Most people think of landlords and tenants living in separate spaces, but what about when you decide to rent out a room in your home?
In doing so, you’ll be a landlord just as surely as if you owned another building that you would be renting.
In the event that you decide you want to rent a room, many of the same lessons, tips and procedures can be implemented to ensure that you and your tenant roommate are conducting business in a fair and legal way.
A Table of Contents for Renting Out a Room in Your House:
- What Does Renting Out a Room Mean Exactly?
- Renting a Room in Your House Laws
- Preparing the Room
- Marketing Considerations
- How to Screen a Roommate
- Room Rental Agreement for Private Home
- Taxes When Renting Out a Room in Your House
If you have unused space in your home, renting out a room might be a nice way to earn some extra money.
Renting out a room may be an actual bedroom, mother-in-law space or some combination of bedroom and bathroom, plus kitchen access.
No matter what space you decide to rent, realize that it means you will have another person living in your home.
There will be times where you get along wonderfully and also when they will probably get on your nerves at some point.
Remember that renting out a room is different than subletting, which happens when you are renting a place you don’t own, but rent your space to someone else, while still being responsible for rent to the landlord.
Renting out a room in the property you own is a different situation, which is more of a landlord/tenant relationship than two renters together.
Some municipalities have rules and restrictions about renting rooms in homes, so make sure your desire to rent out unused space will keep you compliant with the law.
There are a number of conditions that might affect whether or not you can even rent out space in your home.
One example might be that if you own a condo somewhere and your homeowner’s association prohibits additional occupants that aren’t family members.
Your city or town might also have zoning laws that prevent residents from renting to people who are unrelated to them without a license or permit.
There could also be restrictions on the number of unrelated people to whom a homeowner can rent.
Check your city zoning laws to ensure you are proceeding legally.
In some cases, there might be conditions to renting out a room in your home, such as if your city requires unique, independent outdoor access for any rental space inside a home.
In some municipalities, you might need to get an inspection completed in the room before you can rent it out.
Make sure your unused space is in compliance with whatever regulations govern your area.
Ideally, your unused space is a habitable place with proper heating, electric and plumbing system in place.
You can’t deny your tenant roommate the use of a bathroom, so make sure you specify which one “belongs” to the tenant.
Your tenant also has a right to privacy, so you may want to consider installing a lock on the bedroom door.
That way, the tenant can make sure their belongings are secure and enjoy privacy when they are home if needed.
Many people looking to rent a room are seeking one that is furnished.
If you decide to provide the room for rent as furnished, make sure you take a careful inventory and both complete a walkthrough inspection before signing the lease agreement.
You can take pictures of the furniture, walls, carpet and so forth so you both have a visual record of the condition of the room before occupancy.
Create your ideal tenant roommate avatar, and set the standards by which you will select a tenant.
Will it be a college student? A retiree? Someone with no criminal background?
You can set up specific criteria for who you will consider, just as you would if renting an entire property.
There is one important thing to note when crafting your tenant avatar that is exclusive to those renting out a room or getting a roommate.
When selecting a roommate, Federal Fair Housing Laws allow some exceptions to the traditional protected classes.
What this means is that when it comes to renting out a room in your own home, advertising for a tenant roommate and choosing one have certain conditions and exceptions attached.
Federal Fair Housing laws don’t allow anyone to use discriminatory language when advertising for a tenant or tenant roommate.
However, you can include a preference for the sex of the roommate in your ad.
In other words, if you are a female, you can advertise for a female tenant, but can’t include any other qualifiers in the ad.
When it comes to making the decision about which applicant to choose to live in your home, however, new court rulings have opened the door to allow homeowners and tenants seeking roommates to choose based on their own personal criteria, even if it is discriminatory.
In 2012, the 9th Circuit Court held that applying a nondiscrimination requirement to a homeowner or tenant’s roommate selection would be a serious invasion of privacy.
When selecting a roommate, therefore, the anti-discrimination provisions of the FHA don’t apply. You can be free to choose your new roommate, even by discrimination, because of the shared space factor.
Because selecting a roommate increases personal risk and affects an owner’s quality of life, the court allows more particular reasons for selection.
