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If you have a spare room in your home, renting it out can be a way to earn extra to pay the mortgage. There can be problems with this sort of arrangement, however, that could make you wish you hadn’t invited a renter into your home, so it’s important to be educated about the process as much as possible.

Renting out part of your home does put you in the position of a landlord with the associated responsibilities. You have to understand what your legal situation is and how to deal with issues that arise in dealing with your tenant.

Let’s take a look at the most vital things you have to know when renting a room in your home.

Knowing the Rental Laws Are Vital

You have to read up on the laws that will apply to you in your state, as they differ nationwide. There could also be specific rules in your local area; for example, if your homeowner’s association has provisions that could prevent your plans. Make sure you understand your city’s zoning laws and HOA rules, if applicable.

Finding the Right Tenant Is Critical

You want to find someone who is going to be an excellent tenant, and who you can trust in your home. Ask yourself, “Is this person right for renting a room in my house?”. If the honest answer is no, look for someone else. Remember renting out your house is a bit different because you won’t have to put up with that person’s behavior and potentially odd habits.

You should screen your potential tenants to check that they can afford to pay the rent and are reliable. Ask for references and check them. Find out about their employment and earnings, and use tenant screening services. Check that everything they tell you is accurate.

When looking for a roommate, you cannot use discriminatory language in your advertising or discriminate in your choice based on the following protected classes:

Racial identity
Religious beliefs
Nationality
Gender
Disability
Familial status

There are some exceptions to this rule as you are renting a room in your home with shared spaces. This means that, for example, as a woman, you could ask for a female roommate without breaking the Federal Fair Housing Law.

As a landlord, you also have to respect the privacy of your tenant. That means that you can’t enter their room without their permission unless in an emergency. Whether you are renting a room in your house on your own or hiring a real estate agent, it’s critical that you both understand fair housing laws!

How Much Should You Charge for Rent

Check what similar rooms are being rented for in your area. Compare the facilities they offer and increase or reduce your rental price to match what your space offers.

Is your room furnished? Many people will be looking for a room that has furniture, and if you provide this, you’ll need to take an inventory of the items for the tenant to sign. Check that everything is there when they move out and that it is in good condition.

If there is a lot of demand for living accommodation in your area, you can charge more. If you are still unsure, consult a local real estate agent for their expertise.

Don’t Forget About Taxes

You will need to pay tax on the rent you gain. There will be some tax benefits that reduce the amount you have to pay, however. Things like maintenance, insurance, utilities and advertising can be offset against your tax bill. You need to keep good records of your expenses for the end of the year when you file your taxes.

Rental Agreements Are a Must

You should set out an agreement to make sure there aren’t any misunderstandings. This should include things like the rental amount, when it is due, how it should be paid and rules for using the shared spaces in the home. Add anything to the agreement that you think might be helpful to set rules for. This agreement then needs to be signed by you and the tenant with a copy for both of you.

It is advisable that if you are renting out a room in your house for the first time, hire a real estate attorney who can draw up the agreement. Down the road, if you have a different renter, you’ll be able to use the same form again.

A Security Deposit Is Essential

A security deposit makes sure you won’t lose out if any damage is caused by the renter. There may be laws about how much you can charge for a deposit, and what should be done with the money. It may need to be deposited in a separate bank account or held in a deposit scheme. A reasonable amount to charge as a deposit is one month’s rent; this will have to be returned soon after they’ve moved out.

Just like when buying a home, there is an earnest money deposit—a security deposit in rental agreements is standard. These escrow deposits work to protect the owner’s interest in the property.

Ending the Tenancy

If even after you have screened your tenant, you start to have problems, you should try to discuss the issues with them to resolve the situation. If this isn’t possible, you will have to resort to beginning eviction proceedings. You will likely need the services of a lawyer, and there are strict laws to follow to make sure things go your way.

Before committing to renting a part of your home, make sure you understand the eviction laws for your state. Keep in mind that laws in most states heavily favor tenants and not landlords.

Final Thoughts on Renting Out a Room

Renting out a room in your home is an excellent way of bringing in a bit of extra money to help pay the bills. It is vital, however, to lay down the ground rules early on. One of the most significant disadvantages of renting a room in your house is getting a tenant who is disrespectful. Make sure you do a thorough interview with hard-hitting questions before ever coming to an agreement.

At the first sign of trouble, it’s advisable to speak up. Don’t let issues fester until it becomes a bigger problem. Hopefully, you have enjoyed these tips for renting out a room in your home and can put them to good use.

Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 33 years. He has been one of the top RE/MAX REALTORS® in New England for the past decade. In 2018, he was the No. 1 RE/MAX real estate agent in Massachusetts.

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