How to rent out your spare room?

Last month, Alison from Diamond-Cut Life shared a guest post about providing lodging to a housemate in exchange for work (instead of rent). Her story prompted a number of readers to ask about the mechanics and practicalities of actually renting an extra room to generate income. For example, Penny wrote with the following:

In August, my brother-in-law moved in with us. By December, he couldn't find a job, so moved back out. While I had mixed emotions about his leaving, I did lament losing the potential income, because I thought my husband would never agree to renting a room to a stranger. Imagine my surprise when I mentioned the idea and he agreed to it.

I need some advice as to some things we should consider when finding a renter.

  1. What would be the best way to charge for rent? Flat monthly rate with utilities included? Weekly rate plus a third of the utilities? In our immediate area, rooms rent for $485-500 with utilities, or $125/week plus a portion of the utilities. I'm torn between the two modes.
  2. What sort of keywords should I put in the advertisement that would help find the right fit?
  3. How would food work? I don't mind cooking for everyone; in fact, I love it, but I don't want to pay for all of their board.
  4. Any other suggestions? Am I being too specific?

Our situation is a bit unusual, because we're sort of urban homesteaders. We have gardens all over our small yard. We don't use the dryer or the air conditioner. We use wood heat in the winter. Our family hunts and fishes. Will these things matter?

I'm curious about this, too. I don't know anyone who has ever rented out a room, so I don't know the process — and I don't know if the income is worth the hassle. I do have friends, though, who have been on the other side, who have rented rooms from people in Penny's position. During college, for example, my friend Andrew rented a room in a converted garage. But although the garage was attached to the house, but he didn't interact much with the family he rented from.

If I were doing this, I'd check with my lawyer and accountant to be sure I was fulfilling my legal obligations, as well as protecting myself from possible problems.

I'd love to hear anecdotes from other readers. Have you ever rented out a spare room? Or have you ever been on the other side? Have you ever rented somebody else's spare room? What did you learn from the experience? What advice would you give to somebody who was hoping to generate a little income by renting out space in their home, garage, or attic? And, finally, do you have any specific advice for Penny?

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Valerie
Valerie
11 years ago

People used to pay for room and board – they paid for their food, and the landlady did the cooking. Whole families lived in boardinghouses in the nineteenth century.

Penny might get a good tenant if she advertises in alternative or student publications. Or maybe a roommate matching service could help? (This sounds like an area the roommate services need to get into!)

grasshopper
grasshopper
8 years ago
Reply to  Valerie

1. if the person has a record or is a sex offender, it will be hard for him to leave – but on the other hand – he will be great to you because he does not want to get kicked out 2. establish where and when they are supposed to be… like if you work at your kitchen table, do you want some guy always next to you because he is too cheap to buy a wireless card so he can do his internet thing in his room? example no 2: do you want a late night person being… Read more »

Laura
Laura
11 years ago

Wow, I was surprised to see this article. We have a spare guest room/bathroom and I’ve thought of renting it out from time to time as well, but wasn’t sure where to start. I have the same questions as Penny, and look forward to reading any advice your readers have to offer!

HollyP
HollyP
11 years ago

When I was single, I rented out a floor of my house. (We each had two rooms & bathroom to ourselves, shared a living room, dining room & kitchen.) I made a strategic decision to charge below-market rent so I’d have my pick of roommates. I told everyone I knew I was looking for a roommate, and that is how we found each other. She was a friend of a friend. The one thing I wished I’d done differently was to have her agree to change her cat’s litterbox regularly. She was gone for days at a time and the… Read more »

jb
jb
11 years ago

For a couple years, I rented a house and basically sublet out two bedrooms to housemates. This was not a good situation, for several reasons that probably wouldn’t apply to others. I would *never* again rent a place with the idea of getting roommates. I also learned that I value my privacy more than I had realized, and wouldn’t want to take in a border at my house unless finances were really really tight. (And I was lucky that my two roommates only stayed there maybe four nights a week — I often had the place to myself.) If times… Read more »

