Updated May 2020
Most people think of landlords and tenants living in separate spaces, but what about when you decide to rent out a room in your home? When you do this, you become a landlord just as surely as if you owned another building that you would be renting out completely.
Still, the rules and regulations might be different when it comes to renting out rooms where you live versus renting out the complete property. To be a successful landlord, in either case, it is important that you learn the particulars. Without them, you could end up in legal trouble!
In the event that you decide you want to rent a room, many of the same lessons, tips, and procedures can be implemented to ensure that you and your tenant roommate are conducting business in a fair and legal way.
The information in today’s guide will help you become a legal landlord at your own property with as little complication as possible all while you earn some extra cash.
Table Of Contents For Renting Out A Room In Your House
- What Does Renting Out A Room In Your House Mean Exactly?
- Is It Legal To Rent Out A Room In Your House?
- Renting Out A Room In A Primary Residence
- How To List A Room For Rent
- How To Screen A Roommate
- Writing A Lease Agreement For Renting A Room In My House
- Taxes When Renting Out A Room In Your House
- Sublet Options In College Apartments
- FAQs About Renting Out A Room In Your House
- How To Rent Out A Room: Doing It Right Pays Off
If you have unused space in your home, renting out a room might be a nice way to earn some extra cash. Renting out a room in your house may be an actual bedroom, mother-in-law space, or some combination of bedroom and bathroom, plus kitchen access.
No matter what space you decide to rent, realize that it means you will have another person living in your home. There will be times where you get along wonderfully and also when they will probably get on your nerves at some point.
Remember that renting out a room is different from subletting, which happens when you are renting a place you don’t own, but rent your space to someone else, while still being responsible for rent to the landlord.
Renting out a room in the property you own is a different situation, which is more of a landlord/tenant relationship than two renters together.
There are a number of conditions that might affect whether or not you can even rent out space in your home to make extra cash.
One example might be that if you own a condo somewhere and your homeowners association prohibits additional occupants that aren’t family members.
Some municipalities have rules and restrictions about renting rooms in homes, so make sure your desire to rent out unused space will keep you compliant with the law.
How To Legally Rent A Room Out
Your city or town might also have zoning laws that prevent residents from renting to people who are unrelated to them without a license or permit. There could also be restrictions on the number of unrelated people to whom a homeowner can rent; check your city zoning laws to ensure you are proceeding legally.
In some cases, there might be conditions to renting out a room in your home, such as if your city requires unique, independent outdoor access for any rental space inside a home.
In some municipalities, you might need to get an inspection completed in the room before you can rent it out.
Make sure your unused space is in compliance with whatever regulations govern your area. In particular, check through the following laws:
- Local laws
- City ordinances
- Zoning laws
- State laws
- Applicable homeowners association laws
Once you have determined that you can legally rent out a room in your house, you will need to work through the process of preparing your room and then marketing it to find the right tenants. Follow these steps carefully to ensure you have everything set up properly.
Step 1: Preparing The Room
Ideally, your unused space is a habitable place with proper heating, electric, and plumbing systems in place.
You can’t deny your tenant roommate the use of a bathroom, so make sure you specify which one “belongs” to the tenant.
Your tenant also has a right to privacy, so you may want to consider installing a lock on the bedroom door.
That way, the tenant can make sure their belongings are secure and enjoy privacy when they are home if needed. Tenants that pay rent are expected to be given certain securities according to landlord-tenant laws, so doing all of these things ensures you are compliant with the law.
Many people looking to rent a room are seeking one that is furnished.
If you decide to provide the room for rent as furnished, make sure you take a careful inventory and both you and your new roommate complete a walkthrough inspection before signing the lease agreement.
You can take pictures of the furniture, walls, carpet, and so forth, so you both have a visual record of the condition of the room before occupancy.
Step 2: Marketing Considerations
Create your ideal tenant roommate avatar, and set the standards by which you will select a tenant. Will it be a college student? A retiree? Someone with no criminal background?
You can set up specific criteria for whom you will consider, just as you would if renting an entire property.
