Many homeowners have extra rooms in their homes that they don’t end up using. So, rather than leaving it empty and unused, it’s a great idea to rent out the room. It’s not just an excellent source of income but also a practical way of paying for your mortgage. But before advertising your room for rent, remember to check your state and county laws to make sure that you’re complying with the essential housing, license, and fee requirements. To make the process less overwhelming, we have a list of 10 simple steps for your benefit.
1.Check local laws and HOA rules
The first thing to do is find out the tenant laws in your city or municipality. The laws may differ from place to place. Call your local housing authority or browse your city government website to access information about renting out a room in your area. If you’re a homeowner association (HOA) member, look through their by-laws to see if rentals are allowed.
2.Talk to your insurance company
When you’re sure that you’re legally permitted to rent out a room in your house, find out whether your homeowners insurance policy approves it. Some companies may not have any issues with it, but others prohibit renting out parts of a house. In such a situation, having a tenant increases your liability and property damage risk, so your insurance carrier might nullify your coverage. What do you do then? You’ll need to get landlord insurance that may cost you more than homeowners insurance.
3.Prepare the house
Before your home is ready to be shown to people, you need to ensure that it’s in reasonably good condition. So, make sure you take care of these things:
- Add keyed deadbolts on all bedroom doors.
- Remove self-locking door knobs to prevent lockouts.
- Put all your jewelry and other valuables in a fireproof safe fixed to the floor.
- Fix anything that’s gone through wear and tear over time.
4.Decide which room (or rooms to rent out)
Look at all the rooms in your house and decide which one seems worth renting out. Does it have its own bathroom? An excellent option could be a basement setup with a kitchen since it’ll offer more privacy than a shared level.
5.Figure out what to charge as rent
Look at ads on different websites or register for a service like Cirtru to get a rough estimate of what you should charge based on your zip code and the type of rental room you’re offering. Any income earned here is taxable and what’s even better is you can claim expenses for the section of the property that’s being rented out. Seek a tax expert’s help to determine how much you can claim.
6.Add specifics in your advertisement
You need to be honest with yourself about what you’re looking for in a potential tenant. If you wish to have someone who’s a non-smoker, doesn’t have a pet, or doesn’t party hard, mention it in the ad. If you’d like a tenant to live at your rental for at least six months, you need to include that as well. If the neighborhood you live in has excellent restaurants, is close to good colleges and universities, and so on, don’t forget to add these details in the ad. Last but not least, add beautiful photos of your rental property. After all, one of the first things that attract tenants to explore a property is its photos!
7.Use your sixth sense but don’t discriminate
Think through and make a list of relevant questions you’d like to ask a prospective tenant. Here are a few reference questions you can look at for inspiration:
- Why have you decided to move?
- How long do you need or want to rent?
- What’s your preferred move-in date?
- Where do you work?
- How long have you worked there?
- What’s your current income?
- Would anyone be living with you?
- Will your current landlord give you a good reference? If not, why?
- Have you ever been evicted?
- Will you be able to pass a background and credit check?
You can add to the list of questions as you see fit. Without prying too much, have them share specific details and see if you feel the need to raise any red flags. Remember to ask for references and contact information for previous landlords and ensure that you call them. Finally, you need to make sure you provide an equal housing opportunity and avoid discrimination among tenants.
8.Verify with a credit check
If you’re satisfied with the interview and the reference checks, run a soft inquiry credit check. Cozy can help you get a credit check and background check report from a potential tenant. The tenants need to pay for the reports. Based on the results of the reports, you can take a call who you wish to take as a tenant.
9.Have a written rental agreement
Ensure that there’s a written lease agreement. Verbal agreements rarely work, are selectively remembered or conveniently forgotten, and are difficult to prove in court. When putting together the lease document, add specific details about the following:
- The rent amount
- The rent due date
- Whether the tenant will be responsible for utility payments, which ones (if at all), or what percentage
- How you’ll deal with the food, fridge space, shared spaces, and laundry
- Any additional concerns (like parking, cleaning, quiet hours, and so on)
10.Don’t invade their privacy without asking (after move-in)
After your tenant moves in, remember that the room is theirs till the time they pay rent. Therefore, respect their privacy and treat their room like a private home. The law states that you can’t enter their room without a 24 hours notice period. Familiarize yourself with the laws related to this issue; else, you may be sued for violation of privacy.
Renting out a room in your house may work out well for you for two reasons. The first and most important one is that you get to use the rent money to pay a percentage of your mortgage. And the second reason is that it might be good to have company, especially if you live alone or are an empty nester. We wish you good luck!
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