If you have an extra room, then I’m really jealous. If I were you I’d consider renting it out for extra income. Sure, there are pro’s and con’s to weigh out like, what kind of renter are you looking to have in your home? But if you sit down with your significant other and work through them you can possibly bring in a good extra income.
Blech, who wants to talk about taxes? But it’s something to be considered when you rent out a room of your home. It’s not all bad news – you may be able to deduct the expenses related to the rental from your income tax. But rental income will need to be reported to the IRS. Talk to your tax preparer and see how you can get taxes on room rental to even out.
2. To Whom Will You Rent?
This is a question to consider VERY carefully. Here are some thoughts on your prospective renters.
-Family can be a good choice, because you know what they’re like (at least in theory). But family may be a bit too “relaxed” about paying the rent, or spend more time in your house with you than in their rented room.
-Friends are another choice, because you know them well and might like to offer them a place to rent.
-Background checks are a good idea if you rent to strangers.
-Familiarize yourself with the fair housing laws in your area, so you know what’s required of you regarding the acceptance or rejection of potential renters.
-It’s not just the young who need rooms these days, although renting to a college student is a great idea. Elderly people are potential renters, too, as are recently-divorced people. It’s a good idea to be open to looking to demographic areas you might not have considered before.
3. Clear Boundaries
It’s a good idea to be upfront with any renter, whether they are friends, family, strangers, or what-have-you. Be clear about what you expect – is it okay if your renters “hang out” with your family, or do you want them to be in their own space? How much access, if any, do you want your renters to have to your house? Can the renters come and go without using the main entrance to your home? It’s better to figure these details out before rather than taking a “wait and see” approach.
These boundaries also need to be in writing and signed by all parties. It doesn’t matter if it’s family or strangers, get that contract signed with all expectations.
4. What Should You Charge for Rent?
If you are not sure what you should charge, look around at the prices of similar rooms in your area. A quick look on craigslist should help you with this. Here are some things to consider when decided the amount of rent to charge:
- Is your room furnished?
- Does the room have its own bathroom? If so, is it a full bathroom?
- How big is the room?
- How much closet space is there? If a large closet is present, it could be used as a small room.
- Is there appliances so they can cook in their space?
Renting a room for extra income can be a great idea, just make sure you go in with as much information as possible. These people will be in your home and making the correct decision for your family is key.