access from outside.  I am also permitted to just remove the security doors as I do not have an obligation provide the security doors as long as all main doors are steel doors. 

I will explore which is the least costly option.  I will probably remove the security doors and will need to install one steel door, as the other two are already steel. 

Fire Extinguishers

In DC, I am required to have a fire extinguisher mounted on the wall in the kitchen and in the hallway on the upper level.  This will be a simple installation that I will most likely do myself. 

Ground Fault Interrupters (GFIs)

The agent informed me that, in DC, you are required to have GFIs at all faucets, which would be in the bathrooms and the kitchen.  The GFI is pretty recognizable as the outlet with the colored reset buttons.  What isn’t clear to me is whether  you must have a GFI outlet at each faucet or whether, if there is an outlet near the faucet, then it must be a GFI. 

Really, it doesn’t matter for me because my house already has GFI outlets at each faucet. 

Other Tips

In addition to these things that I am required to do, she also made suggestions in a few other areas.

Make the Dehumidifier Disappear

She took note of a dehumidifier that I kept stored in a room at the back of my house.  She suggested that I keep it out of site when I am showing the property.  Apparently, a dehumidifier may give the impression that there are moisture problems in the home. 

I had already planned to get rid of it.  I’d used it a couple of years ago when I had a leaky roof that caused some moisture problems in one of my rooms.  I have since replaced the roof and rectified this problem.  So, I no longer need it. 

But, apparently a lot of other people in this city do because I listed it on craigslist this afternoon around noon and by 1p I’d already had 4 inquiries about it. 

Hire an Accountant

 She suggested that I hire an accountant to help me sort out the differences in personal taxation when including a rental property business.  As a general overview, she added that I should expect to report rental income as passive income and depreciate certain renovations and capital improvements to the property. 

This suggestion is timely, since I’d already been thinking about hiring an accountant on some other tax issues.  Now I can kill two birds with one stone. 

Insurance

In anticipation of converting my primary residence to a rental property, I am already preparing to convert my homeowners insurance to landlord insurance, which will include coverage for the property building and landlord liability. 

She also suggested that, in the event that the property is initially vacant when I move to MS, that I wait to convert my insurance to ensure the property is covered during the vacancy.  I haven’t researched this yet, but it seems that under a landlord policy, the building may not be covered unless and until there is a tenant in the property.  Thus, if the building is vandalized or burglarized while vacant, the homeowner is not covered under a landlord insurance policy. 

If you are taking on a rental property, whether or not you will hire a property manager, you should research your state’s property requirements for rental properties.  I’ve only had an initial interview with my prospective property manager.  She gave me some very good information and suggestions.  But, before I sign my management contract, I intend to do a bit of my own research on these and other issues that will be important as I get down to crunch time. 

Have you ever dealt with property management for a rental property?  I’d love to hear your stories.  Please share in the comment section, or, you may email me at suprieta@gmail.com.

MAKE MONEY MONDAYS is a forum to discuss ways in which you can create additional sources of income.  I try to focus on particular ideas and steps you can take to create alternative income and passive income sources.  I have also begun a series of posts called “Rental Property Conversion.”  This series follows my husband and I as we turn our property into a rental property.  I will also research and post other useful information in this category. If you like what you see here, please use the orange icon at the top right to receive my content updates by email or RSS reader.  

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Filed under Alternative Income Sources, Make Money Mondays, Passive and Alternative Income, Real Estate, Rental Property Series

Dividend Stocks, My 1st Quarter Results

Progress of Dividend Stocks

 In February, I wrote Choosing Dividend Stocks to explore parameters that you can use to select dividend-paying stock investments.  I started with the S&P 500 Dividend Aristocrats, a list of publicly-traded companies that have consistently increased their dividends over the last 25 consecutive years. An updated list, as of March 18, can be found here.

Based on the parameters I referenced in that post, I chose to invest in Avery Dennison Corp. (AVY) – maker of beverage labels, retail tags and vehicle graphics- and Bemis Co. Inc. (BMS) – maker of flexible packing and pressure sensitive material for labels, decoration and signage.

At the time of my initial purchase of these companies, Avery Dennison was $28.03/share. It offers a dividend yield of 5.70% and will pay an annual dividend this year of $1.64 per share.  Bemis was $22.85/share.  The dividend yield is 3.80% and annual dividend is $0.90 per share.

So far, my 2009 investment has appreciated 5.9% and I have made $15.77 in dividend payments on top.  My gain is not realized yet because I still own the stock, but I expect continued growth of these stocks into the second quarter.  I have also purchased them with a long-term outlook so, unless I get wind of distress at one or both of these companies, I plan to hold on to them.    

