We’ve looked at whether home ownership is a good investment. But how would things change if the house you bought had a basement you could rent?
The answer is quite dramatically. Because it decreases the total amount of money you need to invest into the property and splits that investment with another person.
This is not a revolutionary idea, having someone else “pay your mortgage” is a common phrase. But it is powerful.
From the model in a previous article we determined that in aggregate the return on investment for a home in Canada is ~ 5% annually since 2004. Using the same model, but adding rental income increases the return from 5% to 9.7%, which is an excellent return, especially because it’s an after tax return. Equivalent to a much higher return earned in the stock or bond markets.
Compared to not renting out your apartment….
If you have the opportunity to rent out extra space in your home it’s not only a way to “pay the bills”. It’s an excellent investment on its own, producing returns in excess of the stock market over the 2004 to 2021 time period.