Jason
Jason
11 years ago

It’s good you are actually thinking this through. To answer the individual questions, I’d start off just including the utilities if you have a good handle on what they run. For the food, I think you may be assuming too much. Do you really want the roommate at every meal, all the time? Something that starts out novel and fun soon turns into a chore. I also wouldn’t expect to find someone who is necessarily going to fit into your “urban homesteader” plan. If you do, great. But make the decision now if them not participating in your hobby is… Read more »

Ariel
Ariel
11 years ago

I rent a bedroom in a woman’s home. We found each other through Craigslist ads- this is a really good place to find a room or a renter if it’s popular in your area. Otherwise, I’d use whatever other classifieds are popular. Craigslist is free, so ads can be much more detailed than in a newspaper or other paid ad service. Because different people have different habits, I think charging shared utilities is best- that way they have incentive to keep costs down. Based on what I know from the post, I would word the ad like this: Need a… Read more »

Aaron
Aaron
11 years ago

IF YOU’RE RENTING AT A FLAT RATE, I suggest learn as much about your tenant’s daily habits as possible. You know your utilities will change, but by how much? My example: I had a friend-of-a-friend living with me for most of last year. I rented a room in my house for a flat rate. I expected my utilities to change, but I wasn’t sure by how much. He didn’t shower often, but his GF made up for it by taking LONG showers if she was at the house. He didn’t leave the lights in the house on, but his computer,… Read more »

Ross
Ross
11 years ago

We have a bit different situation as we own a side by side duplex that is designed to rent out one side. It still somewhat applies as we do share the yard and garage. The key to success is being upfront with everything. It seems weird to put somethings into a lease but if they aren’t there you have no grounds to stand on should something happen. The nice part about an owner occupied space is that you can be a little more picky about who you rent to. The law gives more flexibility. HollyP is right if you can… Read more »

Gwynn (SereneJourney)
Gwynn (SereneJourney)
11 years ago

My mum rents out a room in her place.

Rent: She charges a flat weekly rate with utilities included.

Food: She will include them in the meal if she gets a heads up. By default she assumes they won’t be eating in. She charges $10 for each meal. It’s good home cooked food so $10 is a good deal for what you get.

The renter has their own room and bathroom. They’re responsible for keeping both clean including their own laundry.

Seems to work out for everyone.

Cheers,
Gwynn

Cynthia
Cynthia
11 years ago

I would also do a background check. Where I live the police will do it for about ten dollars. I think that this could be a good situation, but there is also a lot that could cause problems–some minor, but some major.

LC
LC
11 years ago

We did this with my sister, where the situation was a little different because she was family. The going rate for a 1 BR apt around here is ~350-400. We charged her $350 but included food and utilities. Here’s what I would do: Charge monthly and include utilities in the rate you advertize. That way it’s a more simple transaction (and less often than weekly) and you don’t need to calculate anything. I would just estimate your higest utility bill and add on ~60% of that to your rent. “Lease terms negotiable” will let them know that you’re willing to… Read more »

Jason B
Jason B
11 years ago

I bought a house that I could afford without roommates, but it came with so much space and extra bathrooms that I decided to try it out. It’s not a big deal to me as a single guy. So far every person that has every rented from me has been a friend or friend of a friend. I write a long letter outlining what will and won’t be expected of them and what they can expect from me. They have to agree to that. Make a very clear deadline for rent payments. I like rolling utilities into rent, but be… Read more »

Sick of Debt
Sick of Debt
11 years ago

We rent 3 rooms in our home and have been doing so for over 2 years. We’re a bit like Penny in regards to urban homesteaders. Here are the items I would recommend: – No pets. More problems than good. – We charge by the week or month a flat rate. It makes things easier in the long run instead of arguing over how much electricity they used. – Expect them to leave lights on and use window air conditioner, so include that in your monthly rate. – We keep food out of the rent, but sometimes we’ll offer to… Read more »

