If your child recently moved out, or if you fell in love with a huge house and then realized it was a little too big, you might want to consider renting out a spare room. While taking on a tenant can be helpful in several ways, it could also have pitfalls.
Many homeowners rent out a spare room to generate extra income. Rent payments can help cover the cost of the mortgage, homeowners insurance, maintenance and repairs.
It’s important to understand that rental income is taxable. Depending on the amount you receive, that extra income could even push you into a higher tax bracket. Figure out fair market value for the room and how much you’d need to pay in taxes to decide if renting out a room makes sense financially.
Companionship and Help
If you and your renter’s personalities clicked, you could enjoy having some company. You might even become close friends and develop relationships with each other’s family and friends.
If your house needs repairs and your renter has the skills and time necessary, you might be able to work out an arrangement in which the tenant makes repairs in exchange for a rent reduction. The tenant might also be able to help with landscaping, snow removal and other chores.
Loss of Privacy
Even if you and your tenant get along, you’d still be sacrificing some of your privacy. If your tenant and your friends hit it off, but you wanted to spend time alone with your friends sometimes, the renter might be hurt. Your tenant might also be able to overhear private conversations or learn personal information about you, either accidentally or intentionally.
Tenants sometimes damage the properties they live in. Accidents happen, but some renters are particularly careless or reckless. Others intentionally cause destruction because of a dispute with the landlord or someone else. If that happened, you might need to call the police and possibly pursue criminal charges, a civil case or eviction proceedings—all of which could take several months to resolve.
A renter might go through your mail, steal money or valuables, use your credit cards without permission, commit identity theft or behave violently. A tenant could also engage in other illegal activities at your home without your knowledge.
Think It Over
Before you rent out a spare room, carefully consider the pros and cons. Figure out how much you could charge for the space and how much you would have left after paying taxes. Then weigh the financial benefits, as well as the possibility of having a friendly and helpful tenant, against the risks. If you decide to invite a renter into your home, carefully screen applicants to make sure they’ll be a good match.