How to Rent Out a Room in Your Home
Many of us can relate – the extra bedroom, empty except for a bed, a nightstand, and other odds and ends. Yes, a guest room is a nice thing to have, but it’s beginning to feel like wasted space. You’re paying money each month for square footage not in use. So, how do you get your guest room to make you some extra income? Let’s take a look at how to rent a room out in your home in the best (and safest) way for you.
Reasons Behind Current Short Supply
Shaun Hildebrand, President of Urbanation, attributes growth to a record population growth of over in the past year, and decreased homeownership affordability due to the interest rate spike last year. He anticipates further pressure on rent in the coming months as supply struggles to keep up with demand. Ontario’s medium-sized cities experienced the fastest-growing annual rent increases, with New York, Toronto, Miami, Scarborough, Vancouver and Brampton leading the list due to high levels of immigration. Annual average rent rose 35.9%, while saw a 29.1% increase.
What is a Shared Household?
A shared household is defined as a household with at least one “extra adult” who is not:
- The head of the household
- The spouse or unmarried partner of the household head
- An 18- to 24-year-old student
This applies where the tenant does not have exclusive use of more than one room and shares any or all of a kitchen, a room suitable for living in, or a bathroom or toilet. It also applies to joint tenants who do not have sole use of more than one room. A recent study found, in part, that in 2017, almost 32% of the adult population lived in a shared household.
Rent Out Part of Your Home?
If you own a home with additional rooms that are not being used, then you might consider renting out that extra space. Many understand how to turn a basement area into extra income, but how do you rent out a spare bedroom? What about shared space? Before we get into the details, let’s look at the perks of the extra income that may come from renting out a room in your home.
The USA and Canadian rental market has been experiencing a notable surge, with average asking rent for all property types rising 10.8% annually in March to $2,004, $2800 according to the latest National Rent Report If you’re looking to take on a tenant to help cover your mortgage payments or earn additional income, then there are plenty of renters searching for a space to lease.
- Supplement monthly income
- Renovations can increase home value
- Pay off your mortgage quicker
- Learn the skills for running a rental business
The growing demand for rental housing and insufficient supply in the country has brought about amplified interest private room and shared-accommodation rentals.
The average asking rent for single room rentals in USA, Canada was $834, $1500 in March, with New York , Los Angeles, Boston, Vancouver and Toronto having the highest single room asking rent, averaging from $1,410, $1,740 and $1,909, respectively.
Renting out a room in your house comes with its own set of challenges, namely, finding tenants who will pay rent on time. When you take on a room tenant (or roommate), you also take on a significant amount of responsibility. Even if you’re not renting out an entire property (and live there), you are still considered a landlord. Which means you are subject to the rules and regulations governing landlords. Additionally, you’re choosing to share your living space with a stranger, which can become frustrating the longer you live together or a potential safety risk if not properly vetted,
Rental Income and Your Homeowner's Insurance
Renting out a room in your house can offset your mortgage payments. If you’re struggling to make ends meet or looking for extra cash, having a tenant allows you to collect rent as a new income source. But don’t forget about your homeowner’s policy when considering taking on a tenant. Most traditional home insurance services are not set up to cover room rentals. You will need to meet with your insurance broker and discuss your options. You can amend your current policy to cover the room rental, or scrap your old policy altogether to create a comprehensive new one. Moreover, there is a chance that your premiums may go up with your new policy if it includes a clause for the room rental.
It’s important to note that if you are simply renting out one room to a single person, you are not operating a business. However, if you are renting out multiple rooms, or will be having a rotating number of guests, you need to purchase commercial insurance. Why? Because you are technically running a business out of your home.
If you are considering becoming a landlord, it can be challenging, time-consuming, and even risky due to real estate being such a sizeable investment. Residential landlord insurance, also known as rental property insurance, is exactly what it sounds like. It will typically provide protection for property owners from financial losses or damages that are related to their rental properties.
Landlord coverage includes:
- Content Insurance: Coverage for the building and the contents within it.
- General Liability Insurance: Covers liability arising from ownership of the property.
- Property Insurance: Covers your building structure from natural damages, such as fire or weather-related damage.
- Losses of Rental Income: If your rental property is destroyed or damaged to the point where it is uninhabitable, your coverage will pay for the missing funds until your tenants can resume renting again.
Don't Keep it a Secret!
When renting out a room in your home, tell your insurance company and insurance broker. You may feel that disclosing this information isn’t important when in fact, it’s crucial. Unfortunately, not everyone is going to treat your property with respect. If you don’t tell your insurer that you have rented out a room and that person causes damages, you will not be covered.
Can you legally rent a room in your house Ontario?
A room rental still falls under the Residential Tenancies Act unless the roomer is required to share the kitchen and/or bathroom facilities with the owner, the owner’s spouse, child/parent or the spouse’s child or parent.
What is the difference between a boarder and a tenant?
A boarder is someone whom a tenant allows to reside in his/her apartment. Both roommates and persons subletting an apartment are considered boarders. Boarders are not recognized by landlords or the Tenant Protection Act. Boarders are subject to contract law between themselves and the tenant.
How do I evict someone from renting my room in my house?
Overall, the process can take 85-138 days after providing your tenant with an eviction notice. However, it can take up to 168 days if you need to remove the tenant forcefully.
Single room rentals may not be a new idea, but their popularity is becoming more prevalent. It can be a lucrative move and help you handle your monthly mortgage payments. However, you should consider how to rent out a room in your home. Remember, a new individual will be living with you on your property, so ensure you’re protecting your investment and yourself by thoroughly screening tenants before signing a rental agreement.
If you are considering becoming a landlord and renting out your property, give one of our knowledgeable insurance brokers a call. We take pride in finding you the best rates on the market when it comes to landlord insurance. With our top-notch customer service, we can make finding a policy that suits you and your budget easier than ever.