Eric
Eric
11 years ago

I think this is the first time i’ve ever responded on this group. I am a bit of a financial nut. I have always bought bigger homes than i need and then rent out the addl rooms as ‘income’. My last house was 6 br/4ba. I only used two bedrooms and i put in a master bath for our exclusive use. I rented 4 bedrooms and that income alone paid my entire mortgage. I also try to have only two people max share a bathroom. Of course I had utilities to deal with but it was a small price to… Read more »

Matthew
Matthew
11 years ago

Ooh, finally something I can chime in about. I’m a homeowner who has been renting out a couple rooms for the past 3 year, so I’ve had some experience with this. It’s good that you ask these questions ahead of time, because it will help you figure out and be aware of some things that will work to your advantage on taxes. First of all, my roommates and I all have access to the whole house with the exception of our respective bedrooms. Thus, when I have 1 roommate (2 occupants) for the full year, my house is 50% rented,… Read more »

Sarah
Sarah
9 years ago
Reply to  Matthew

Would you be willing to share your renters agreement?

Mary
Mary
8 years ago
Reply to  Sarah

Was the renters agreement ever shared? I would love to use that as well if possible. Thank you very much.

sarah
sarah
4 years ago
Reply to  Mary

may I get a copy of renter’s agreement as well if possible? thank you

donna
donna
8 years ago
Reply to  Matthew

I called Internal Revenue and they said that you don’t pay tax on a renter if they rent in the house you live in. Just thought you should know.

Eric
Eric
11 years ago

OH and I always tell them they are responsible for their own food. I even give them their dedicated space in a pantry or cabinet and the main fridge. I also put dorm fridges in the rooms for drinks. That keeps them from taking mine and vice versa. But I do say that I will share what I have, and they are welcome to it, IF THEY ASK first, but to always replace what they take and NEVER take the last of something. I also love to cook large meals so If i’m in the mood to cook large, i… Read more »

Eric
Eric
11 years ago

Darn sorry… I keep remembering things.

ALWAYS put agreement in writing. Even though technically it’s your home and you can kick them out easily, it’s just better to back yourself up with documentation.

AND NEVER rent to friends or family!

Emily
Emily
11 years ago

I had great luck using Craigslist for roommates when I lived in LA. I decided to get a 2 bed/2 bath apartment I could afford on my own, and then rent out the other bed/bath. I was afraid of identity theft, so before I got a roommate, I: * got my mail sent to a PO box * changed my bedroom doorknob to one that locked with a key (easy to do, knobs sold at Home Depot) * got a lockbox and locking file cabinet to keep my important documents in Rent/Utilities With the first roommate I had, I charged… Read more »

Deb
Deb
6 years ago
Reply to  Emily

Emily— how much did you make your housemate pay for electric in the summer?? My housemate seems to be running the A/C all the time and this is getting to be an issue since I have to pay half of it. Just wanting some advice on this.

shuchong
shuchong
11 years ago

I rent a room, as do two other people, in my landlord and landlady’s house. We’re charged 1/5 of the monthly utilities, plus a flat monthly fee. The lists above are quite good, but other things you might want to consider are: – Guests: Can they throw a party in your house, or have their significant other over for days on end? If not, make that clear. – Noise: Can they blare music at 2:00am? Is there a time after which you’d appreciate it if they weren’t practicing for a night out at the karaoke bar? – Smoking: Do they?… Read more »

tg
tg
11 years ago

When I moved out of my parents’ house, I moved into a roommate situation where I had one of three bedrooms, the owner another, and one more roommate in each of the other bedrooms. It worked out fairly harmoniously. Each of the non-owner roommates paid a fixed amount of rent + utilities each month (budget plan). I thought I had paid a security deposit, but it turned out to be last month’s rent. It would probably be a good idea to have a security deposit, as well as a written agreement on house rules (smoking, pets, overnight guests, political signs… Read more »

Beth
Beth
11 years ago

If you’re aiming for a student, try “mature” or “graduate” students only. That sends the message that your home is not going to be party central, and the students will be grateful to find a quiet place to live and work.

