Renting Out a Room in Your Home

4 Concerns When Renting Out a Room in Your Home

By Karina Gafford 


Would you share a room in your home today in order to avoid sharing the title of your home with your mortgage lender for any longer than necessary? Many families across the U.S. are doing just that; they are sharing their homes to help either pay bills or pay down their mortgage more quickly! 

The growth of the sharing economy--Uber, AirBnB, Dog Vacay, ZipCar, and so forth--makes the idea of renting out a room in your home to make a few extra bucks just that more alluring. As military families, we're already pretty familiar with sharing: we borrow goods from the loan locker on base before our household goods arrive, we give our used moving boxes to the next military family PCSing, and we sometimes find ourselves in need of renting a room in another military family's home. Geobachelors, in particular, search for single rooms for rent, especially when they're supporting both the household at their current duty station and their family's household back at the last.

To help meet this need for renting a room, MilitaryByOwner has added a "room" feature under the advanced search settings under "property type." If you're renting out a room in your house, make sure to list your property type as "room" instead of single family home or condominium to make sure those searching can find your room for rent!

If you decide to rent out a room in your home, you'll be joining the over 6.2 million other Americans who share homes with non-family members, according to the U.S. Census Bureau.

Before you do post that room for rent listing, though, take heed. Renting out a room in your home definitely isn't for everyone. Let's look at the top four concerns to consider when you rent out a room in your home. 

    1. How important is cleanliness to you? 

If you describe yourself as an obsessive neat freak, then coming to terms with having a less than immaculate home may present a challenge. On the other hand, if your renter is coughing up enough dough to cover more than half of your mortgage, you may be able to afford to splurge on help with housekeeping. You have to weigh the cost-benefit ratio of not knowing the exact living habits of your roommate. Can you deal with someone who doesn't prioritize picking up after themselves in exchange for making thousands of dollars in rent over the year?

  1. What are your HOA restrictions? 

An article on MarketWatch a couple of years ago discussed the quiet but steady growth in the number of homeowners in high end neighborhoods adding tenants to their homes. The reporter explained that the hurting economy had significantly affected their abilities to pay not only the mortgages on their 15,000 square foot mansions but also their utility bills, noting one individual paid in excess of $1,400 per month on electricity alone.That amount would cover the mortgage or rent for most military families! 

As a result of the proliferation of these boarding houses, homeowner's associations moved quickly to enforce stricter tenancy restrictions, such as the amount of time non-family members can reside in the property. HOAs and management companies around the country followed suit; many don't like the idea of people moving in and out of their neighborhoods every few months, believing that it create a destabilizing effect on the overall community. If you live in an HOA, check the policies before proceeding with adding renters to your home. A real estate agent who is familiar with your area should be able to better advise you on any zoning restrictions or policies that would otherwise prohibit you from renting out a room.

  1. Are you comfortable with the administrative aspects of being a landlord?

If you are renting out your entire property, but don't want to handle the landlord's administrative tasks, you can hire a property manager. But if you're living in your home as the landlord, then you are the property manager. Are you prepared for the task? Check out our resource article on 8 Lessons for a First Time Landlord to get a better sense of what's involved. Essentially, though, you should be prepared for the following tasks when renting out a room in your home:

  • Perform a background and credit check on applicants
    ·         Execute a lease
    ·         Mandate that your tenant maintain renter's insurance
    ·         Collect rent
    ·         Follow up according to the law when rent is late
    ·         Keep records of income and expenses that pertain to your rental unit

The background check is critical for military families. You don't want the short-term financial gain of a rental unit negatively impacting your long-term career prospects, so verify you aren't allowing a criminal into your home before you have to report that on your next security clearance. 

A lease is an absolute must in a roommate situation. Since this individual will be living in your primary residence, he can claim legal rights to your home if you don't have anything in writing that draws up a clear delineation of his status as a tenant. You don't want to have to take your tenant to court because he's claiming squatter's rights when you try to sell your home when orders arrive. You think your last PCS was stressful? Get a lease in plain simple language to avoid this mess!

Keep receipts of all rental income as well as receipts of any costs associated with renting out your property. While you do have to pay taxes on your rental income, you also have quite a number of tax deductions available to you. For example, if you rent out a room in your home using MilitaryByOwner, keep the receipt as this advertising counts as an expense for your rental property! Make sure to consult your tax advisor to ensure that this applies to your situation. Also, if you use the free tax service with H&R Block through MilitaryOneSource, you'll see an option under your rental properties for where to include this advertising expense. 

  1. Can you set house rules and hold to them?

Before your tenant rearranges your furniture and takes over the pantry, make sure to lay some ground rules. One way to help you achieve house rules are to create a list and keep it posted in a clear, visible place such as on the front of the refrigerator. House rules may include items such as:

  •  No smoking inside the home.
     ·         Rinse and put your dishes in the dishwasher. 
  •  No male/female house guests (as appropriate).
     ·         No overnight house guests without approval.
     ·         Don't turn the AC below 72 degrees. 

Now that you've considered some of the key factors of renting out a room in your home, would you consider joining the "sharing economy" by sharing a room in your home? If you have experience in this situation, what tips do you have to share with other military families who are considering making the decision to share their space?