Tips for Renting Out a Room in Your House

You walk by it every day. It’s empty except for a bed, a nightstand, and a stack of old clothes that you’ll donate someday. Yes, a guest room is nice to have, but it may also be a mortgage vampire. Is it really worth it to shell out money each month for square footage that only gets used three nights a year when Nana visits?

Homeownership costs are only going up in the US. According to data from real estate Redfin, almost half of Americans struggle to pay their mortgage every month (~49.9%). Many of these people opted out of vacations, sold belongings, skipped meals, and worked more to help them afford their mortgage payments.

While starting a gig at your local Starbucks might seem like the quickest option for gaining additional dollars, there could be another way to do this from the comfort of your own home.

If you own a home with additional rooms that are not being used, then you might consider renting out that extra space. This could help you:

• Supplement monthly income
• Help pay off your mortgage
• Develop the skills for running a rental business

But, before you go and find a tenant who’s up for sharing the fridge, make sure you run a background check from an established tenant screening service like SmartMove®. After all, you may want to avoid the disaster of defaulting on your mortgage only to fall victim to the misfortune of an ill-fitting tenant.

This article covers the basics of renting out a room in your home, including tips for getting started, watchouts, and how to select a roommate.

Potential Benefits of Renting Out a Room

Now is a great time to rent out your extra bedroom. As you can see below, the research shows a combination of more adults living together and a larger supply of available extra rooms.

According to research from Bowling Green State University, shared living has become more common in recent years, both among younger generations and in older adults.”. A shared household is defined as a household with at least one “extra adult” who is:

• 18-29
• Not living with a parent, grandparent, spouse, or cohabitating partner

If you’re looking to take on a tenant to help cover your mortgage payments or earn additional income, then there could be plenty of people searching for a space to lease.

On top of that, Americans have more extra bedrooms than ever before. According to research from Realtor.com, there were 31.9 million extra bedrooms in the U.S. in 2023––a record high that represents 8.8% of homes.

If you’re in the sizeable chunk of Americans with an extra bedroom, you may be able to rent it for some extra cash.

Challenges of Renting Out a Room

However, just because an opportunity to make some extra cash exists, doesn’t mean it’s risk free. Of course, renting out a room in your house comes with its own set of challenges, like:

• Preparing the space
• Ensuring privacy and security
• Making sure everything is done properly
• Finding tenants who will pay rent on time

The point of renting out a room is making money for your own mortgage. Given that, it makes sense why rental nonpayment is a major fear of landlords––even if it’s just a room.

If you do decide to rent out your room, avoiding eviction should be a top priority. Evicting a tenant can be a time-consuming and costly process. This is because an eviction. may cost you between $1,000 and more than $5,000 depending on a number of factors, according to SmartAsset.

When you take on a room tenant (or roommate), you also take on a significant amount of responsibility. Even if you’re not renting out an entire property, you are still considered a landlord.

This means you are subject to laws and regulations applicable to landlords. Additionally, you’re choosing to share your living space, which could become frustrating the longer you live together.

So, there’s plenty to keep in mind when considering renting out a room. However, that doesn’t mean it’s a non-starter. Below, you’ll find some tips to help mitigate some of the challenges of renting out an extra room to help set yourself up for success.

Tips on How to Rent Out a Room in Your House

1. Make Sure the Room is Tenant-Ready

When you rent out even a room, you are a landlord. As a landlord, you generally have a responsibility to create a habitable living space before taking on a tenant, according to FindLaw .

In general terms, habitable means that the premises must suitable for human living throughout the tenancy. According to FindLaw, the states have varying standards on what it takes for a dwelling unit to be considered fit for human habitation.

Before taking on a live-in tenant, you may need to determine whether you have the means to fix up the space, both now and through continued upkeep. It may be important to consider your financial situation along with your own repair capabilities.

For example, if your tenant’s toilet leaks, are you able to roll up your sleeves and fix the issue? Or, if you need outside help, can you afford it? You need to make sure you have the budget for repairs and ongoing maintenance.