If you were selling or renting an entire unit separate from your own living space, nondiscrimination laws would, of course, apply.
Once you’ve put an ad together, it’s time to get it out there. Consider that your tenant may not look in the normal places for your ad.
Try a college campus housing agency or college newspaper, or a senior citizen center for a single looking for a room.
Since you won’t be attracting a family, for example, you can focus on more of a niche marketing approach than a wide net.
Spread the word with friends and family as well, because networking can often yield good results.
As always, a good tenant screening is invaluable and will eliminate a lot of trouble for you down the road. You can conduct the screening on your own or use a professional service for a reasonable fee.
One thing to ask for in a room rental/roommate situation is to get references for previous roommates if the applicant is willing.
It’s much different to find out what a person is like to live with from a former living partner than to ask the landlord, who probably won’t know what that person is like in the day-to-day.
If you’re renting out a room it’s extremely important you get a good renter in your home.
Normal tenant issues are amplified when you’re sharing a home with the renter.
Our tenant screening guide will walk you through how to find a great renter.
To do this properly AND legally you need to start with a compliant rental application that gives you (the landlord) permission to run a background check and contact references.
If you haven’t already, enter your information and get our legally binding rental application:
Once you have the proposed tenant fill out the application you should run a full background check.
We can do this for you right here at RentPrep.
Yes, even when renting out a room, it’s a smart idea to have a lease agreement that specifies what is expected of a tenant roommate and what your responsibilities are as a landlord.
While many states accept an oral rental agreement as legal and binding, it’s much smarter to put everything in writing and have both parties sign it.
That way, if any conflicts or problems arise in the future, you both have a resource to use.
A room lease agreement should list the specifics on your expectations for the tenant roommate.
Here are 5 things that the lease should include:
- The length of time that the tenancy will cover. Lease agreements typically go for one year, but if you are renting to a college student, you may want to consider a 9- or 10-month lease to coincide with the school year. Or, if you want to create a 6-month lease agreement to see how you like renting out a room in your home, that’s perfectly fine as well.
- Defining shared space. Renting a room means that the tenant can expect privacy in their own room, but the shared space between you can lead to some conflict down the road if not discussed up front. Unless the rental space is a mother-in-law apartment style in your home, your tenant will generally need access to the kitchen, bathroom, laundry room and even the living room. Parking in the driveway and use of the backyard or balcony should also be part of the discussion. Specify what spaces are off limits as well. Make sure your lease clearly outlines the rules and regulations about all shared space.
- Utility responsibility. If you are renting out a room in your home, you won’t want to turn the utilities over to a tenant. Instead, pay the utilities yourself and boost the rent a little to cover your tenant’s portion. However, some landlords may still want to split utilities down the middle, or have the tenant pay one utility like the cable or the internet, for example. You’ll simply have to examine your own situation and see what is best for you.
- House rules. Make it clear what your expectations are when it comes to behavior from your tenant, especially with regard to noise, overnight guests, pets and extended vacations. Because you will essentially be living with a roommate, you can eliminate a lot of confusion and gray area by presenting applicants with a clear list of house rules to see if they have any problems with living to your standards. Make sure the tenant you choose gets a copy of the rules and refer to them as needed if your tenant roommate isn’t following them.
- Set the rent and deposit amount. Specify the rental rate, due date, and the security deposit amount in the lease agreement and let the tenant know that in the event of late rent, the eviction process works the same as it does if you were renting out a separate property. Conversely, you are also responsible for following the law when it comes to official notices, maintenance service and returning a security deposit.
Any rent that you receive is taxable income.
However, you’ll be able to claim expenses and deductions when renting out a room that you could not claim before.
If the carpet needs to be replaced you’ll be able to deduct the cost of the new carpet in the room that is being rented.
If you are planning to rent out a spare room in your house you’ll want to figure out the square footage of that room and what percentage it accounts for in your home.
If you have a 2,500 square foot home and the room you rent out is 500 square feet this would account for 20% of your square footage.