“Young professionals” also gets the same message across.

Eric
Eric
11 years ago

good points shuchong: some of my house rules are NO SMOKING indoors PERIOD by anyone. I have allowed outdoor smokers in the past but one recent roommie used to REEK of smoke all the time. It was so disgusting to me and when the HVAC would kick on i could smell the smoke from his clothes in his room throughout the house. So smokers on a case by case basis. It’s more about the person. If you come in late, please remember other people live there. My house is NOT a party house but with notice they are welcome to… Read more »

Mike
Mike
11 years ago

We rented out a spare room to both family and friend before, so we were somewhat lax as to dictating rules. Which was nice because you then aren’t some whiny ranting dictator, but on the other hand too they then can easily abuse it. We just did a verbal agreement, I would not recommend that because who’s going to remember little agreed upon details in that way? Go with a signed document with both parties have a copy of, so if there’s any disputes just whip that out and there’s the tie breaker. We just charged a flat rate with… Read more »

Hans
Hans
11 years ago

I’ve been renting out a room in a house for about a year, and my landlord charges me a flat fee for rent, utilities, and 3 meals a day (I work from home). While some people have recommended rolling the utilities into rent, you may want to have some leeway depending their usage – for example, instead of $500 inc. utilities, you might want to consider $400/mo + $50 – $200 depending on usage (use the prices in your area, obviously). Offer to have it start at the low end, and then adjust it after a You can still have… Read more »

Penny
Penny
11 years ago
I would not have thought of alternative publications or organizations. I do know friends who belong to a large “fringe” organizations with leanings towards green living.

As far as water, we have well, so the only issue is heating oil, though that is also something that I wouldn’t have considered.

Nitpicking at first would probably make everything clear to all parties involved. I like the idea of having a dinner “interview.”

Keep the tips coming! I’m taking notes!
Pets: We have three cats, two dogs, and nine ducks, so I don’t think there is any room for animals.

liz
liz
11 years ago

I don’t know why, but as a person who rents, reading this kind of post makes me cringe a bit. I’ve been in situations where someone is renting out a room in their house and they are *not* clear with their expectations beforehand and so I am prompted to write a bit of a response to the article.. . I would caution someone before committing to renting out a space – how flexible are you really when it comes to other people and their schedules? And how willing are you to have space available for people to cook/ lounge/ park/… Read more »

Rob
Rob
11 years ago

Most people do not think about this but you will be required to report the rent on your income taxes.

Your house will be considered a rental property and a portion of your house will have to reported on your Schedule E (passive income) but you will be able to deduct depreciation.

Additionally you will not be able to have rental loss if you live in the home as well.

Penny
Penny
11 years ago
We’re only planning on renting one room, but they would be able to use the living room, dining room, and kitchen. Ideally, we would find someone who would at least be friendly. We don’t expect them to hide in their room.
@ liz: thanks for bringing up the renters point of view. I’ve only shared housing with people I was already friends with, so I’m unfamiliar with this type of situation.
tinyhands
tinyhands
11 years ago

I rent part of the house that I own to a friend of mine. Although we get along very well, I think what makes it work well for us is that we don’t spend a lot of time together, despite the shared areas of the house. Many of the other ideas and suggestions that have been left here are great, as are the tax reminders, so I won’t rehash. What I will add is WRITE A LEASE. Putting it in writing, even when it’s a friend or family member, seems like overkill but those legal documents were invented for a… Read more »

Mister E
Mister E
11 years ago

I sublet a room in an apartment once and I’ve known a couple of people that regularly rented rooms out in their houses so I can pass on a little bit of (partially second hand) advice. Neither landlord offers board it’s just a rooming situation. Both obviously allow use of the kitchen and bathrooms (with rules and schedules), one allows some limited use of the common living room area and the other restricts tenants to their rooms. If you plan to allow laundry room access it’s best to have that on a schedule. Negotiating one day per week that is… Read more »

InvestEveryMonth.com
InvestEveryMonth.com
11 years ago

I have found that by only advertising in online formats, I get a higher level of potential renters.

wolfgirl
wolfgirl
11 years ago

Several years ago my husband rented a room when he was working an outoftown contract. It worked well for him. If I remember correctly, he payed a monthly rent and a flat rate on the utilities.

