Everything You Need to Know Before Renting Out a Room in Your House

If you are interested in earning a bit of extra cash, you might be thinking about renting out a room in your house. This kind of arrangement can benefit homeowners and renters alike. Homeowners can put their extra space to good use and make some cash, while renters can have their own private space without the larger obligations of renting or owning an entire home.

There are several important things for both landlords and renters to think through before entering into this type of arrangement. Some of these include:

  • Legal restrictions
  • Tax issues
  • Tenant screening processes
  • Details for rental agreements

If you’re a homeowner looking to open up a room for rent, make sure you investigate these topics before you put up a “room for rent” sign in the yard!

The Legalities of Renting Out a Room in Your House

Without understanding regulations and laws that pertain to being a landlord, you could find yourself in legal trouble down the road. 

There may be local rules that prohibit you from renting out space in your house. For example, having a room for rent might violate the rules of your homeowners’ association, your home insurance policy, or even your mortgage. 

While it’s possible that these entities might not discover your status as a landlord, the risk is great. The financial penalties for breaking these rules can be severe.

If you confirm that you legally are able to become a landlord, know that it’s your responsibility to make sure your property is in proper rental condition. This includes ensuring that your home is fully up to code. 

A note about security, too: Some cities require specific locks to be installed for people who want a room for rent. Some areas require outdoor access for in-home rental spaces. Finally, some municipalities require an inspection of the room that will be rented.

Landlords and tenants should also read the Fair Housing Act. This covers federal mandates designed to protect renters from discrimination during real estate transactions. 

It’s crucial that you gain a comprehensive understanding of how the Act relates to you and your potential situation so that you can assert your rights as a renter and be aware of legal pitfalls to avoid as a landlord.

The money you make from rental rooms is taxable. However, there are some ways you can maximize your deductions in the same ways landlords who rent out entire properties maximize theirs.

Landlords can deduct the expenses that arise from the rental, as long as they divide certain ones between the rental portion of their house and the part they live in. 

Some of the expenses landlords can deduct include mortgage interest, home improvements, utilities, and repairs/improvements for the entire home. Talk to a qualified tax expert to determine whether you might be eligible for these kinds of savings.

Tenant Screenings

Tenant screenings should be done any time a new person is interested in a room for rent. These screenings benefit both landlords and tenants; they help ensure a good fit between parties. 

Tenant screenings should include income verification, background checks, and references. 

In addition, since part of a home is being rented instead of a separate property, landlords and potential tenants should always chat together before any contracts are signed to make sure both parties get along.

Rental Agreements

Rental agreements are for more than just establishing rent payment schedules; they are also for setting boundaries and expectations. Renters need to make sure they read every word of a proposed agreement or contract before signing. The better boundaries are spelled out, the fewer frustrations there will be down the road.

Before renting out a room in your house as a landlord, outline stipulations for tenants regarding pets, visitors, common areas, parking, and anything else you want tenants to be clear about. Tenants looking for a room for rent should never hesitate to ask for clarification on anything before agreeing to sign.

Rental Payments

Collecting rent is vital for landlords, but it’s also important that tenants can easily pay on time, every time. It must be clearly understood by the tenant that the due date is non-negotiable — if there is a grace period included, this should be clear, too. 

The best way to make rental payments easy for tenants and landlords is to use an online rent payment system like PayRent. This can eliminate potential confrontations and is quick, easy, convenient, and secure for you, whether you’re renting out a room in your house or you’re seeking a room for rent.

SIGN-UP FOR PAYRENT

Start collecting rent online in less than 5 minutes.
  • Control when and how renters pay you
  • Automatically remind tenants when rent is due
  • Accept bank transfers and credit cards
GET STARTED FOR FREE
>

Leave a Comment

PayRent is on a mission to build a rent collection app that fosters a positive and productive relationship between renters and landlords. We focus less on transactions and more on the people behind them.

Do You Find This Information Useful?

Sign-up for our newsletter and get great content like this delivered to your email.
Subscribe
SUBSCRIBE NOW
close-link

Subscribe to Our
Email Newsletter

Receive timely and relevant articles directly to your email inbox.
SUBSCRIBE
You can unsubscribe anytime.
We respect your privacy
close-link
FREE TEMPLATE DOWNLOAD

Create a Custom 
Rent Collection Policy in Minutes

Get instant access and generate your iron-clad rent collection policy.
DOWNLOAD
close-link

SIGN-UP FOR PAYRENT

Start collecting rent online in less than 5 minutes.
  • Control when and how renters pay you
  • Automatically remind tenants when rent is due
  • Accept bank transfers and credit cards
GET STARTED FOR FREE
>
close-link

Discover the Truth About UFOs

Top secret documents reveal ET encounters the government has been hiding
freshmarketer CTA
SUBMIT
close-link

Donate Today

To the Center for Kids Who Can't Read Good
LEARN MORE
close-link

Protect Yourself From Robots

Smart seniors get their robot insurance from Old Glory Insurance
freshsales CTA
SUBMIT
close-link

Interested in PayRent?

Get a custom price quote when you schedule a demo.
*We won't share your information outside of our company
REQUEST A DEMO
close-link

Protect Your Evictions

PayRent gives landlords the control to block
all or partial payments from their renters.
LEARN MORE
close-link

Protect Your Privacy

PayRent allows landlords to accept payments without
ever sharing their personal information with tenants.
LEARN MORE
close-link

Automatic Rent Reporting

PayRent reports rent payments to
all 3 credit bureaus at no extra cost.
SIGN-UP FOR FREE
close-link

Track Renter’s Insurance

Require Insurance and Track Documents with PayRent
LEARN MORE
close-link

Accept Credit Cards

PayRent makes it easy for Landlords to accept
Bank Transfers and Credit Cards.
SIGN-UP FOR FREE
close-link

Save Time With PayRent

Automate invoices, payments, receipts, late charges
and credit reporting with PayRent
LEARN MORE
close-link