In addition, my dividend payment was based on my original investment in these stocks. I purchased additional shares after the dividend payment.  Thus, my next quarterly dividend payment will be based on a higher number of shares.  This is in addition to other investments I have in stocks, but the other investments were made prior to January 1 and have mixed results.  I may report on that later, but I don’t find it worth it to hash out here now. 

Here is a snapshot of my progress with these companies:

 

 

AVERY DENNISON

BEMIS

Yield

5.70%

3.80%

Annual Dividend

$1.64/share

$0.90/share

My Total Divs.

1st Qtr

$15.77

 

 

 

1st Buy Price (1.22)

$28.03

$22.85

2nd Buy Price

(3.31)

$22.28

$20.80

Value a/o Fri. (4.24)

$29.76

$24.18

My % Gain

5.9%

 

Have you done any dividend stock investing this year?  What parameters have you used to choose dividend stocks?  What is your experience with dividend stocks in this market?  Please share your comments in the comment section below.    

MAKE MONEY MONDAYS is a forum to discuss ways in which you can create additional sources of income.  I try to focus on particular ideas and steps you can take to create alternative income and passive income sources. If you like what you see here, please use the orange icon at the top right to
receive my content updates by email or RSS reader.  

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Rental Property Conversion Series: Setting the Appropriate Rent, Part 1

I have created the Rental Property Conversion Series as a way to provide useful information to you about the process of converting a residential property into a rental property.  This forum follows my own encounters as my husband and I convert our primary residence to a rental property. 

In this post, I introduce some important factors to consider before establishing the rental amount for your property.  This is the third topic covered in the Rental Property Conversion Series.  Since this topic is a little lengthy, I will break it up into two parts.   Stay tuned for part two in next week’s Make Money Monday post.

Previous posts in the Rental Property Conversion Series were:

Refinancing Mortgage Loans

Refinance Settlement, Power of Attorney and Escrow

Setting the Appropriate Rent, pt. 1

If you are preparing to convert a residential property to a rental, you will need to determine how much rent you would like to collect on the property.   Chances are you are looking to net a profit from the rents you collect.

Before you can choose an appropriate rental rate, however, it is important to consider at least three things: your mortgage obligation on the property, the expenses you expect to incur in your roles as owner and landlord and the comparable rental rates in your area.  In this post, part 1, I discuss the consideration of your mortgage obligation.  In part 2 of this topic next week, I will discuss the considerations of your expected expenses and comparable rents in your area. 

While there may be other factors for you to consider in your specific situation, these three considerations are among the most important.

What is your mortgage obligation?

Before establishing the appropriate rental amount for your property, take an account of your own mortgage obligation.  What is the balance on your mortgage loan?

Julie at RevNYou, a website about real estate investment, has a 1% Rule that says your gross monthly income on a rental property should ideally be 1 % of the mortgage loan amount.  While Julie discusses this rule in the context of quickly investigating rental properties you would like to purchase, I think it is also a good starting point when thinking about establishing the rent for a property that you already own. 

According to Julie, although having a monthly rental income that is at least .08% of the mortgage loan amount is probably ok, after fees and other considerations, your cash flow may be a bit tight. To ensure a sufficient cash flow after the mortgage and fees are paid, therefore, the 1% rule is ideal.  It is also a lot easier to calculate 1%.

Julie recommends setting aside 35% of your rental income for any fees, including management fees, taxes, insurance and maintenance.   So, if you own a home and have a $300,000 balance on the mortgage loan, under Julie’s 1% rule, you should be making at least $3,000 in monthly rental income.  After you set aside 35% for fees, or $1050.00, you should have enough left over to cover your mortgage.  

But you must also take into account your specific circumstances.  Thus, if you have liens or other outstanding debts on the property, or your mortgage interest rate is a higher rate such as 7% or 8%, you will have to account for this in your analysis.  The bottom line is that you ensure all of your obligations can be paid. 

Next week I will continue with part 2 of this discussion – considering your expected expenses and the comparable rents in your area when setting the appropriate rent for your property. 

MAKE MONEY MONDAYS is a forum to discuss ways in which you can create additional sources of income.  I try to focus on particular ideas and steps you can take to create alternative income and passive income sources.  I have also begun a series of posts called “Rental Property Conversion.”  This series follows my husband and I as we turn our property into a rental property.  I will also research and post other useful information in this category.   If you like what you see here, please use the orange icon at the top right to receive my content updates by email or RSS reader.  

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