Be Aware Of Fair Housing Laws
There is one important thing to note when crafting your tenant avatar that is exclusive to those renting out a room or getting a roommate. When selecting a roommate, Federal Fair Housing Laws allow some exceptions to the traditional protected classes.
What this means is that when it comes to renting out a room in your own home, advertising for a tenant roommate and choosing one have certain conditions and exceptions attached.
Federal Fair Housing laws don’t allow anyone to use discriminatory language when advertising for a tenant or tenant roommate. However, you can include a preference for the sex of the roommate in your ad.
In other words, if you are a female, you can advertise for a female tenant, but you can’t include any other qualifiers in the ad.
When it comes to making the decision about which applicant to choose to live in your home, however, new court rulings have opened the door to allow homeowners and tenants seeking roommates to choose based on their own personal criteria, even if it is discriminatory.
In 2012, the 9th Circuit Court held that applying a nondiscrimination requirement to a homeowner or tenant’s roommate selection would be a serious invasion of privacy.
When selecting a roommate, therefore, the anti-discrimination provisions of the FHA don’t apply. You can be free to choose your new roommate, even by discrimination, because of the shared space factor.
Because selecting a roommate increases personal risk and affects an owner’s quality of life, the court allows more particular reasons for selection. If you were selling or renting an entire unit separate from your own living space, nondiscrimination laws would, of course, apply.
Once you’ve prepared the space and figured out what type of roommate you are looking for, it’s time to craft an ad and get it out there. Consider that your tenant may not look in the normal places for your ad.
Try a college campus housing agency or college newspaper, or a senior citizen center for a single person looking for a room. Since you won’t be attracting a family, for example, you can focus on more of a niche marketing approach than a wide net.
Spread the word with friends and family as well, because networking can often yield good results. As always, a good tenant screening is invaluable and will eliminate a lot of trouble for you down the road. You can conduct the screening on your own or use a professional service for a reasonable fee.
One thing to ask for in a room rental/roommate situation is to get references for previous roommates if the applicant is willing. It’s much different to find out what a person is like to live with from a former living partner than to ask the landlord, who probably won’t know what that person is like in the day-to-day.
If you’re renting out a room, it’s extremely important you get a good renter in your home. Not only do you want to ensure that they will pay rent, but you also need to remember that normal tenant issues are amplified when you’re sharing a home with the renter. You will be sharing common areas, so screening is even more important.
Our tenant screening guide will walk you through how to find a great renter.
To do this properly AND legally, you need to start with a compliant rental application that gives you (the landlord) permission to run a background check and contact references.
Once you have the proposed tenant fill out the application you should run a full background check.
We can do this for you right here at RentPrep.
A room rental agreement for a private home should, in many ways, reflect what landlord-tenant laws require any other lease agreement to look like. Yes, even when renting out a room in your own house, it’s a smart idea to have a lease agreement that specifies what is expected of a tenant roommate and what your responsibilities are as a landlord.
While many states accept an oral rental agreement as legal and binding, it’s much smarter to put everything in writing and have both parties sign it.
That way, if any conflicts or problems arise in the future, you both have a resource to use.
A room lease agreement should list the specifics on your expectations for the tenant roommate. Here are 5 things that the lease should include in addition to all general lease agreement requirements:
1. The length of time that the tenancy will cover. Lease agreements typically go for one year, but if you are renting to a college student, you may want to consider a 9- or 10-month lease to coincide with the school year. Or, if you want to create a 6-month lease agreement to see how you like renting out a room in your home, that’s perfectly fine as well.
2. Defining common areas. Renting a room means that the tenant can expect privacy in their own room, but the shared space between you can lead to some conflict down the road if not discussed up front. Unless the rental space is a mother-in-law apartment style in your home, your tenant will generally need access to the kitchen, bathroom, laundry room, and even the living room. Parking in the driveway and use of the backyard or balcony should also be part of the discussion. Specify what spaces are off limits as well. Make sure your lease clearly outlines the rules and regulations about all common areas.