RMS
RMS
11 years ago

I have been the “house guest” twice. It is expensive living in Boston, and so this was the best choice for singles. In general, if the home owner lives the house, the place is kept in really good shape compared to a rental apartment. The first time was a disaster. There were multiple guests and the turnover rate was high. My landlord didn’t interview the candidates well and she ended up having a pedophile ex-priest live there with a man who was a former victim. The second place was a great success. My boyfriend also ended up living with us… Read more »

Maria
Maria
11 years ago

For the past 5 months I’ve been renting out a bedroom in my house to a girl in her 20’s. All utilities are included in the monthly rent. She moved in her boyfriend also, so I got a 2-for-1 deal without being consulted! Hmmm….not impressed… About three months ago, she gave up her job and started going to college by night. That means she’s at home during the day with her student boyfriend and they have the heating is on full blast, when I get home from work the house is like a sauna. My last heating bill nearly bankrupt… Read more »

Avistew
Avistew
11 years ago

My only experience there is when I spent a week in ireland to learn English. There were classes in a school nearby, and I lived in the house with other students, some of which stayed as much as 2 months. Supper was included in the costs, but lunch wasn’t. Sadly, I can’t remember how much it was. I’d suggest deciding exactly what you want to do. If there is a program with foreign students where you live, that might be one of the options, although chances are it won’t (check anyways, if you’re interested). You could also offer bed&breakfast but… Read more »

Ruth
Ruth
11 years ago

My husband and I occasionally rent out a spare bedroom (or both) in our house to college students. He works at a company that hires college kids for the summer, and they have a formal system of listing housing options that other employees are offering. I like having college-aged people living with us (I’m 24, my husband is 27, and we don’t have kids). We charge $500 for a room, and it includes all utilities, satellite TV, and wireless internet. As far as food, we were friendly with our renters, and would share cheap stuff (i.e. vegetable oil, mustard) and… Read more »

Zeke
Zeke
11 years ago

Bingo to Comment #4, right on the nose.

KATY
KATY
11 years ago

Put an ad on the bulletin board at the library and grocery store,

Get a standard tenant agreement from a stationery store. Add your own codicil, i.e. re noise, food, utilities, security deposit, guests, pets.

Michael K
Michael K
11 years ago

The practical advice on setting guidelines with renters is great, but what are the tax ramifications of renting out a room, and can there be any legal issues with homes that are zones as single family dwellings?

Jay
Jay
11 years ago

I have to agree with several other posters and say that Graduate Students make great roomates. Since I own a 3 bedroom house in one of the nations largest cities I have had a easy time finding quality roomates. Some places that may give you some good leads are -Church/Mosque/Temple -Clubs or sports teams you participate on -Friends or Friends of Friends -Grad Students/Medical Students/Seminary Students I so far have rented to a Medical Student, a Law Student, and a friend from church. They all had their quirks but overall were nice guys who needed an affordable and clean place… Read more »

Notme
Notme
11 years ago

I have never considered this because I am concerned about safety- live near a major city and I have a child still at home. I have a friend who did this- her problem has been that she did it on a “handshake” and getting someone evicted here is not easy. The woman is neat and was quiet but often doesn’t pay rent and then had a boyfriend who brought drugs into the house and then kicked in my friend’s door. The boyfriend is sort of gone(he shows up at the door sometimes) but the woman is still there. My friend… Read more »

angulo
angulo
11 years ago

I commend those of you that can have roomates/tenants within your own living space.Just the thought of sharing a bathroom with someone I’m not closely related to would drive me to insanity…The smell of some one elses’s …excretions/BO/gases/..Even the lingering smell of toothpaste left in the air immediately after some one brushes their teeth,if it comes from somebody else besides myself would cause me to puke. Seeing the water splashes on the bathroom sink and counter,and realizing that some one just probably spit into that sink after brushing their teeth…or washed their dirty hands after(hopefuly)wiping their…. or somebody leaves body… Read more »

