In one week, my sister will be moving back in with us.
She’s joining us in Colorado so that she can do a little more traveling while having a safe place to store her stuff. She won’t be with us full-time, as she mainly plans on using our home as a home base so that she can travel more. However, she will be with us some of the time and she will be paying rent for when she is actually with us.
Related article: We’re Moving To Fruita, Colorado! And My Moving Bucket List.
I’m excited to have her move back in. We’ve missed her, it will be nice to have our dog sitter back (I’m not going to lie, this will be amazing), and the little extra money will be nice.
While renting a room in your house most likely will not make you rich, it may earn you a good amount of side income. I know of a few people who rent out many rooms in their home and have been able to pay off their home completely due to this.
There are many things to think about if you are interested in renting out a room in your house. It’s not an easy decision and will require some thought. Some people love the extra cash that renting a room in your house brings, while others just aren’t meant to live with others.
Side note: This post is about renting a room in your house on a long-term basis. If you are interested in renting out a spare room on a short-term basis (such as for vacations), I highly recommend you check out Airbnb. I know people who are making thousands of dollars a month by renting out rooms on this site!
Related: 12 Passive Income Ideas That Will Let You Enjoy Life More
Below is what you need to know when renting out a room in your house for extra money.
Check to make sure you can start renting out a room in your house.
Before you spend any more time, you should always make sure that you can actually rent out a spare room in your home. If you are unsure, it might be a good idea to check with laws in your town as some towns are a little picky when it comes to rentals.
If you are renting your home from someone else, then it’s always wise to ask for your landlord’s permission. They might want a new contract written up or they might even say no.
If you live in a neighborhood that’s in a homeowners association, sometimes they don’t allow renters either. It’s very wise to check with your HOA as well so that you don’t get fined.
Research before you set a monthly rent.
Setting a price for your rental can be a hard part of this process. I highly suggest that you do your research before you assign a random number on your spare room. I say this because if you price it too low, then you may actually end up costing yourself money in the end (due to wear and tear, utility bills, etc.).
Also, if you price it too high then no one may be interested.
You can determine the price of your room rental mainly by checking comparables. You can check what other spare rooms are going for in your area, what extras they may be offering, whether there is a private bathroom included or not, and more.
One thing you will have to determine is whether you will include utilities in your rental rate, or if you will split all bills with your new roommate.
For me, I like to just make it easy and include it. However, you may lose money if your new roommate is wasteful when it comes to electricity, water, etc. By splitting utilities, your roommate will most likely be more mindful of what they are using.
Advertise that you are renting out a room in your house.
There are many places where you can advertise your rental. You can put a sign on your front lawn, advertise in a newspaper, or place an ad online on a website such as Craigslist.
Everyone and everything is online now, so posting your ad online will most likely be your best choice.
Always be honest with what you list in your advertisement. You should be honest about how big the room is, what rooms come with the agreement, if there is a separate entrance, and more. Also, be sure to include pictures of what is included.
Interview possible roommates.
You should never just take any random person when renting out a room in your house. Always conduct interviews just like you would if you were renting out your whole home.
Conducting interviews is important because you can learn more about the possible roommate, weed out any crazy people, and determine if the two of you will get along. You will be living within feet of them, so this is a very wise step to take.
You can also do a background check if you would like as well. After all, you will be living with them!
Always set rules when renting a room in your house.
Before your new roommate moves in, it is always a great idea to talk about (you may even want to create a contract) the many things that people fight about once they move in together. This can help prevent arguments.
Some of the things you may want to talk about include:
- Can they have friends over? What about a party or a BBQ? What about sleepovers?
- What noise level is allowed?
- Who cleans the home?
- What area or areas are off limits?
- When is rent due?
- Who buys things like toilet paper and trash bags?
- Will food be shared? Sometimes when renting a room in your house, food is shared. I don’t think this is common though.
Would you ever think about renting out a room in your house for extra money? Why or why not?
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This is awesome advice. While we’re not in the position to rent out a room at the moment, we have two outbuildings on our property that we’d eventually like to do up, and we want to weigh up the options of adding a kitchenette and murphey bed so that it could either be used as an extra office for us OR somewhere to rent out.
However, we do have a dog (a very crazy one), which could cause issues with garden access for a renter.x
Great tips though!
x
http://thecornishlife.co.uk
We have dogs as well, so renting to a stranger wouldn’t work well. I definitely see where you’re coming from!
