01 May 2017 Passive Income Series 3: Uber, Lyft, & Airbnb
Passive income sources are a great way to make some money. Did you know you can make money with the cars and homes you already own? Uber, Lyft, and Airbnb are great ways you can have a passive income source in your free time or when you are away from home.
Uber and Lyft Ride Sharing
Driving with Uber and Lyft can also be extremely helpful ways of making some extra money when you have free time. Depending on where you are and when you’re driving, you can make a decent amount of money. Your income is based on how much time you’re driving for that ride and how far you are driving. Uber will take a 2% cut of the final fare, but drivers still get paid as usual when riders are using a promotional credit. Lyft gives the opportunity for users to tip on their app as well. The amount made is not constant, depending on the size of your vehicle, what city you are driving in, and what time you are driving at, because if there is a high demand for drivers at a specific time, you will see a higher increase in rate.
That being said, there are expenses that need to be taken into consideration. Car and lease payments, tolls, license, and permit fees, gas, and vehicle maintenance are all things that fall under driver costs every month. Insurance is also a large aspect that you must take into consideration. Does your insurance cover ride sharing? Do you have enough coverage if something happens while you’re driving for Lyft or Uber? These are questions that you will want to take up with your Massachusetts insurance agent before getting behind the wheel for a ride sharing company.
Airbnb can be a great way to rent out your space when you aren’t using it. The listing is free, you get to approve of potential guests, and you set your own rate based off of the going rate in your area. Airbnb will even send a professional photographer to capture your space for free if you’re an active host.
Risks and costs must also be considered before you rent out your home to someone you’ve never met before. Consider the cost of hosting. Cleaning, higher utility bills, taxes, and Airbnb’s 3% host fee for payment processing all should be taken into account. Also, are you allowed to host? Some homeowner’s rules and landlords don’t allow your space to be rented out. It’s important to check in with your policies prior to signing up. Consider things like getting a business license and regulations on local and federal taxes.
Make sure that it is safe for you. Your personal safety comes first. Is it safe to rent to a stranger? Don’t forget about your valuables either. This includes your personal items and your identity. Make sure everything regarding your personal identity and valuable items are stored away with no access to them by a stranger. Home safety is important because minimizing safety risks to guests minimizes your risk of being sued by a guest who is injured on your property.
Finally, insurance is extremely important. Airbnb’s host guarantee provides up to $1 million in insurance coverage for property damage. Still, this is not a substitute for homeowners or renters insurance and does not protect against theft or personal liability. Talk to your homeowners or renters insurance company to make sure your policy will cover your property, your possessions, and you liability while renting out your place. You may need extra coverage such as an umbrella policy.
No matter what you do to gain passive income, there are some things that you can do to prevent mishaps from happening.
- Keep track of everything from the beginning – money spent and made
- Determine if you’ll need to charge sales tax if selling products
- Create a business address to prevent your personal information from being shared – get a P.O. Box or alternative address
- Get an Employer Identification Number (EIN) so you don’t have to use your personal Social Security Number on paperwork.
- Set up a business bank account – keep your personal and business accounts separate
- Make sure you’re prepared to pay income taxes
- Ensure you have the insurance you need
At the end of the day, you want to make sure you are protected. Check out our first and second posts in this series and then give us a call at (800) 941-3317 to make sure you have adequate coverage before you start your passive income endeavor!