Editor’s Note: This story originally appeared on Point2.
If you’re a homeowner looking to earn a little extra cash to pay your mortgage, you might consider renting out a room in your home. In the right circumstances, it can be a good solution.
You just have to make sure you do it legally and efficiently.
With that in mind, let’s look at the steps to successfully rent a room in your home.
What You Should Know About Renting A Room In Your House
When you rent a room in your home, you will essentially own the property, and anyone who moves into your room will become your tenant.
The process is similar to renting an entire unit, although your tenant will likely share facilities such as the bathroom and kitchen with you. This may be similar to having a roommate, but the relationship is very different. Therefore, renting a room in your home should always be considered a professional decision.
The good ones:
- Additional source of income
- It prevents the waste area from falling.
- You may be eligible for a tax deduction.
- Flexible lease terms
Disadvantages:
- Strong penalties for non-compliance with local laws and regulations
- Less privacy
- Collision hazard
- It takes time and effort.
If, after weighing the pros and cons, you have decided to rent a room in your house, here are the important steps you need to ensure success.
1. Understand the Landlord’s Local Rules
Before you start, it’s important to understand the rules and regulations in your area, keeping in mind that different areas will have different rules.
The rules will affect various aspects of the landlord-tenant relationship, from the inspection process to the collection of rent to the declaration of benefits.
Now is also a good time to check if your mortgage lender will let you rent a room in the first place.
2. See If You Need Homeowner’s Insurance
Another thing to check before you start looking for renters is whether your current home insurance will cover you if you rent a room.
In some cases, you may need to take out separate landlord insurance. This provides more comprehensive coverage that addresses issues that may arise from renting out your property, such as damage to your property, loss of income, or lawsuits.
3. Prepare the Space
Whether you’re renting a spare bedroom or an entire annex, the space should be properly prepared for your future tenant.
At the very least, you’ll need to do a deep cleaning, but you may wish to renovate the room to make it brand new for the tenant. At this point, consider whether or not you will rent the space provided.
Finally, make sure the room offers full privacy, with a lockable door and good access to shared spaces.
4. Find out how much you should charge
Before marketing your room, you need to decide on a reasonable but competitive rental price. Finding the right balance is important. Too high, and you will struggle to attract employers; it’s too low, and you’re leaving money on the table.
Working with a real estate agent can help here; if not, check out the comparable list on our site to get an idea of how much you should be charged.
5. Set Your Test Criteria
With any rental property, it’s important to vet potential tenants to ensure you’re choosing reliable tenants who won’t miss payments and will treat your property with respect.
However, it is very important that you think about your evaluation criteria when you are going to share a house with them.
As long as you abide by the laws and regulations of your area, you can screen tenants any way you want to find someone you can live with.
6. Marketing Your Room
The more information you provide on your listing, the better. Include plenty of photos and make it clear that the rental is for a room in a shared house. Talk about local amenities and services available in your home.
Once you’ve created an ad, submit it to multiple listing sites for better reach.
7. Check Your Applicants
Once the programs start coming in, use your pre-screening method to test them, filtering out the ones that aren’t a good fit. Make a short list of potential employers and check the credits.
You can also get comprehensive reports detailing an applicant’s employment history, criminal background, and previous discharges.
8. Meet Successful Applicants
Since you will be living with the successful applicant, it is important to meet them before you agree to give them space. This is a great opportunity to show them around the place, so make sure it’s clean and inviting and be ready to answer any questions they may have.
While you’re showing them up close, it’s also a good idea to go over the basic rules.
9. Make a Lease Agreement
Once you have chosen your tenant, you will need to create a lease agreement for the room. This legally binding document outlines the rights and obligations of both the landlord and the tenant and is designed to protect both parties.
You should detail all the important details, such as:
- Lease term
- Security deposit amount
- Rental price
- No longer a policy
- Maintenance policies
- Utilities (whether they are included in the rent or how they are calculated if they are separate)
- House rules (shared areas, quiet times, etc.)
- Any pet policies
You can download templates online, but your lease can also be tailored to your individual needs.
10. Stay on top of your accounts
Track your income and expenses and keep any important documents safe. You’ll probably need to claim any income you’ve earned from renting out a room in your home, but you may qualify for a tax deduction for certain expenses.
When in doubt, work with a professional to make sure all your accounts are above board.
Renting out a room in your home is a great opportunity to earn extra money and make good use of any empty spaces. It is an effective solution for those who have empty spaces that find that they have several rooms that are sitting empty.
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