Do you have a spare room in your house and would love to turn it into a source of passive income? Renting out or subletting your free space can be a good idea. However, there are many things involved that you should get right.
How do you go about the local laws? Where do you start? And how do you protect your valuables after finding a renter? These are some of the questions you need to answer first. Here is a simple guideline to help you make the right decision.
Check your local laws
If you are a renter, you need to check if your lease agreement allows you to sub-rent a room. Some landlords do not allow it, while others have conditions for the same. So, it is important to find out and get permission from your landlord first. If you are a homeowner, you should check with local laws to determine the way forward before you rent out the spare room. You may be required to take on a lodger and fill in various details first.
Consult your insurance company
After checking and confirming that the laws allow you to rent out a vacant room in your house, you should confirm if your insurance policy permits the same. Some insurance agents may not allow you to rent out part of the house, while others are okay with it. Accordingly, the move may affect your insurance policy, particularly your premiums.
Make the room rentable
With everything polished out, you should start making the room more presentable and rentable. Ensure you repair everything in advance and set aside the facilities you would want the renter to use. Do you want to share your living space? Or do you plan to offer a separate kitchen and bathroom? Have it figured out in time to make matters more manageable once you have a potential renter.
Price the room appropriately
This is where you need to do a background check of the prevailing rental rates. Figure out how much your space should cost in the current market to ensure you do not overcharge or undercharge. If you want to rent out the room temporarily, you may want to compare prices at Airbnb or other websites that offer vocational rentals. Ensure your pricing reflects the value of the room and facilities you offer.
Do a background check
Now that you are ready to welcome someone into your house, you should know the person well by asking personal questions and doing a thorough background check. Screen all potential renters and enquire about their employment, social, and security status. You should ask lifestyle questions to determine if you are compatible with the person. However, do not go into extreme questions that touch into people’s private lives.
Set your boundaries
Do you have someone you deem fit and trustworthy to let into your home? You should set boundaries that define your co-existence. This is where you set rules and guidelines that help you co-exist harmoniously. Define whether you will share some facilities or not. Do you share cleaning responsibilities? Get into the details before you let the tenant in. Lastly, have the tenant clear the rent money and deposit.
Secure your belongings
Before you build trust, make sure your valuables are safe. You should not leave money anywhere in the house unless the other person cannot access it. The same applies to your valuable personal possessions. Keep your jewellery away in a safe or lock them in your room. Accordingly, you should ensure the tenant has safe and secure locks.
Respect each others’ privacy
Once the tenant has moved in, you should ensure you create an environment that respects their privacy. The vacant room you rent out belongs to the tenant, not you and your family. Accordingly, it is unethical to bump into that room without permission or a good reason. Let the tenant enjoy his freedom and privacy. Make this mutual by letting the tenant know you expect them to extend the same respect. If you have shared facilities, agree on how you will use them without bothering each other.
Check your tax obligations
Rent income is taxable. Therefore, you have to ensure you remain compliant by checking how renting out a vacant room in your house affects your taxes. Consult with a tax attorney to get an overview of what to expect.
Renting out a vacant room in your house can help you raise a passive income that offsets some of your bills. Whether it is a long-term thing or just a short-term idea, you should ensure you get things right from the onset. Start by checking the local laws before you make your home more rentable before you let someone in. This post should guide you through the process.