Have you been thinking about renting out the spare room in your house? If so, you are not alone, 79 million Americans live with roommates.
| Benefits | Drawbacks |
| Earn extra money/pay mortgage faster | Safety concerns |
| Companionship | Higher monthly expenses (water, electricity, insurance, home maintenance) |
| Tax deductions | Lifestyle differences |
12 Steps to Renting Out a Room in Your House
Here are the steps to rent out a room:
- Identify if It’s Legal
- Learn Landlord Laws
- Talk to Your Insurance Agent
- Get the Room Rental Ready
- Set Your Rental Price
- Identify Your Ideal Tenant
- Create a Solid Application
- Advertise Your Space
- Accepting and Screening Applications
- Interview Applicants
- Background and Reference Checks
- Create and Sign a Lease Agreement
1. Identify if It’s Legal
Most homeowners can legally rent out a room in their house, but all locations have specific rules and guidelines you must follow. For example, if you already have 2 roommates unrelated to you and live in cities like Pittsburgh, Medford, or Fort Collins, another roommate would break the law.
If your home is in a community with an HOA, you will also need to check your bylaws. Many communities limit the number of tenants or do not allow rentals at all.
Checking your local laws, HOA, and zoning guides will determine if you can rent out a room in your house.
2. Learn Landlord Laws
As a new landlord, you’ll have to learn federal, state, and local laws about what are and aren’t allowed to do. Here are a few examples of activities that landlords cannot do:
- Entering their room without proper notice
- Unlawful lease termination
- Using a tenant’s personal space
- Changing the locks
- Raising the rent without notice
3. Talk to Your Insurance Agent
Before legally leasing a room in your home, you need to talk to your home insurance provider. Some insurance companies will not raise your rates for one additional tenant. Others may prohibit renting at all.
You should also require your tenant to have renters insurance. It costs an average of $12 per month and offers peace of mind to both landlord and tenant.
4. Get the Room Rental Ready
Use a critical eye to check out the rental space. Identify if there are things that need to be updated or repaired. Some things to look out for include:
- Broken window latches, ripped screens, blinds, or shades
- Faulty smoke detectors
- Chipped or unattractive paint
- Malfunctioning outlets
You may also want to hire a professional to clean the space. A clean, tidy, and well-manicured space will attract better tenants and may help you get the rental price you want.
Also, resist the urge to do a full remodel, as you’ll unlikely be able to recoup the cost in raised rent. Make the place attractive, but it doesn’t need to be the nicest unit in town.
5. Set Your Rental Price
Check out local rental sites to see what rental rooms are listed for. Be sure to compare the spaces, what access the landlord offers, if utilities are included, and any other important information.
Create a spreadsheet that lists your expenses such as your mortgage, property taxes, insurance, and utilities. You will also want to account for any extra costs you may have, such as additional fees for having a tenant. Then identify a minimum rent amount you would need to make renting out the room worth it to you.
6. Identify Your Ideal Tenant
Take some time to identify who your ideal tenant is. If you have other roommates, it’s a good idea to get their input. Consider how a new roommate will change your current lifestyle and routine. Keep in mind, you will now be sharing your personal space with someone else. This is not a task you want to take lightly.
Here are some important roommate qualities to consider:
- Respectful, responsible, and trustworthy
- Level of cleanliness
- Smoker/non-smoker
- Solid work history and current employment
- Clean criminal history
Surveys show the number one issue (63%) among roommates is leaving common spaces messy. Take a hard look at your level of cleanliness and determine what level of cleanliness is ideal for your roommate.
7. Create a Solid Application
As the landlord, you need a solid rental application to gather information, run a criminal background check, and pull a credit check. Even if you think you know the potential tenant, it’s still important to require an application. Your rental application should include:
- Basic information
- Rental and employment history
- Vehicle information and insurance
- Pay stubs or bank statements
- References
- Pet Information
- Proof of identification
- Permission for a background check and credit report
8. Advertise Your Space
Crafting an attractive advertisement will help you reach more prospective tenants. Consider the platforms you want to use to post your advertisement. For example, if you plan to hang a flyer in a coffee shop and on Instagram, be sure the ad you create can be formatted for both.
