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Investing in real estate is an effective way to build wealth and diversify a portfolio. While there are many ways to do this, one of the most lucrative is investing in shared housing. This involves renting out a property to several tenants and charging each one a fee. Investing in shared housing can benefit you and your tenants, and there are many ways to get started. Here’s a closer look at how you may invest in shared housing to generate passive income.

Key Takeaways

  • Shared housing involves renting out living space to several tenants, such as renting out each of the bedrooms in a single-family home to different people.
  • Investing in shared housing has several benefits, such as accommodating those in need of housing and increasing your cash flow immediately.
  • One of the best ways to invest in shared housing is to purchase a single-family home and then rent out each bedroom to a separate tenant, charging each the same amount of rent per month.
  • Government grants for affordable housing efforts can help fund your initial investment in shared housing.

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Shared Housing Explained

Shared housing involves a property where different people rent out a single living space. This sometimes involves a single-family home with several bedrooms, and you rent each room to a different tenant. Apartments are another example of shared housing, as it’s common for several tenants to share an apartment. While non-profit organizations providing housing for people in need run many shared housing properties, it’s also possible to manage shared housing that’s open to the public.

Benefits of Investing in Shared Housing

There are many benefits to investing in shared housing for both you and your tenants. Here are some of the key advantages of investing in shared housing:

Housing for Those Who Need It

One of the greatest benefits of investing in shared housing is that you can provide accommodation to people in need. Shared housing designed for those in specific demographics who require extra help is quite common. For example, many shared housing properties provide housing to people recovering from addiction. They also offer transitional housing for veterans, people exiting the prison system, or children leaving foster care due to their age. It’s often difficult for those in these situations to find safe, affordable housing so shared housing may provide a solution.

Extra Cash Flow Right Now

Another benefit of investing in shared housing is that it’s an effective way to increase your cash flow quickly. Since shared housing often involves charging rent for several rooms in a property, it results in you getting more money when tenants occupy those rooms. This can be beneficial for investors who want to build wealth quickly, as they can experience fast returns on their initial investment through the rents they receive. While some of the income goes toward maintaining the property, you’ll still have significant extra income in less time than other investments.

More Income to Put Toward Retirement

Apart from earning more money immediately, investing in shared housing allows you to build your retirement savings. When you get extra income through a shared housing investment, you can put a portion of it into your retirement savings. 

Regardless of the type of account you use to prepare for retirement, you should be able to contribute a monthly amount that will increase through compound interest over the years. This will help you better prepare for retirement by increasing the cushion of wealth you can rely on when you stop working.

How to Invest in Shared Housing to Generate Passive Income

Here are some ways to generate passive income by investing in shared housing:

Purchase One or More Single-Family Homes

One of the best ways to start investing in shared housing is to purchase a single-family home. If you have the capital to purchase multiple homes, this can benefit you even more. When buying a property, look for single-family homes in good neighborhoods with excellent safety ratings. This can ensure that the housing you provide is attractive to those looking for a nice home in a neighborhood where they can feel safe. Since many shared housing properties are in unsafe neighborhoods with worn-down architecture, choosing a good location can be advantageous.

Once you purchase the home, complete any repairs or renovations before you start renting it. This can increase the property’s value and help set a baseline for the rent you can charge. You can determine how much rent you need to make a small profit without it being so much that the housing is no longer affordable. Some states stipulate the number of beds in each room of a shared housing property, such as requiring each room to have space for two people.

When it’s time to rent, determine a base rent that you’ll charge for each room. This is where the investment becomes fruitful, as you can gain more than you need to cover the mortgage by charging for each room. For example, if a home needs to bring in $2,000 to cover its payments, but it has three bedrooms, you can charge $2,000 per bedroom for an income of $6,000 per month just from rental payments. This triples the income potential when compared with an apartment or single-family rental.

Shared Housing Passive Income

Invest in an Apartment Building

Another way to invest in shared housing is to purchase an apartment building with large units. You can rent out bedrooms in each unit in the same way you might for a single-family home that you’re using for shared housing. While you might need to hire a manager to help with the property, you can still experience significant returns since there will likely be more tenants than in a single-family home.

You can also use an apartment building as shared housing while living in it yourself. For example, if you purchase an apartment building with three units, you can live in one unit and rent the other two. This creates a shared housing model where the income you receive from renting the other units covers the cost of your rent and provides extra income to save or invest. 

For example, if an apartment building with three two-bedroom units needs to bring in $3,000 per month, you could charge $1,000 per bedroom for the extra two units. This will bring in $4,000 per month, covering your payments and leaving you with $1,000 in profits.

Apply for Federal Grants

The United States government offers grants designed to help people develop facilities in communities that lack the infrastructure to support people who need housing. For example, there are specific government grants for those planning to provide facilities, such as shared housing, in rural communities. You can use this money to renovate and upkeep the property you’ll rent out as shared housing. This can greatly reduce the initial cost of your investment and make it easy to make a profit in less time than other investments.

The government also provides grants specifically for single-family housing. Many of these provide money to cover the cost of repairs, which can be beneficial if you want to repurpose a home for shared housing. The exact types of grants you qualify for can vary, depending on where you live, so review your state’s provisions before applying.

Learn More About Investing in Shared Housing

There’s a lot to consider before you’re ready to start investing in real estate and getting involved in shared housing opportunities. This is why it’s best to work with a professional financial advisor who can guide your investment journey. Infinity Investors offers a paid membership that gives you insider access to valuable resources about investing. You’ll get to attend strategy sessions with professional advisors, view on-demand training, and access our weekly investing rooms that involve live deal analysis. Try out Infinity’s membership today to unlock your full investing potential with the help of trusted finance experts.

If you’re looking for a lucrative investment opportunity that will also give you the chance to help people in need, shared housing might be the perfect option for you. Whether you want to purchase a new single-family home to renovate and convert to housing, or you already own a home that you want to re-purpose into shared housing, it’s possible to experience outstanding returns on these types of investments. Think about how to break into shared housing in your community and speak with someone at Infinity Investors if you need help getting started.

Infinity Investing Featured Event

In this FREE event you’ll discover how the top 1% use little-known “compounders” to grow & protect their reserves. Our Infinity team of experts show you how to be the best possible steward of your finances and how to make your money and investments work for you instead of you working for them. Regardless of your financial situation today, you’ll have a road map to get to where you want to be.