How to Generate Extra Income by Renting Out a Room in Your House
If you find yourself in need of some additional cash, one effective method to consider is renting out a room in your house. While it may not be as simple as listing your home alongside other apartments or rooms for rent, it can be a legal and lucrative option for homeowners. However, before you dive into this venture, there are several important factors to consider. In this article, we will explore the step-by-step process of renting out a room in your house and maximizing your income potential.
Step 1: Become a Landlord
Although you may not feel like a traditional landlord when renting out a spare room or the space above your garage, legally you will be recognized as one. It is crucial to familiarize yourself with the responsibilities and obligations that come with being a landlord. Educate yourself on the tenant laws specific to your state, which encompass timely repairs, respecting tenant privacy, and providing a peaceful living environment.
Before making a decision, research the landlord and tenant laws in your state and assess whether your lifestyle aligns with having a tenant in your home. For example, if you tend to be active during late hours, this may conflict with a tenant who prefers an early bedtime. Additionally, ensure you have the financial means to address any repairs or issues that may arise as a landlord. Evaluate whether your house is in suitable condition for renting and if you have the necessary resources to cover potential repairs.
Step 2: Find Suitable Roommates
When renting out a room, you are essentially becoming a roommate due to the close quarters. Consequently, it is essential to select tenants with care to avoid potential conflicts. Ask yourself if you are ready to share your personal space with someone else and determine if the potential rental income outweighs the challenges of living with a stranger.
There are numerous avenues for finding roommates. Utilize your social networks, and other relevant platforms to advertise on iROOMit, Padsplit, Zumper or Zillow for Rooms availability However, exercise caution even when dealing with acquaintances. Thoroughly screen potential applicants, including conducting credit and criminal background checks where permissible by law. This ensures a safer and more reliable tenancy.
Step 3: Create a Comprehensive Lease Agreement
While a verbal agreement might seem sufficient, it is highly recommended to draft a written lease agreement that both parties can sign. Verbal agreements often fail to hold up in court, leaving both you and your tenant vulnerable. If you are uncertain about how to create a lease agreement, seek assistance from your local housing authority or a consumer attorney in your area. Alternatively, you can download a sample lease from reputable sources like iROOMit.
Additionally, consider requesting a refundable security deposit from your tenant. This deposit provides a layer of protection in case any issues arise. However, be sure to familiarize yourself with the rules and regulations governing security deposits in your state. Some jurisdictions impose limits or specific requirements, such as keeping the deposit in an interest-bearing account until the lease concludes.