3. Utility responsibility. If you are renting out a room in your home, you won’t want to turn the utilities over to a tenant. Instead, pay the utilities yourself and boost the rent a little to cover your tenant’s portion. However, some landlords may still want to split utilities down the middle, or have the tenant pay one utility like the cable or the internet, for example. You’ll simply have to examine your own situation and see what is best for you.
4. House rules. Make it clear what your expectations are when it comes to behavior from your tenant, especially with regard to noise, overnight guests, pets, and extended vacations. Because you will essentially be living with a roommate, you can eliminate a lot of confusion and gray areas by presenting applicants with a clear list of house rules to see if they have any problems with living to your standards. Make sure the tenant you choose gets a copy of the rules and refer to them as needed if your tenant roommate isn’t following them.
5. Set the rent and deposit amount. Specify the rental rate, due date, and the security deposit amount in the lease agreement and let the tenant know that in the event of late rent, the eviction process works the same as it does if you were renting out a separate property. Conversely, you are also responsible for following the law when it comes to official notices, maintenance service, and returning a security deposit.
Any rent that you receive is taxable income.
However, you’ll be able to claim expenses and deductions when renting out a room that you could not claim before.
If the carpet needs to be replaced, you’ll be able to deduct the cost of the new carpet in the room that is being rented.
If you are planning to rent out a spare room in your house, you’ll want to figure out the square footage of that room and what percentage it accounts for in your home.
If you have a 2,500 square foot home and the room you rent out is 500 square feet, this would account for 20% of your square footage.
The fraction of the mortgage interest, utilities, or real estate taxes that is due to your roommate is one-fifth. These expenses are deductible as rental expenses on Schedule E. [source: H&R Block]
Of course, in a college town, you are also faced with the very high probability that many of your tenants will want to return home for summer vacation, leaving you with a lot of vacancies. This, of course, is why rental agreements and leases in college towns are 12 months long rather than 9 months so you get the assurance of those 3 summer months of full rent.
This is not to say that your tenants won’t go home anyway. You can earn a lot of goodwill simply by suggesting to your college-age tenants who want to return home that they find people they can sublet their room too. This is a common practice in towns and cities that have thousands of college-age students.
The concept is quite simple: As a landlord or property manager, you can consent to a subleasing agreement between your tenant and his subtenant. Of course, you can also decline. Your tenant is still financially responsible for all rent that is owed to you and they will be held liable for any non-payment.
However, you will be better off in the long run if you help your tenants find subtenants.
They will most likely return when school starts up again. You will also get the benefit of having an occupied apartment for the three months that your tenants are gone.
You may be amazed at how quickly an apartment unit goes downhill when nobody is in it. You will have to do more cleaning and maintenance if you don’t fill the space with a subtenant.
It’s just a part of the business.
How Much Should I Charge To Rent A Room In My House?
The first thing you should do is look at any comparable rents in your neighborhood. See if there are similar situations where a landlord is renting out a single room. This is going to give you the best idea of what market rents are for a roommate situation.
Next, look at traditional rents in your area and compare how your rental situation stacks up.
The type of renter you’re looking for can’t afford (or doesn’t want to pay for) a one-bedroom studio. Knowing this, you should be priced well below these one bedroom options to entice a renter to stay on your property as a roommate.
Can I Rent Out A Room In My House To A Friend?
This is a tricky situation because you’re blurring the lines between landlord and friends.
Some landlords consider this one of the cardinal sins of property management and will tell you to never rent to a friend.
The upsides are that you have an idea of who the person is and how they will treat your property.
The downsides are that you’re introducing a financial component into your friendship. What happens if they’re late on rent or if there is a dispute over damage in the rental? Would you be comfortable asking them to pay rent if they are late?
Many landlords would tell you that you’re better off renting to a stranger after a thorough screening process. There will be clear lines in the relationship and it will be easier to treat your rental income as a business.
Is Renting A Room Taxable Income?
Yes, any income generated from renting a room (in the United States) is taxable income. However, if you rent out the room for less than 15 days, this does not apply as long as you use the residence as your general housing for at least 15 days yourself.
Should I List All Adults In The Lease Agreement?