You don’t mention tax.
In Britain, renting out a room is tax-free money if the income is below £4,250 a year, but over that you pay income tax.
Interesting. Good to know!
I could definitely imagine us renting out our spare room to a friend or family member, but I don’t think I’d be up for renting to a stranger. Much as the extra income would be nice, I really love our clean, quiet home. That’s wonderful that your sister is moving back in–sounds like an ideal situation for you both!
Renting to a stranger isn’t something I could do either. I like my privacy.
Hi Michelle, we are currently in this situation of renting out a room on a short basis (three months) for one of my wife’s co-teachers. It has been good and bad due to some repair issues (television left on during storm, bathroom sink clogged as examples). This is our first roomate and the money does help towards the mortgage. I just hope the repairs does not outweigh the cash flow.
I hope there aren’t too many more repairs!
I have two kids… there is pretty much zero chance I will rent out a room. I might do it very short term, but I would make that clear.
Also it is really nice of you to not charge your sister when she is not there. Personally, I would still charge market rate for the storage. That stuff is still in your house taking up space and if she didn’t have your house she would either have to sell all her stuff or put it in storage. Just a thought… maybe it is a little extreme, but we are having trouble have a friend get their stuff out of our old house because we didn’t charger her anything. We have told her, that if she doesn’t get her stuff by the time we put the house on the market we will sell it and we will only give her 10% of what we make. Yeah I’m a heartless jerk
Haha Brian. I’m not sure what we will do. We do need to talk to her about storage in case she is doing an au pair job in Europe when our current lease is up. It will stink to have to move everything for her!
Hey Michelle,
This goes hand and hand with your article of how to make extra money. My wife and I were going to do AIrbnb but our county wouldn’t let us. Instead we rent out our garage for car storage. This is considered a home occupancy in most counties and totally legal.
We ue STOW IT for their benebfits (https://stowit.com/) but I know there are a few companies out there!
I might comfortable renting a room to a family member, like you are to your sister, but probably not with a stranger. Not only would I worry about safety a bit, the possibility of disagreements/issues (not caring for the house as they should, etc.) would outweigh the income for me.
I’m the same way. However, I know of many who rent to strangers and haven’t had a problem.
I don’t think I could rent out a room to someone I didn’t know. But if you’re in the situation where you need the money and feel safe doing so, then I see it as a good way to bring in some extra income.
Definitely!
We have a guest room. If I didn’t have kids, I would consider renting it out. With kids in the house, it would have to be a family member. Too many risks!
I think it’s great you are able to help your sister out and make some extra $!
Yes, renting to my sister is so easy!
That’s wonderful your sister is moving back in!! How exciting!!
As much as I would love the extra money, I don’t know if I would rent out a room. I like my privacy and quiet time! For a family member, I would though. But with two little ones who wake up multiple times a night I don’t know if it would be an ideal situation for the renter, haha.
Yes, I’m glad to have my dog sitter back! I need a dog-free vacation haha.
I used to rent a room out of my house and it was awesome spltting the bills with someone else. It took a long time to find the right person though! A lot of weirdos out there, ha! Having your sister is the best 🙂
Haha yes!
If a family member needed a place to live (not for long-term) I would rent out a room. No strangers for me though! I like my personal space.
Yeah, I enjoy my personal space as well.
There is a part of me that wants to do this with our basement. We are in the process of making the plans to finish it. If I can create an extra door just for an entrance, it might just be good enough for a little basement apartment!
Yes, definitely!
I’m trying to rent out my extra room to my brother, but I’m not sure yet if it’ll happen… It would be a great way for me to make some extra $$ for debt.
Yes, definitely!
I’ve owned my home for over 2 years, and this is the first month I’m NOT renting out rooms in my house. I was lucky (and young) enough to have friends who needed places to live and were over apartment-living, so I’ve been able to save a nice chunk of cash because of the extra income. It was especially nice considering I was a first-time homebuyer – there are a lot of things you don’t initially considered when buying your home, and having that extra income each definitely helped cover the cost of those.
Awesome! How much did you make each month?
Depending on whether I had one or two renters, between $450-$850 each month. Definitely helped my finances!
