Renting Out a Room in Your House Legally - The Complete Guide

According to a recent survey, twenty-four percent of homeowners in the United States believe it’s important to rent out rooms in their homes while they still reside there. It would help them earn an extra income and help them pay off the mortgage if they have one.

Jim is a first-time homeowner, and he says, "Renting a room in my house was the best decision I have taken in my life. I have paid my ten years long mortgage in less than three years."

You have been thinking about renting out those spare rooms in your house, but you are not sure how to go about it.

Guide to renting out a room in your house legally:

1. Talk to the stakeholders

It is pretty apparent when you have multiple owners as also in the case where you are the single owner, you should discuss the idea of renting a room in your house even before you start the due diligence.

Once you have convinced everyone in your house, you should also consider talking to a lawyer or a legal advisor to make yourself aware of the state’s laws and regulations around renting a room in a house.

One last thing that people often take for granted is their HOA’s bylaws. Make sure there are no clauses that prevent you from renting out a room in primary residence.

2. Make your house ready for shared living

Being a successful landlord, it is your responsibility to provide and maintain all the facilities you promise to your tenants.

Ensure that your entire house, including the front yard and the backyard, is safe and compliant.

You should carry out home repairs if required and perform maintenance on anything and everything that needs attention. If need be, replace old and faulty appliances with new ones. You would not only get extended warranties, but it would also pay for itself.

3. Choose the rooms you want to rent out

If you plan to be a live-in landlord, you should select the spare room to rent out and the one you want to live in. It’s not uncommon for landlords renting out their best rooms to earn maximum rent every month.

Having a private bathroom can help you command a higher rent.

Renting out a basement with a separate entry with its kitchen and bathroom can fetch you even more rent.

4. Determine rent, deposit, and other charges

Check out the rooms posted on Cirtru, and you would get the ballpark figure for the rent; you should ask for the rooms you plan to rent out in your house.

While deciding on the rent, you should also consider the type of room you are renting out. Having a private room with a private bath will increase the value of the property and will get you the most rent, while a shared room with a shared bath will get you the least.

Generally, the landlords charge one month’s rent as a security deposit.

Variable usage utilities like electricity, gas, water, TV, and internet can run in hundreds of dollars every month. Generally, the tenants pay for it, but it’s essential to let them know whether they would be splitting equally or a different percentage would be determined upfront.

5. Post your room for rent

You can easily advertise your rooms for rent and also list house for rent on Cirtru by providing the following details:

• Location - Your exact address won’t be visible, and others will only see an approximate location.
• Space - Whether you are renting a room in your home or your entire home.
• Property - Select whether the property has a living room and the number of total bedrooms and bathrooms.
• Bedrooms - Here, you can provide individual bedroom-specific details. If it is available for rent, you can give more information like
  • Will it be a private or a shared bedroom?
  • Does it come with an attached private bathroom?
  • Do you prefer males, females, or couples?
  • How much are the rent and deposit?
  • When is it available?
• House Rules
  • Smoking Policy - Whether smoking is ok or not allowed
  • Pets Policy - Do you allow cats or dogs or both or none?
  • Lease Duration - Minimum number of months?
• Amenities - Specify the amenities that your property has to offer, like air conditioning, heating, washer and dryer, TV, internet connection, elevator, pool, gym, gated community, and parking.
• Description - Provide more details on anything that you feel was not covered in the above fields.
• Photos - The most crucial step is to provide the best quality photos of the bedrooms, shared spaces, and the exterior. Help them imagine living in your space.

6. Shortlist without discrimination

You should be aware that The Fair Housing Act prohibits any sort of discrimination in the United States based on race, color, sex, religion, national origin, familial status, and disability.

But it is normal and, in fact, recommended to be careful while evaluating prospective tenants and their rental application forms. You can ask them for references from their previous landlords. You can also ask for their pay stubs to verify their income and capability towards paying the rent on time. You can prepare a complete checklist of questions you want to ask to find a perfect tenant.

7. Perform background and credit check

Once the shortlisting goes well, you can then request a background check and credit report through Cirtru.

Tenants pay for the background check and the credit report, and they share it with you. Based on the reports, you can decide whether you want to rent out your property to this tenant or select the next one from your shortlisted pool.

8. Make everyone sign a rental agreement

Preparing a comprehensive lease agreement and having everyone sign it makes it legally binding.

The rental agreement should include:

• Lease duration, clearly indicating the start date and the end date.
• Rent amount, its due date, the rent payment options, & all the details about late fees.
• Security deposit amount and the terms & conditions that are applicable towards the refund.
• Make it clear that the tenant or the landlord will bear the payment of utilities. Specify the details mentioning the utilities like trash, electricity, gas, water, landline, TV, internet, etc.
• Other points could include details over usage of common areas like the living room, kitchen, parking, laundry, fridge, food, etc.

Conclusion

Follow this guide, and you will have complete control while renting out rooms in your house. You would end up paying off that mortgage much faster than you initially thought and start earning an extra income with minimal but diligent efforts.