If you’re looking for a way to generate additional income with unused space in your house, you may have considered renting that space to renters. But before you begin renting out your spare bedroom or basement, there are certain steps you must take to do this properly.
Keep reading to learn the pros and cons of this rental model and how to legally rent out a room in your house.
Renting out an unused room can be an excellent way to become a first-time landlord and receive income to put toward your mortgage. However, renting out a room in a property you own differs from bringing on a roommate. Instead, it’s much more like a landlord-tenant relationship. As the property owner, you may need to create a lease agreement for the renter to sign and familiarize yourself with landlord-tenant laws. You’ll also need to ensure that your renter is paying rent on time, is following the rules you’ve established, and that they certain expenses like property damage and pet fees if applicable.
Since you’ll be receiving payments from your renter, you’ll also need to understand how rental income is taxed and how to report the income appropriately before pocketing your earnings. Regardless of your decision, remember that the dynamic of your relationship will be more professional, and you should prepare to manage your renter’s stay as such.
No matter what space you decide to rent, you’ll have another person living with you in your home. As such, there are several pros and cons to consider. On the plus side, it can be a great way to generate extra income, especially if you aren’t using the space. Managing a smaller space can also be considered good practice before managing larger rental properties. You may even qualify for significant tax deductions if you rent out a room in your home.
On the downside, renting a room can be a lot of work. You’ll be responsible for maintaining the room and dealing with any issues they may come across. And, even if you thoroughly screen prospective renters, there’s still potential for conflict if you struggle to maintain a healthy relationship.
If you’re ready to rent out a room in your house, here are steps you can take to get started.
Next, you’ll have to decide which room you want to rent. You’ll want it to be a space you’re okay with having limited access to. This will make it easier to respect your tenant’s rights and privacy.
You should also consider what could make your space more attractive to prospective tenants. For example, the main bedroom and connected bathroom may be more convenient for a tenant than a different room. If your basement is similarly equipped, consider that space instead. It’s also appealing if the area has separate access in and out of the house.
Before renting a room, it’s essential to understand the landlord-tenant laws specific to your state and local area. You’ll need to know what you can and can’t do if a person rents out a room in your primary residence.
Furthermore, ensure that your mortgage provider or Homeowners Association (HOA) allows you to rent a room in your house legally or if there are occupancy limits. Your city may require landlords to have a license before renting, or you might have to have the space inspected before it can be rented.
Having a renter living in your home may affect your insurance coverage. Contact your insurance provider to review your policy. You may be required to add landlord insurance to your policy to rent space to a tenant legally.
Once you’ve decided what space to rent, you’ll need to set your rent price. If you’re unsure how to start, consider researching the cost of other rooms in your area on rental listing sites. Compare the amenities included in different rooms for rent with the ones you offer to set a competitive price.
The next step is to list your room for rent. Treat this as if you were listing an apartment or house for rent — be clear that the rental is a room or interior space, not an entire property, and share as many relevant details as possible about the amenities your area offers.
If you want to create a single listing that will post to several of the top rental listing sites, you can create an Avail rental listing to find quality tenants with no hassle. Publish your listing across the top dozen rental sites, including Realtor.com®, Zillow, Trulia, and more. You can even manage leads and schedule showings directly through your account.
