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Many homeowners wonder how they can avoid sharing the title of their house with their mortgage lender for longer than necessary. Homeowners across the U.S. are sharing a room in their home to do just that. They’re opening their property to tenants to help pay bills or pay down their mortgage more quickly.
The rapid growth of the sharing economy (Uber, Airbnb, Dog Vacay, ZipCar, as examples) legitimizes the idea of renting out a room in your home for extra income. Military families are already pretty familiar with sharing: they borrow goods from the loan locker on base before their household goods arrive, they give used moving boxes to the next military family PCSing, and they sometimes find themselves in need of renting a room in another military family's home.
Geo-bachelors, in particular, search for single rooms for rent, especially when they're supporting the household at their current duty station in addition to their family's home back at their previous duty station.
To help meet this need for renting a room, MilitaryByOwner has added a “Room” feature. From your property results, choose “Refine Search” then “Home Type.”
If you're renting out a room in your house and wondering how to find renters, be sure to list your property type as “room” instead of as a single-family home or condominium to ensure those searching can find your room for rent. Additionally, you can add “Room for Rent” to the thumbnail of your ad listing.
Take the time to research before listing a room for rent. Renting out a room and inviting strangers into your home may not be right for every situation.
Top Questions to Answer Before Renting Out a Room in Your Home
1. What are the legalities of a room for rent?
For first-time landlords, realizing there are laws about rooms for rent may be surprising. There are federal and local laws to consider, and they’re related to the marketing of the home, the lease, and the taxes that will have to be paid on the income you’ve earned.
State’s Laws
Invest in a state-specific landlord/tenant lease, such as those offered at U.S. Legal Forms. They cover each state and its specific rental agreement language. You may need to customize the wording to accommodate a room for rent versus a house for rent. However, the major categories are covered, such as the application, lease, disclosures, termination notice for non-payment of rent, inventory reports, and salary verification.
Not only do state laws regarding rooms for rent differ across the country, but your local city, town, or municipality government could also have a say in how your business is operated. Understand how they govern occupancy, privacy, zoning laws, and even parking.
Federal Fair Housing Laws
Landlords must abide by the Federal Fair Housing Act, which protects classes of people from discrimination. The marketing and advertising used to find tenants can’t use discriminatory language to dissuade certain people from applying. These protected classes include race, color, religion, nationality and ethnic background, gender, familial status, and mental and physical disabilities. State and local laws may expand these protected classes, for example, military status.
However, Federal Fair Housing laws involving a room for rent are unique regarding the relationship of the people living together as roommates. Legally, there are differences between renting a house to someone you don’t live with and renting a room to someone in a shared home.
Essentially, you cannot use discriminatory language in your ad. However, if you’re wondering how to find renters that mesh with your preferences, you can advertise with qualifiers specific to your lifestyle: for example, a female owner who prefers a female roommate.
This change was instituted in 2012 and was mainly based on the invasion of privacy that the homeowner would endure. “Because we find that the FHA doesn't apply to the sharing of living units, it follows that it's not unlawful to discriminate in selecting a roommate.”
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Taxes When Renting Out a Room in Your Home
It’s not surprising to learn that the income earned from renting a room is taxed. But landlords qualify for some tax benefits that allow their rental business to become profitable.
Some typical deductions:
- Advertising, listing, and service fees accrued from companies such as Airbnb
- Mortgage interest
- Utilities
- Repairs and maintenance for the room, shared furniture, and appliances
- Cleaning fees for laundry and the room
- Property insurance
2. Are you comfortable with the administrative tasks and responsibilities of landlord life?
If you’re renting out your entire property but don't want to handle the landlord's administrative tasks, you can hire a property manager. However, if you're living in your home as the landlord, then you are the property manager.
Evaluate the benefits and drawbacks of the responsibilities associated with property management.
