Rent Out a Room for Extra Income
If you have an extra room, you might have considered renting it out for extra income. Have you wondered about the pros and cons? What kind of renter are you looking to have in your home? These and other questions are important to answer before you embark this way of making money.
Here are some things to consider before you rent out a room for extra income.
1. Taxes
No one likes to talk about taxes, but it is something to be considered when you rent out a room of your home. It’s not all bad news – you may be able to deduct the expenses related to the rental from your income tax. But rental income will need to be reported to the IRS. If you’re lucky, these two aspects of taxes on room rental will even out.
2. To Whom Will You Rent?
This is a question to consider very carefully. Here are some thoughts on your prospective renters.
-Family can be a good choice, because you know what they’re like (at least in theory). But family may be a bit too “relaxed” about paying the rent, or spend more time in your house with you than in their rented room.
-Friends are another choice, because you know them well and might like to offer them a place to rent.
-Background checks are a good idea if you rent to strangers.
-Familiarize yourself with the fair housing laws in your area, so you know what’s required of you regarding the acceptance or rejection of potential renters.
-It’s not just the young who need rooms these days, although renting to a college student is a great idea. Elderly people are potential renters, too, as are recently-divorced people. So it’s a good idea to be open to looking to demographic areas you might not have considered before.
3. Clear Boundaries
It’s a good idea to be upfront with any renter, whether they are friends, family, strangers, or what-have-you. Be clear about what you expect – is it okay if your renters “hang out” with your family, or do you want them to be in their own space? How much access, if any, do you want your renters to have to your house? Can the renters come and go without using the main entrance to your home? It’s better to figure these details out before rather than taking a “wait and see” approach.
4. What Should You Charge for Rent?
If you are not sure what you should charge, look around at the prices of similar rooms in your area. Here are some things to consider when decided the amount of rent to charge:
-Is your room furnished?
-Does the room have its own bathroom? If so, is it a full bathroom?
-How big is the room?
-How much closet space is there? If a large closet is present, it could be used as a small room.
Renting a room for extra income is not a bad idea; just make sure to do your research.