As financial planners and investment managers, we're often asked, "How do I maximize profits and reduce risk?" There are thousands of ways to make money, and every now and then, we run across a unique way to make a few extra bucks that, for some clients, may work well.

One idea was recently introduced to me by a property management company in the San Francisco Bay Area.

The idea is to rent out a spare bedroom in your home to traveling nurses for three- to six-month intervals. Basically, homeowners renting out a spare bedroom (preferably furnished) to a traveling nurse, and at the end of the term, the nurse typically moves out and on to another job and location.

Of course, this strategy is not for everyone. But, if you're comfortable sharing your home, have a spare bedroom and bathroom, or have an auxiliary dwelling unit (ADU), this idea may be a good way to fund some of your financial goals.

The drawbacks, aside from the obvious ones, include:

You’ll face more complicated tax reporting (if you decide to report the income at all).
You'll absolutely want to have a much larger umbrella insurance policy with accompanying and increased homeowner's insurance policy limits.
You'll need to put some time and effort into the process of tenant selection, rental agreement management and maintenance, and, of course, making the room and bathroom rent-ready.
You'll need to establish some house rules for the tenant. These may involve things you normally take for granted, such as refrigerator and kitchen cabinet space usage, guest visitation, laundry service, noise, and where and when you're available to help resolve other matters.
You'll need to maintain strict privacy for your tenant. That is, you, the homeowner, must not interfere with the tenant in any way.
You don't know the person, so you'll need to be clear about what you're willing to tolerate (and not).
You'll want to get about the rules and regulations on renting a room in your house to someone.

But, once you've taken the appropriate steps, you can potentially be collecting a tidy sum each month. If you are unfortunate enough to have selected an undesirable tenant, you're not taking a significant, long-term risk of having the person create problems since typical rental terms range from three to six months. Further reducing the risk is the proximity of the tenant to you, the homeowner.

What About the Rent?

Rent depends on factors such as:

Is the room furnished?
How close is the home to a large hospital or medical facility?
How's the neighborhood, and what are average rents?
Do you offer a separate entrance?
Do you allow pets? If yes, you can charge a little more and demand a pet deposit.

You can also compare your rental rates with other, similar homes using the site: www.furnishedfinder.com

Please keep in mind that we do not recommend engaging in this type of rental arrangement unless you know what you're doing or work with proper legal, insurance, and if needed, financial advisors.

Schedule a complimentary 15-minute call with a fee-only financial planner to discuss your situation.