Check out our blog post How to Succeed as a First-Time Landlord to better understand what's involved. Be prepared for the following tasks when renting out a room in your home:
- Perform background and credit check on applicants
- Execute a lease
- Mandate that your tenant maintains renters insurance
- Collect rent and follow up according to the law when rent is late
- Keep records of income and expenses that pertain to your rental
The background check is critical for military families. You don't want the short-term financial gain of renting out a room to negatively impact your long-term career prospects. Verify you aren't allowing a criminal into your home before you have to report the incident 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 have nothing in writing that draws up a clear delineation of his status as a tenant.
You don't want to take your tenant to court because he's claiming squatter's rights when you sell your home when orders arrive. Get a lease in plain, simple language to avoid a mess!
See essential terms to include in a lease.
3. What are the HOA restrictions?
In response to the Great Recession of 2007–2009, there was a slow but steady growth in the number of homeowners in high-end neighborhoods who added paying tenants to their homes. The hurting economy significantly impacted owners’ ability to pay mortgages and utilities on their estates.
As a result of the proliferation of these boarding houses, homeowners associations (HOAs) moved quickly to enforce stricter tenancy restrictions, such as the amount of time non-family members can live on the property. HOAs and management companies around the country followed suit. Many didn't like the idea of people moving in and out of their neighborhoods every few months, believing that it created a destabilizing effect on the overall community.
HOAs often legislate policies on traditional single-family homes, condos, and townhouses, often with more stringent rules about additional tenants to protect all occupants of the complex or neighborhood.
If you live within an HOA’s jurisdiction, check the policies before adding renters to your home. A real estate agent who is familiar with the area will be able to advise you on any zoning restrictions or policies that would otherwise prohibit you from renting out a room.
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4. Is the room adequately prepared for a paying tenant?
Legally, the room must be habitable, meaning it has to meet health and building codes, including the absence of mold. Landlords must ensure the tenant’s comfort and safety through working heating and air conditioning, functional windows, and access to a bathroom.
To attract the most qualified renters, you need preparations beyond safety standards. Many room renters are interested in simplifying life and hope to find an updated, furnished bedroom. To justify asking the market’s highest rental prices, landlords can supply the room with quality amenities, from linens and floor coverings to updated paint and curtains. Document the room’s condition with pictures before and after the tenant moves in.
5. Can you set house rules and hold to them?
Before your tenant rearranges your furniture and takes over the pantry, it’s wise to establish and communicate some boundaries. One way to help you achieve house rules is 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 the following items:
- No smoking inside the home.
- Rinse and put your dishes in the dishwasher.
- No male/female houseguests (as appropriate).
- No overnight houseguests without approval.
- Don't turn the AC below 72 degrees.
6. How important is cleanliness to you?
Those who consider cleanliness a priority may find it hard to accept a home that isn't perfectly tidy. However, if your tenant's rent covers over half your mortgage, you might be able to spend some money on cleaning services.
Landlords have to weigh the cost-benefit ratio of not knowing the exact living habits of their new roommate. Would you accept a tenant who neglects tidiness in return for a substantial annual rent payment?
7. How can I find renters for my room for rent?
Finding the right renter starts with getting your listing in front of the right audience. Advertising on military-focused platforms like MilitaryByOwner and local installation Facebook groups will help you reach service members actively searching for affordable rentals. Clear photos, a straightforward description of what’s included in the rent, and details like proximity to base or flexible move-in dates can make your room stand out.
Referrals are a great way to find good, trustworthy renters. Consider letting neighbors, coworkers, and friends know you’re looking for a renter, because word of mouth often leads to reliable candidates.
Once inquiries start coming in, take the time to screen carefully. Because a room rental means shared living spaces, it’s important to stick to the formal process, even if the applicant comes recommended by your best friend. Request an application, run a background and credit check, and have a conversation (in person or virtual) to make sure the renter is a good fit for your home.
Gaining insight into the important factors related to renting a room in your home will help you and your family make a well-considered decision.
Take a look at our detailed FREE resource for military landlords below.
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