Before committing to becoming a landlord in your own home, be sure you understand the level of responsibility and financial burden it can entail.

2. Consider the Criteria of Your Ideal Tenant

If you rent out a room in your home, then you’ll become both landlord and roommate. Are you comfortable sharing your personal space with someone else? First, figure out what you want from a roommate and a tenant, before the moving boxes start showing up.

Deciding on tenant criteria early on provides several benefits:

• It makes it easier to write a good rental and advertise your property
• It can help identify potentially ill-fitting candidates if they don’t meet your criteria
• It can help you tailor your screening questions when you start accepting applications
• It can help provide clarity into what you’re looking for

For example, when setting criteria, you’ll likely want to confirm potential tenants have sufficient income, and will comply with your non-smoking and pet policies.

Depending on your own situation, these might be different. For example, if you are a smoker, perhaps you won’t mind a fellow smoker moving in.

3. Create an Enticing, Transparent Rental Listing

Once you’ve created your ideal tenant profile, write an effective rental ad to help attract prospective tenants, according to Housing Anywhere it’s important to highlight specifically what you’re offering and your property’s amenities, both shared and private.

Housing Anywhere recommends including information on your listing such as:

• The size of the bed
• If there is a private or shared bathroom
• If they have access to common space like a living room
• Included appliances or furniture
• Information about the other people living there
• Local conveniences, public transportation, or attractions
• Other criteria that might be important to the type of person you’re looking for

If you’re hoping to rent out a room to a working professional, you might highlight local transit access for commuting. Or, perhaps you’d like to capitalize on seasonal college student tenants; in this case, your listing might highlight proximity to campus, local attractions and recreational areas.

Additionally, you may want to include information about parking, how utilities are shared, and your pet and smoking policies in your ad.

Lifestyle and Conduct Information

As you’ll be living with this tenant, you need to communicate your expectations, as well. Be clear about what you’re looking for in a roommate, including your requirements surrounding:

• Use of communal space
• Frequency and number of guests allowed
• Access to shared amenities (Ex: garage, patio space, kitchen, etc.)

Rental Application Requirements

Beyond highlighting amenities and your expectations, you should also disclose any rental application requirements you have. For example, you may want to explain that you will contact their employer to verify their income, talk to previous landlords for a reference check, and require a tenant credit report and other background checks before taking them on as a tenant.

By setting these expectations upfront, you should be able to narrow down your pool of applicants more easily and help increase your chances of finding a quality tenant that may hit all your marks.

4. Set the Right Rent Price

No one wants to overpay for rent, so you’ll need to research on how much to charge when renting out a room in your home. Setting the right price may help secure your rental income. Pricing correctly could mean the difference between filling the room and dealing with an expensive vacancy.

Choosing the appropriate rent cost is important for several reasons:

• Too high: You may find it hard to rent out the bedroom
• Too Low: You may lose out on profit or attract ill-fitting applicants

To set rent in the sweet spot, consider the average income of those who live in your rental market area. Your rental rate should target prospective tenants with similar earnings so you can fill your empty room faster and get paid sooner.

You might consider using Rentometer.com to help determine average prices, check out local forums, ask other landlords, or search “rooms for rent” on Craigslist, Roommates.com, and other similar sites to help determine what homeowners are charging in your area.

5. Write a Proper Lease

A proper lease agreement may be crucial, as it could potentially serve as your protection if a landlord-tenant dispute ever arises. As you draft your lease or rental agreement, there’s plenty to keep in mind.