Le
Le
11 years ago

I rented a room in a home straight out of college. From my situation-here are my thoughts: 1) Charge monthly rent and include all utilities except phone, internet and A/C. (A/C is commonly +$25 a month for a window unit.) 2) Define you expectations for use of a common space. Is the living room off limits in the evening or all the time? 3) Make room in your kitchen and define boundaries. A shelf in the fridge and space in the cupboard are a must. Be clear about dishes. Do you want them washed in two hours or loaded into… Read more »

Samantha
Samantha
11 years ago

Absolutely no pets allowed. My sister-in-law moved in with us. While I have a dog myself, I couldn’t stand her dog constantly relieving himself in the house.

Sarah
Sarah
11 years ago

In my current share, we avoid a lot of potential tension regarding cleanliness by splitting the cost of a cleaning lady twice a month. Worth every penny. Just remember that if you pay them more than $1000/year (unlikely outside of major metro areas) you need to do withholding. We have a “kitty” to cover shared expenses like paper towels, dish detergent, etc. (and, by special agreement, eggs). When it gets low, we each pay ten bucks or so into it. We share condiments, spices, oils (things a single person probably wouldn’t use up by herself anyway), but other food items… Read more »

Jen
Jen
11 years ago

These are all really good suggestions. I definitely agree with talking with a real estate lawyer and a cpa about the legal and tax ramifications respectively. I would also have them sign a Lease and have the rules and such attached to that document. I would most definitely do a background check if you are welcoming a stranger into your home, but have them pay for it as part of the application process and sign a document that they agree to allow you do the check. However, I wouldn’t just have the local police do the check – they can… Read more »

PDXgirl
PDXgirl
11 years ago

I work in commercial property management and one of the things that happens frequently (about 95%) in commercial or retail leases is that utilities etc… are estimated at the beginning of the year with a monthly amount figured in, and then reconciled at the end of the year with either a credit or additional bill coming due. I think the reason most residential landlords don’t do this is that your lease terms are generally much shorter (commercial leases range from 5-15 years) so it’s more of a hassle if you have to reconcile every month or two due to people… Read more »

Amy
Amy
11 years ago

I used to be a renter of someone else’s spare bedroom room, then got a similar place of my own nearby and rented out the spare bedroom. The way I’ve handled it is to write up a contract and make the terms as specific as possible: total length of the contract, rent per month, date due per month, fees for late payment, how utilities are to be split, what happens if the contract needs to be terminated early, what the common areas were, etc. This was all made really clear, even though I only rented to friends or acquaintances, just… Read more »

Leanne
Leanne
11 years ago

To reiterate what a lot of folks have said: put *everything* you can think of in writing. Make sure you’ve outlined how to end the relationship–for both the renter and the landlord. Consider building in the cost of a cleaning person. Nothing is more frustrating than to discover that your new roommate has different cleaning standards than you do, and you’re stuck doing more of the cleaning than you want. (I mean, this can be a real issue with your lover, so just imagine how annoying it could be with someone you’re not personally invested in!) Is there any way… Read more »

La BellaDonna
La BellaDonna
11 years ago

Some of this is what I remember, some of it is what I’ve observed, some of it is what scares me to death: 1. Absolutely get your renters vetted – AND KEEP YOUR BILLS AND ID LOCKED UP. I know SEVEN people who’ve had their identities stolen. No, they weren’t all from renter situations – but it’s an increasing problem, and you just want to make sure you have a secure place to keep this information. It’s for your renter’s security, too; if your information is secure, you won’t have to worry about them. 2. Control your own environment –… Read more »

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