Here is a brief list of things to include in the advertisement:
- Information about the space (size, shared/private bathroom, amenities)
- Included appliances
- Information about the general area
- What you are looking for in a roommate (within reason)
- High-quality photos of the room, bathroom, and shared spaces
- How to apply and what items are needed for the application
For safety reasons, it’s not a good idea to be too specific with your advertisement. Don’t offer too many details about the exact location or whom you live with until you know the applicant is serious.
9. Accepting and Screening Applications
Once you have a few applications, you can begin the screening process. Be sure to have each applicant sign consent to undergo screening. You can look through each application to determine if the applicant will be a fit.
Items like no employment or a violent crime history may allow you to narrow down the applicant choices quickly. You can then spend more time vetting any realistic potential tenants.
10. Interview Applicants
Interviewing applicants offers you an opportunity to get to know your potential roommate. Ask them questions about their job, personal life, routine, and habits. It’s important to know things like if they work from home or hate to clean. Be very open and honest about what you are looking for. Here are a few sample questions to consider:
- What does a typical day look like for you?
- What do you do for work?
- Do you have reliable transportation?
- What is your cleaning schedule?
- Do you cook?
- Do you have any allergies or dietary restrictions?
- Who would be your ideal roommate?
- How often do you have guests?
- Do you have regular overnight visitors or a significant other?
- What do you like to do on the weekends?
While landlords are generally subject to Fair Housing Laws, those sharing their space have a bit more leeway. The Mrs. Murphy Exemption allows property owners the ability to deny applicants for almost anything.
11. Background and Reference Checks
After you have a few realistic candidates you will want to do your due diligence to confirm everything about your new roommate. Some people can easily play the part of a perfect roommate while their real life is a mess.
Calling and speaking with a reference will likely give you insight into the potential tenant. Be sure to ask for at least one previous landlord and one professional reference. Someone’s friend or parent may not be very truthful.
Many landlords collect an application fee to cover the cost of background checks. Check with your local guidelines to see if you can charge to cover this expense.
12. Create and Sign a Lease Agreement
A lease agreement is your chance to set expectations and protect yourself as a landlord. Set clear guidelines and terms for the use and occupancy of the home. Here are some things you need to include:
- Length of agreement
- Name of tenant(s)/landlord(s)
- How much rent is and how/when it should be paid
- Rental deposit and fees
- House rules and policies
- Normal wear and tear guidelines and expectations
- Pet policy
- Landlord’s notice for access to tenant space
- How to handle maintenance issues
Having a solid lease agreement will help you and your roommate have clear communication about expectations in the home.
Is Renting Out a Room a Fit for You?
Renting out a room does offer some great perks, especially for those who don’t like to live alone or need some extra money. But, having a roommate may be more of a risk than reward. Here are some questions to consider:
- Do you have the space for a roommate?
- Are you easy to get along with?
- Are you comfortable with unknown guests in your home?
Should You Consider Renting to College Students?
Landlords often consider renting a room to a college student as finding affordable housing can be an issue. Students often have busy schedules and aren’t the traditional “college student” of the past.
In fact, almost 74% of undergraduate students are considered non-traditional. They may attend school part-time, have full-time employment, or be financially independent from their parents.
Here are some pros and cons to renting to college students:
| Pros | Cons |
| Highly motivated to find housing | Minimal rental and credit history |
| Consistent new potential tenants | Frequent turnover |
| Lower maintenance and upgrade expectations | Guests may be rowdy |
Do I Have to Pay Taxes on Rental Income From a Roommate?
Any income you receive is taxable and must be reported to the IRS. However, there are some deductible expenses if you own the house.
For example, if you need to replace the room flooring or light fixtures, this can be a deductible expense. However, be sure that you only discount the area specific to the rented space. You cannot deduct flooring from the entire house.
Should I Get a Security Deposit When Renting Out a Room?
Getting a security deposit isn’t required by law but is highly recommended. It will help financially protect your rental property. There are state security deposit laws that limit how much you can charge, what it can be used for, and how long you have to return the remaining money.
