Renting Out a Room
When the economy is bad – and even when it’s not – it seems like the bills can get out of hand even before we realize what’s happening. So a creative family must devise ways to get those bills paid. There are different ways of doing this, of course. Here, the idea is for families to get what may be their largest asset-their home-to pay for itself–at least in part. This can be accomplished by renting out a room to a person who needs temporary housing.
More and more people I know are renting out the spare room in their home to get extra money. Most people use the money to offset the cost of their mortgage; other people use the extra money to pay off other bills like college tuition, cars, and credit cards. Whatever you decide to do with the money, it can be a big help in helping your get your bills paid off.
Who Makes a Good Tenant
Remember that your a tenant will be around your family and sharing your living areas and coming in and out of your home at different times, depending on their work, school, and personal schedules. That’s why it’s so important that whomever you bring into your home be compatible with your family. For example, it would be highly uncomfortable to have a tenant who works the night shift and will be awake and active when you and your family are trying to sleep. Other factors of incompatibility might revolve around smoking, pets, allergies, and social activities.
Extended family members can make excellent tenants or housemates–assuming that you get along with them. Almost equally as good is a tenant who comes personally recommended by your family or close friends–because your family and friends have a good idea who will be compatible with your family.
How to Find a Tenant
- Referrals from family, friends, or coworkers
- World of mouth from people you know casually – your mailman, grocery store clerk, gas station attendant, etc.
- Church referrals
- Local Housing Authority referral
- Newspaper ads
- Listings with local community college – students may need housing
- Listings with local board of education – new teachers moving to the area may need housing
- Listings with any nearby military bases – members of the military who are new to the area may need temporary housing
- Department of Social Services – may provide listings to persons temporarily without housing
How Much Should You Charge?
Divide the amount of your monthly mortgage payment by the square footage of your home; this will give you the monthly price per square foot that you are paying for your home. Now, multiply this figure by square feet of floor space in the room you are thinking of renting; this will give you an estimate for the base price you should charge for the room. Now to add up the utilities….
To get the utilities fee for the room you’re going to rent–add up all your utilities for the home: electricity, oil, water, sewer, cable, phone, Internet, etc. Divide this cost by the square footage of your home to get the utility cost be square foot. Multiply this figure by the square footage of the room you’ll be renting–the resulting figure will give you the utilities fee for the room.
A Combined Rate for Room and Utilities
Providing the tenant with a single, consolidated fee for room and utilities is generally easier to deal with than trying to collect from the tenant each time a bill comes in. For a combined rate, add the base room price to the utilities price for the room.
Remember, the tenant will not be secluding themselves in their room while staying with you–so they’ll actually be making use of more square footage than just their room. With this in mind, the calculation used above would seem to be a real bargain for them, considering they are only paying for using the square footage of their room. On the other hand, you and your family are benefiting long-term by the extra money coming into the house because the home will belong to you, once it’s paid for. So it kind of evens out.
One final consideration–check your local room rental listings to see if what you want to charge is consistent with what similar rooms cost–otherwise, you may not get much response from your listings.
Things to Consider Before You Rent
Personally, I would strongly recommend:
1. a lease agreement to be signed by the tenant and yourself. This agreement should spell out the responsibilities of each party, and should specifically state the terms under which the tenant will keep–or lose–their security deposit. Also spell out if the tenant will be responsible for paying for any damage he or she causes to your home or property.
2. collecting a security deposit from the tenant, along with the first month’s rent, in advance.
3. having a credit check done on the tenant. You need to make sure the tenant can reasonably afford to pay their bill to you.
4. completing a background check on the tenant. I would think this is non-negotiable, considering this person will be in close proximity to your family–and to your belongings. Remember, you can’t always know a person’s intentions based on their appearance or on your first impressions of them. And when the safety and well-being of your family is at stake, you can never be too careful.
All Things Considered
There’s a lot that goes into renting out a room in your home. Ultimately, only you and your family can decide if it’s workable–and desirable. But if you really need the extra money, renting out a room can bring in a nice extra chunk if cash for a while.
Seen from another perspective: when your rent out a room, your house will pay for itself – at least a little.