It is prudent to get every adult inhabitant of the rental agreement or lease. Failure to do so can lead to some hairy issues down the line. For example, you need to serve the leaseholders when a potential legal issue arises. If there are three inhabitants of an apartment, but only one is on the lease and you can never find them at home, it will be difficult for you to begin an eviction process.
It still can be done, but it is more difficult and time-consuming. If you had gotten all the people living in the apartment on the lease, however, you could serve any one of them.
How Do I Evict My Tenant’s Roommate?
If your tenant added a roommate without consulting the landlord or lease, you may want to evict both parties.
If the lease contains a specific notice provision, the landlord should act on it as soon as possible by giving notice to the current tenants that they will have to move out of the premises.
If the lease has no notice provision, the landlord may have to give notice according to the laws of the state in which the property is located. In these situations, the notice may be the length of a rent-payment period or longer.
The landlord may have the opportunity to pursue an eviction on the basis that there are unapproved tenants living in the unit if the lease allows for eviction on this basis.
How Do I Legally Rent Out A Room In My House?
To legally rent out a room in your house, you need to follow these steps:
1. Make sure that local laws and zoning permits allow you to rent out a room in your house; some cities or HOAs have restrictions on anyone that is not family living at the property.
2. Make sure that the room is set-up properly for rental, including any required safety features such as an egress window or a fire extinguisher as needed.
3. Advertise the room in non-discriminatory ways, and screen tenants thoroughly to find a good fit.
4. Set up a rental agreement that includes house rules to avoid potential problems in the future.
5. Pay taxes, as necessary, and ensure that your renter is not being overcharged for their share of the taxes or any other utility payments.
For more information about all of these steps, head back up to the top of today’s article. From there, you can navigate to each section to find out more about how to properly, legally, and easily rent out a room in your house.
Can I Rent Out A Room In My House On A Normal Mortgage?
Most lending companies allow you to rent out a room of your house while you have a mortgage, but the rules are going to differ depending on your specific lending terms. Check with your lending company to ensure that you are not breaking any rules before you move forward with a room rental situation.
How Much Can I Charge To Rent A Room In My House?
Theoretically, you can charge as much as you want to for a room rental; most homeowners set their prices somewhere below the local price for a one-bedroom studio apartment to attract the right tenants. Some cities or state laws may have price caps on how much you can rent out for, but in most cases, it is up to the tenant and landlord to negotiate the price.
What Rights Do I Have When Renting A Room?
Landlord-tenant laws apply to room rentals the same way that they apply to property rentals. Both you and your tenants will have these rights as outlined by your local and state laws; any confusing bits that need to be cleared up because of shared space should be outlined in the rental agreement.
How Do I Protect Myself When Renting A Room?
When renting out a room in your house, make sure that you do the following to protect yourself and your finances:
- Have a thorough and complete rental agreement in place
- Screen tenants properly
- See if you are eligible for additional insurance protection
- Do move-in and move-out walkthroughs to check for damages
Do I Have To Report Rent Income From A Room Rental?
Yes; rental income made from a room rental out of your home still needs to be reported as income. Rent that you receive is considered income and should be reported for the year that you receive it even if the rental period covers a different year.
Can You Rent Out Rooms In A Single-Family Home?
You can rent out rooms in a single-family home if you are living there in most areas; if you are not living there, you will need to check your local restrictions to see if it is allowable to rent out the rooms individually. Many areas limit the number of families that can occupy a home, or they require this type of rental situation to be registered as a boarding house. Check your local laws to be sure.
You’ll run into far fewer issues if you implement this phrase, which should be every landlord’s mantra—“Treat it like a business.”
The horror stories that come from landlords who have rented out unused space in their homes are often avoidable when you treat this landlord/tenant situation like any other.
Written lease agreements, inspections, maintenance, dealing with money, and even evictions are all a part of being a landlord and that shouldn’t change if the tenant is in your own home or in a separate rental property. Follow the steps on how to rent out a room properly from start to finish, and you will have a much more successful experience.
Renting out a room in your house can be a great experience and a great way to make some extra cash as long as you take the time to do it right. Work through the rental set up, advertising, screening, and agreement signing thoroughly to ensure that you have the best rental situation possible.