We currently rent out our first house to a friend. He pays a pretty cheap rate due to the fact that we’re in the process of fixing up the house. It’s difficult to come up with the right rental rate for once it’s done, however, because there don’t seem to be too many comparables in our area. We’ve discussed starting out with a higher rate to see if anyone bites, and then adjusting as needed.
Good luck! 🙂
We’ve been renting out a spare room of our homes on and off for the last 7-8 years. Right now, we have a couple living with us and a single guy (all friends from our board gaming group). And we rent out our first home completely. Altogether, the extra $2400 a month covers our current mortgage and both sets of property taxes and home insurances.
That’s awesome Crystal!
I would not rent out a room in my house. Though the extra income would be nice, I really love our clean, quiet PRIVATE home. The lack of privacy would far outweigh the extra income
I agree. I couldn’t rent to strangers. My sister is different though since me and my husband helped raise her, so we see her more as a boomerang child coming back haha.
I actually rent a room from my parents. After graduating from University and returning back to the island I thought if I am going to be paying rent it might as well be for a room that I like and to the people I trust the most. Almost 4 years later, I’m still here and I’ll probably be here for awhile. With the cost of living and housing market my biggest fear is I’m going to be like 40 and still here 🙁
Makes complete sense. Housing can be so expensive!
This is a nice way for homeowners to earn extra income; it can cause some tax headaches for some but to be honest I realize most people don’t even claim the income they earn
Yeah, taxes are definitely something to think about.
And maybe something to write about in your article titled “The COMPLETE guide to renting out…”
My husband and I have been discussing this as we plan our next house (we are designing and building it ourselves). I would love to build a little in-law suite above our garage with a separate entrance. It would be great as some extra income (we live very close to quite a few colleges and medical schools and students are always looking for cheap, short term housing) and it would be a great place for my mom to stay when she comes to visit!
Yes, sounds like a great idea!
While we arent in a position to rent any rooms, I have friends that have done this and its a good money maker. Though I would caution that you check out whoever your potential renter is (call references). Other rental ideas include renting out space for people to park RVs, boats, etc.
Yes, those are other great rental ideas. Thanks! I’ll have to do a post on that one day.
I wouldn’t mind renting a room in my house to someone, but it would have to be a family member only. I think it is a great idea to make a little extra money.
Yes, I agree.
It didn’t work out well for us the last time we rented out a room in our house. Maybe it was because we did not have any clear rules and the tenant was using our phone to make too many calls. We didn’t have cellphones then.
That stinks. Not all tenants are great. We rented to someone once who was absolutely horrible.
This is great! I’m saving this post for the future 🙂 I don’t think we’ll rent a room but it’s always nice to know it CAN be done.. and how to do it! I do wish I had a sibling that could serve as a roommate. That sounds like an ideal situation.
Thanks Kali!
I would be too afraid of ending up with a serial killer! Guess I’ve watched too much “Criminal Minds.”
Yes, you would be living very close to someone!
I definitely would not want to rent out a room to a stranger, but I would consider renting to my sister with clear rules. I know a couple of people who have rented rooms while in school and loved it, but I just couldn’t live with strangers!
I couldn’t live with strangers either. I know plenty of others who do it just fine. However, I work from home all day and I like my privacy.
I have done this in the past. And had mixed experiences. I would highly recommend it if the possible renter/lodger has good references.
Yes, making sure there are good references is a must!
I understand everyone’s concern about renting out rooms to a stranger. I’ve rented out my spare room in my house for years and the extra money I made has been really nice. If you interview wisely and set expectations, having a stranger move-in isn’t that bad at all. I encourage single young professionals who own a house in their 20’s to rent out a room. If you’re single and don’t have any kids or a wife, I strongly feel that’s the prime time to rent out a room.
I was hoping you would see this post Mike 🙂
I’m surprised that the majority of the people who responded to this post said that they wouldn’t have a roommate. I understand if you have children, but it can be an awesome way to reduce your overall living expenses. I lived outside of DC for years and there was no way I could shell out the kind of money it took to live in a 1 bedroom. I found roommates through roommates.com and even Craigslist. Both provided excellent housing arrangements.
@ Michelle
It will be a great Idea if you are looking for money for a short term because it will give extra bucks to the pocket in the cost of privacy. It seems a great Deal.
-Jenifer
I am from California, and I would like to know if you need to reported the income to the IRS when you rented a room in your house?