Thinking about renting out a room in your house to make some extra cash? We did it when we owned a house before traveling full-time and had four different roommates over the years. We rented out an extra bedroom and a finished basement, which turned out to be a great way to earn additional income. While having roommates isn’t always perfect, the money we made helped pay off debt and save a bit.
I’ve been on both ends of the experience—renting a room from someone else before buying my house and then renting out rooms in my own home. Although it requires some effort, renting out a room can be a relatively passive income source.
Benefits of renting out a room include:
– Extra money to pay off your mortgage faster
– A roommate who can watch your pets when you’re away
– No more living paycheck to paycheck
– Possibility of early retirement
– Diversifying your income sources
While it won’t make you rich, renting out a room can provide a significant side income. Some people have even managed to pay off their entire mortgage this way. According to Zillow, 30% of U.S. adults live with a roommate or parent, and in cities like New York, Los Angeles, and Miami, the figure is over 40%.
If you’re considering renting out a room, it’s important to think it through. It’s not an easy decision and requires careful consideration. Some people love the extra cash, while others might find they aren’t suited to living with others. Renting out a room is one of the most consistent ways to make extra money.
Here’s what you need to know:
### What Does Renting a Room Include?
Renting a room can mean different things:
– A bedroom within your home
– Your full basement or part of it
– Mother-in-law quarters
– A bedroom plus living and eating areas
If there’s a separate entrance, like a basement door, it gives both you and your renter more privacy. However, even without a separate entrance, you can still rent out a room, sharing common areas like the kitchen and living room.
### Is It Legal?
Check your local laws to ensure it’s legal to rent a room in your area. If you’re renting your home, get your landlord’s permission. Homeowners associations (HOAs) may have their own rules, so check with them too. You also need to comply with federal and state housing laws, including the Fair Housing Act.
### How Much Should You Charge?
Setting a fair rent is crucial. Research local rates for similar rentals and consider what amenities you offer. Decide whether to include utilities in the rent or split the bills with your roommate. Room rental prices can range from $400 to over $1,000 a month, depending on various factors.
### Finding Renters
You can advertise your room through:
– Friends and family
– A sign in your yard
– Your personal Facebook page
– Online platforms like Craigslist
Be honest in your listing about the room size, amenities, and any special features. Include pictures to attract potential renters.
### Renting to Friends or Family
Renting to friends or family can be a mixed experience. While it worked well for us, it can sometimes strain relationships. Be upfront about rules and expectations to avoid misunderstandings.
### Ensuring a Good Fit
Interview potential roommates just as you would if renting out your entire home. Ask about their job, living history, and work schedule. References and background checks can also help ensure a good fit.
### Setting Rules
Before your new roommate moves in, discuss and possibly put in writing:
– Rent amount and due date
– Rental period
– Guest policies
– Noise levels
– Cleaning duties
– Areas that are off-limits
– Smoking and pet policies
– Parking arrangements
– How to split bills
### Taxes
Consult tax professionals for advice on any tax obligations related to renting out a room.
### Summary
Renting out a room involves a lot of preparation but can be rewarding. It can help you save money, stop living paycheck to paycheck, and pay off debt. The main challenge is adjusting to living with someone else. While it’s not for everyone, many people successfully find and live with roommates each year.
Would you consider renting a room in your house for extra money? Why or why not?