If your exercise bike has found its way to the guest room, it might be time to revamp the space. Although extra bedrooms and guest rooms often start as tidy, well-decorated rooms, they quickly become magnets for clutter and oversized furniture.
Luckily, your spare bedroom could be more than just extra storage space. By listing your extra bedroom as a rental property, you maximize your real estate property and earn a little side money.
Rental properties also make for a great investment, and the extra money could be used to help pay off a mortgage and subsidize the cost of the property. (Yes, you heard that right. Your spare room could be earning you hundreds–even thousands–of dollars a month).
Renting out a room also breathes new life into an unused space. From drab to fab, dismal to dazzling, your spare room can be so much more.
Without further ado, here’s everything you need to know if you’re thinking of renting out a room in your house. (And for those who aren’t sure renting is right for you, there are other ways to monetize your unused space. Just keep reading).
Is Renting a Room Legal?
Before you start looking for tenants, you’ll have to ensure that you’re legally allowed to rent out a room in your home. Start by looking up your state’s landlord-tenant laws and look out for any zoning restrictions or local laws that apply to your home.
Although it is highly unlikely that any local laws will prevent you from renting out a room, here are some scenarios in which it might be deemed illegal:
- Zoning Regulations: Certain areas have zoning laws that dictate the permitted uses of residential properties. If your property is located in an area zoned strictly for single-family homes, renting out rooms could violate zoning regulations.
- Violating Lease or Mortgage Terms: Renting out rooms in your house might breach the terms of your lease agreement or mortgage contract.
- Health and Safety Codes: If the room you intend to rent out does not meet local health and safety codes, it might be illegal to rent it out.
Even if you can legally rent your extra room, you’ll still want to familiarize yourself with local laws to maintain ongoing compliance. Read up on tenant rights, eviction procedures, and lease agreements, so you’re a well-prepared landlord.
Six Steps to Renting Out a Room
So you’ve sorted through the legalities, and you’re anxious to get started. Here are six steps you’ll need to follow to prep your home, find tenants, and become a landlord.
Step #1: Prepare the Space
First, you need to make sure that the spare room is in good condition. Ensure the door and the windows have working locks so your future tenant has privacy and feels safe.
Next, make sure that the outlets and lights are all working. You’ll want to declutter the room and remove any personal belongings. If you’re renting a furnished room, make sure the room comes with all basic furnishings, including a bed, wardrobe, and possibly a desk.
Step #2: Establish a Fair and Competitive Rent Price
Now that you have a clean and liveable space, it’s time to determine your room’s rental price. Start by researching local rental prices. You can check websites like Facebook Marketplace and Zillow to see what other homes in your area are charging for a room.
As the landlord, you must also decide if your rental price includes utilities or if you plan on charging extra for these at the end of every month. Some landlords also charge extra for amenities like internet access, laundry facilities, and parking.
Step #3: Create a Rental Agreement
Next, you’ll need to draft a comprehensive room rental agreement. This contract should outline any house rules and maintenance responsibilities, along with any pertinent information regarding rent, such as the monthly price, the due date, and the security deposit amount.
Consider additional clauses covering pets, parking, and the smoking policy.
If you’ve never written a room rental lease agreement before, there are lots of templates that do the majority of this work for you. You’ll just have to customize the template to make it specific to your home and expectations. You can find these on websites like LawDistrict and Rocket Lawyer.
Step #4: Market the Room
It’s time to advertise your room. Start by taking high-quality pictures of the room and any shared spaces. Post these photos along with a written listing on websites like Facebook Marketplace, Zillow, Craigslist, and Trulia.
Your listing should outline the room’s specifics, such as dimensions and furnishings, as well as other general information about the house, like how many people live there and what other amenities tenants can expect.
You can also advertise the room among your family and friends or through word-of-mouth if you’d rather not market the room online.
Step #5: Finding the Right Tenant
You won’t truly know what it’s like to live with someone until they’ve moved in, but thoroughly screening your potential tenants will help weed out any bad characters. Here are some steps to screening tenants:
- Request rental applications: Many websites, including TurboTenant and Rocket Lawyer, offer free or paid rental application templates. These forms will ask for your potential tenant’s personal information, rental history, employment details, and references.
- Background Checks: Websites like RentPrep, Avail, or MyRental allow landlords to conduct background checks. They typically provide credit reports, criminal history, and eviction records. Just keep in mind that, most of the time, you need a person’s consent before running a background check on them.
- Interview Potential Tenants: Get to know your prospective tenants by arranging an interview to discuss any expectations and house rules. If you’d rather keep things casual, you can save these questions and house rules for when you’re giving a tour of the room.
Once you’ve found a suitable tenant, finalize the rental agreement, collect the security deposit and first month’s rent, and provide your tenant with a copy of the signed lease.
Step #6: Managing Your Room Rental Business
The hard part is over. Now, you’ll just have to manage your room rental business. This involves ensuring tenants pay rent, handling tenant issues, and tracking rental expenses.
You’ll also want to keep track of costs associated with your rental business, like property maintenance, repairs, and utility expenses, to ensure you’re making a profit and that your rent prices are appropriate.
If you want your rental business to be a success, stay up-to-date on any changes in rental laws or zoning ordinances that may affect your rental business. You also need to pay taxes on the income you receive as a landlord, but tax deductions can partially or fully offset this. More on landlord tax deductions here.
Alternatives to Renting Out Your Room
Renting out a room in your home can be lucrative, but it’s a lot of work, and you run the risk of living with someone you don’t get along with. If you’re on the fence about renting out your room, here are some alternatives:
Consider Short-Term Rentals
If you’re curious about renting out a room, but you don’t want any long-term commitments, consider listing your property on short-term rental platforms like Airbnb and VRBO. If you decide you don’t like sharing your home with a stranger, you won’t be committed to hosting someone for very long.
Rent Out the Space as Self Storage
If you’re worried about finding a suitable tenant, consider renting out your extra room as a self-storage space. List your room on a website like Neighbor, which connects individuals seeking extra storage space with those who have unused space in their homes.
Turn the Room Into an Office
You could also repurpose your room as a home-based office. Although you won’t be earning money from the room, having a space that boosts productivity could pay off in the long run. This space can serve as a hub for remote work, entrepreneurial pursuits, or any personal projects.
Summary
In addition to providing an added income, renting out a room could introduce you to a new life-long friend. To maintain a healthy relationship with your future tenant, make sure you respond quickly to any requests, keep your tenant in the loop about any upcoming repairs, and be respectful of their privacy.
