After retirement, housing-related expenses, like property taxes, insurance, utilities and maintenance, are still a responsibility even if the mortgage is paid off.
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For many retirees, finding ways to offset these costs and others becomes a priority. Here’s how retirees can increase their monthly income by using their homes.
1. Renting Out a Bedroom or Other Space
Retirees can make extra money by renting out part of their home, such as a spare bedroom or finished basement. Long-term rentals will provide a more predictable income than short-term ones but will require managing a tenant.
Also, income earned from renting part of a home is taxable, and homeowners are required to report it, along with any eligible expenses, per the IRS.
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2. Adding an Accessory Dwelling Unit
Adding an accessory dwelling unit (ADU) on the same lot as their primary home is another way retirees can increase monthly income. ADUs may be detached, such as a manufactured home, or created by converting garages or other existing structures on the property into a living space, according to Fannie Mae.
However, under Fannie Mae guidelines, financing isn’t available for an ADU if the primary residence is a manufactured home.
3. Downsizing and Utilizing the Equity
Selling a larger home and moving into a smaller or less expensive one can free up equity that can then be used to increase monthly income by investing it or making scheduled withdrawals.
4. Living in One Unit While Renting the Others
Another option for retirees who own a duplex or a multi-unit property is to live in one unit while continuing to rent the others. Rental income from the other units can help cover property expenses or provide additional monthly income.
5. Selling the Home and Leasing It Back
Sale-leaseback arrangements allow retirees to convert home equity into cash while continuing to live in the same property. Essentially, they sell the property to a buyer who is willing to lease it back. This arrangement eliminates property taxes, insurance, and home repair and maintenance costs. However, it also eliminates the ability to build future equity and replaces ownership costs with rent.
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This article originally appeared on GOBankingRates.com: 5 Ways Retirees Can Use Their Homes To Generate Monthly Income
