Renting A Bedroom In Your House: What You Need To Know

Renting out a room in your house can be a great way to generate extra income and help cover mortgage costs. However, it's important to remember that becoming a landlord comes with certain responsibilities and legal considerations. From tenant screening and lease agreements to maintenance and repairs, there's a lot to keep in mind. In addition, you'll need to understand the tax implications, as rental income is usually considered taxable. While it can be a lucrative move, it's important to carefully weigh the pros and cons before deciding to rent out a room in your house.

Legal and insurance requirements

Before renting out a room in your house, it is important to understand the legal and insurance requirements to ensure compliance and avoid potential issues. Here are the key points to consider:

• Local Laws and Zoning Requirements: Familiarize yourself with the city's legal and zoning requirements. Some areas may have restrictions on renting to unrelated individuals, and certain conditions or inspections may be necessary for your space to be rentable. Understanding these requirements will protect you legally and ensure a smoother rental process.
• Insurance Coverage: Contact your insurance provider to review your policy. Renting out a room may affect your insurance coverage, and you may need to obtain landlord insurance to protect yourself in case of property damage, lawsuits, or loss of income.
• Lease Agreement: Create a comprehensive lease agreement that outlines the terms and conditions of the rental, including rent amount, payment dates, security deposit, utilities, pet policies, and house rules. This agreement should be legally binding and compliant with local laws.
• Fair Housing Laws: Comply with the Federal Fair Housing Laws, which prohibit discrimination based on race, colour, national origin, religion, sex, familial status, and disability. Be aware that some states have additional protected classes, such as sexual orientation and gender identity.
• Tenant Screening: Conduct thorough background checks on potential tenants, including credit and criminal history checks, and verify their rental history by contacting previous landlords. This will help you find reliable tenants who will respect your property and comply with the lease terms.
• Privacy and Boundaries: Understand and respect your tenant's right to privacy. Their rented space belongs to them while they are paying rent, and you cannot enter their room without giving advance written notice, except in cases of emergency. Clearly communicate boundaries and expectations before signing the lease agreement.
• Maintenance and Repairs: Stay on top of maintenance and repair issues to provide a habitable living space for your tenant. Address heating, plumbing, and electrical problems promptly and be prepared to handle normal tenant issues, such as leaky faucets or faulty light switches.
• Eviction Procedures: Familiarize yourself with eviction procedures in your state or city. Know your rights and responsibilities as a landlord, and follow the legal process if you need to evict a tenant. Provide proper notice and allow the tenant a chance to correct any issues before proceeding with eviction.
• Tax Implications: Rental income is taxable, and you must declare it on your taxes. You may also be able to claim deductions for expenses related to renting out the room, such as repairs, upgrades, and certain home improvements. Consult an accountant to navigate the tax rules and ensure compliance.

Preparing the room

Before renting out a room in your house, it's important to ensure that the space is ready for a future renter. This involves making any necessary repairs or upgrades to ensure the room is a habitable living space. Here are some steps to help you prepare the room:

• Fill holes, refresh the paint, and replace the carpet or flooring if needed.
• Ensure the room has adequate heating, plumbing, and electricity.
• Schedule a third-party inspection to identify any maintenance issues.
• Hire a pest control company to inspect the interior and exterior of the home.
• Perform a deep clean of the property before showing it to potential renters.
• Organize shared spaces and set clear boundaries to establish guidelines and expectations for tenants.
• Consider whether to rent the room furnished or unfurnished.
• If renting furnished, take an inventory of the furniture and other items provided and do a walkthrough inspection with the tenant before they move in.
• Specify which bathroom the tenant will be using.
• Consider installing a lock on the bedroom door to provide the tenant with privacy and security for their belongings.
• If renting out a separate space, such as a basement apartment or guest house, ensure it has its own entrance, kitchen or kitchenette, and full bathroom.
• Check local housing codes and requirements, such as the need for an egress window or a fire extinguisher.

By following these steps, you can ensure that the room you are renting out is safe, functional, and compliant with any legal requirements, providing a comfortable and private space for your future tenant.

Setting the rent price

Setting the right rent price for your room is a crucial step in renting out a room in your house. Here are some tips to help you set a competitive and fair price:

• Research the Market: Start by researching similar rental offerings in your area. Look at rental listing sites and compare prices for rooms with comparable size, location, and amenities. Consider the location of your property and the demand for rentals in your area. If there is high demand and low supply, you can set the price higher.
• Calculate Using Home Value: One rule of thumb is to set the rent price at 0.8% to 1.1% of your home's value per month. For example, if your home is worth $400,000, a rental price between $3,200 and $4,400 per month would be appropriate.
• Consider Comparable Rentals: Find out how much rent others are charging for similar units in your area. Look at factors such as square footage, number of bedrooms and bathrooms, age, amenities, and location. This will give you a good sense of the market rate for your room.
• Factor in Amenities and Location: If your property has desirable amenities such as a pool, tennis court, outdoor space, parking, or laundry facilities, you can charge a higher rent. Additionally, consider the location of your property. Is it near schools, colleges, or public transportation? These factors can also command a higher rent.
• Understand Your Costs: Calculate your monthly operating expenses, including mortgage, insurance, utilities, and maintenance. Make sure the rent you charge covers these costs and provides a reasonable profit.
• Be Flexible: Remember that you can always adjust the rent price up or down as needed. If your room sits empty despite being listed and advertised, you may have set the price too high. On the other hand, if it gets snatched up immediately, you may have gone too low and can adjust the price at lease renewal.

Screening applicants

• Establish clear screening criteria: Determine the specific criteria you will use to evaluate potential applicants. This may include factors such as credit score, rental history, income, and pet ownership. Be sure to comply with local laws and regulations regarding tenant screening.
• Pre-screen interested renters: Before showing the property or requesting rental applications, pre-screen applicants through an online questionnaire or phone call. Ask questions about their income, rental history, and comfort with undergoing a credit and background check.
• Schedule in-person showings: If an applicant meets your initial screening criteria, schedule a time to show them the room and the rest of the house. Use this opportunity to outline any rules and expectations you have for potential tenants.
• Conduct comprehensive tenant screening: For applicants who seem like a potential fit, conduct a thorough screening. This may include running a credit check, background check, and verifying their rental history with previous landlords. Use a reputable tenant screening service to obtain screening reports and make informed decisions.
• Compare applicants with others in your area: Utilize tools that allow you to compare your applicant's score with average scores in your area. This can help you identify tenants who are more likely to pay rent on time, treat the property with care, and stay for longer periods.
• Make your final decision: Based on the screening results and your criteria, make an informed decision on which applicant to choose. Remember to trust your instincts and select someone you feel comfortable living with.

Remember, screening applicants is a crucial step to help you find a reliable and compatible tenant. Take your time, be thorough, and don't be afraid to set high standards for your ideal tenant.

Lease agreements

A lease agreement is a legally binding contract between the landlord (or principal tenant) and the new tenant. It details the relationship between the parties and serves as a comprehensive guide for tenant responsibilities and rights.

• The date of the agreement and the length of the lease.
• The contact information and details of each tenant.
• The address of the premises being leased.
• The amount of rent and security deposit to be paid.
• The primary responsibilities, chores, and obligations of the new tenant.
• How utilities will be divided between tenants.
• Parking details, including the number of vehicles and parking spots allotted to each tenant.
• Each tenant's responsibility for damages they or their guests may cause.
• Whether the new tenants will purchase renter's insurance.
• Rules regarding smoking and alcohol consumption, including designated areas and hours.
• Whether pets or guests are allowed.

Frequently asked questions