The fraction of the mortgage interest, utilities, or real estate taxes that is due to your roommate is one-fifth. These expenses are deductible as rental expenses on Schedule E. [source: H&R Block]
Doing It Right Pays Off
You’ll run into far fewer issues if you implement this phrase, which should be every landlord’s mantra—“Treat it like a business.”
The horror stories that come from landlords who have rented out unused space in their homes are often avoidable when you treat this landlord/tenant situation like any other.
Written lease agreements, inspections, maintenance, dealing with money and even evictions are all a part of being a landlord and that shouldn’t change if the tenant is in your own home or in a separate rental property.
As a landlord or property manager, you will find it extremely common to have to modify leases and rental agreements to accommodate your tenants. Sometimes, you are asked to remove a tenant because she has to move away; other times, you may need to add on a tenant.
Sublet Options in College Apartments
Of course, in a college town, you are also faced with the very high probability that many of your tenants will want to return home for summer vacation, leaving you with a lot of vacancies. This, of course, is why rental agreements and leases in college towns are 12 months long rather than 9 months long so you get the assurance of those 3 summer months of full rent.
This is not to say that your tenants won’t go home anyway. You can earn a lot of goodwill simply by suggesting to your college-age tenants who want to return home that they find people they can sublet their apartments too. This is a common practice in towns and cities that have thousands of college-age students.
The concept is quite simple: As a landlord or property manager, you can consent to a subleasing agreement between your tenant and his subtenant. Of course, you can also decline. Your tenant is still financially responsible for all rent that is owed to you and he will be held liable for any non-payment.
However, you will be better off in the long run if you help your tenants find subtenants.
They will most likely return when school starts up again. You will also get the benefit of having an occupied apartment for the three months that your tenants are gone.
You may be amazed at how quickly an apartment unit goes downhill when nobody is in it. You will have to do more cleaning and maintenance if you don’t fill the space with a subtenant.
It’s just a part of the business.
FAQs: Renting A Room In My House
How much should I charge to rent a room in my house?
The first thing you should do is look at any comparable rents in your neighborhood. See if there are similar situations where a landlord is renting out a single room. This is going to give you the best idea of what market rents are for a roommate situation.
Next, look at traditional rents in your area and compare how your rental situation stacks up.
The type of renter you’re looking for can’t afford (or doesn’t want to pay for) a one bedroom studio. Knowing this, you should be priced well below these one bedroom options to entice a renter to stay on your property as a roommate.
Renting out a room in my house to a friend
This is a tricky situation because you’re blurring the lines between landlord and friends.
Some landlords consider this one of the cardinal sins of property management and will tell you to never rent to a friend.
The upsides are that you have an idea of who the person is and how they will treat your property.
The downsides are that you’re introducing a financial component into your friendship. What happens if they’re late on rent or if there is a dispute over damage in the rental?
Many landlords would tell you that you’re better off renting to a stranger after a thorough screening process. There will be clear lines in the relationship and it will be easier to treat your rental income as a business.
Is renting a room taxable income?
Yes, any income generated from renting a room (in the United States) is taxable income. However, if you rent out the room for less than 15 days this does not apply as long as you use the residence as your general housing for at least 15 days yourself.
List All Adults in the Lease Agreement
It is prudent to get every adult inhabitant of the rental agreement or lease. Failure to do so can lead to some hairy issues down the line. For example, you need to serve the leaseholders when a potential legal issue arises. If there are three inhabitants of an apartment, but only one is on the lease and you can never find him home, it will be difficult for you to begin an eviction process.
It still can be done, but it is more difficult and time-consuming. If you had gotten all the people living in the apartment on the lease, however, you could serve any one of them.
How Do I Evict My Tenant’s Roommate?
If your tenant added a roommate without consulting the landlord or lease you may want to evict both parties.
If the lease contains a specific notice provision, the landlord should act on it as soon as possible by giving notice to the current tenants that they will have to move out of the premises.
If the lease has no notice provision, the landlord may have to give notice according to the laws of the state in which the property is located. In these situations, notice may be the length of a rent-payment period or longer.
The landlord may have the opportunity to pursue an eviction on the basis that there are unapproved tenants living in the unit if the lease allows for eviction on this basis.