According to landlord insurance provider Steadily, there are several common lease terms you should consider including in your agreement. These include:

• Rent amount and payment collection: In addition to clearly stating the rent amount and due dates, you should designate how rent must be paid, by check, cash, or online.
• Late rent: Your lease should indicate what happens if your tenant pays rent late, including late fees and eviction measures, if applicable. To make money, you need to get paid on time, in full, and every month.
• Security deposits: A security deposit helps reimburse you in the event of damages or for other losses. The amount you can charge for a security deposit is determined by applicable state or local law, so do your research before settling on a price.
• Pet policy: Will you allow your new tenant to bring pets into your living space? Be upfront about your pet policy, and explain applicable pet deposits and fees if you do decide to allow animals.
• Maintenance and care: Clarify what is maintenance and what are damages. It’s important to distinguish between normal wear and tear and damages due to tenant abuse or neglect, such as broken windows, carpet burns or chipped flooring.
• Utilities: As you will be sharing communal areas and amenities with your tenant, you need to determine how to share the costs of utilities. Make sure your lease indicates how and when utilities are paid

6. Interview Your Applicants

Once you’ve published your rental listing and begin collecting applications, set up initial interviews, either by phone or in-person. Your first conversation with a prospective tenant may help you quickly identify potentially unqualified applicants. Ultimately, this step could help you save time when it comes to giving rental showings.

7. Review Rental Applications

Consider requiring a rental application from every prospective tenant. Once you’ve collected applications, review them to determine if the applicant meets your criteria.

Ask yourself these questions as you review:

• Income: Can they afford the rent?
• Credit: Do they have credit history that indicates a habit of paying on time?
• Criminal background: Are there any worrying patterns that could make living with them concerning for you?
• Housing history: Do they list any previous evictions on their rental application?

As you can imagine, it’s one thing to read this information on a rental application. It’s quite another to get data to help verify what rental applicants claim.

8. Complete a Tenant Screening

Once you’ve gone through applications, it’s time to select your top pick and conduct a tenant screening.

It’s crucial that you don’t just go with your instinct, as placing the wrong tenant in your home may have longstanding consequences. Ideally, you want to rent to someone with healthy financial habits and criminal and eviction history that meets your criteria.

Conduct a Previous Landlord and Employer Reference Check

Like with a job interview, it’s helpful to get the inside scoop from people familiar with your applicant. After reviewing their rental application, consider doing the following reference checks:

1. Previous landlords: call your prospective tenant’s two previous landlords to help confirm that the listed rental addresses are correct, and learn how they treated the property.
2. Current employer: To help validate the employment information listed on a rental application, you can also complete an employer reference check.

This data may help you better predict how the tenant might behave while living in your home.

Run a Tenant Background Check

After completing reference checks, formally screen your prospective tenants with a fast, reputable online screening service like SmartMove. You can get flexible reports that are backed by TransUnion, a credit agency with four decades of data expertise.

Most reports are delivered same day after the applicant verifies their identity. You should consider getting the following reports:

• Criminal history:A criminal background report can help you determine if there are any relevant and worrying patterns in your applicant’s past.

• Eviction history: Knowing how someone has behaved in past situations may help you make more confident leasing decisions. Considering evictions can cost upwards of $1,000, according to SmartAsset, it’s worth it to vet an applicant’s eviction history
• Identity verification: There are many types of rental scams––and some include assumed identity fraud. Help confirm your rental applicant is who they say they are with identity verification.
• Credit check: If you rent out a room in your house, you likely rely on that income to make your own mortgage payments every month. A credit check gives insight into your applicant’s financial and debt payment history. With SmartMove, you’ll also receive a ResidentScore®. This proprietary credit scoring model helps identify eviction risk 15% better than generic credit scores alone.

Having all of this information can help you back up your initial instincts. This way, you may feel more confident that you’re choosing a great tenant for your spare room.

9. Remember that Rental Income is Taxable

Finally, becoming a landlord means taking on an array of new responsibilities, including paying your dues to Uncle Sam.

Taxes may take a significant chunk out of your rental income. Rental income has been defined by the IRS as “any payment you receive for the use or occupation of property.” But remember to consult qualified tax and legal advisors if you have any questions.

Such payments may include, for example:

• Normal rent payments
• Advance rent payments
• Security deposits
• Tenant payment for canceling a lease
• Tenant-paid expenses
• Property or services received as rent

The IRS guidance for residential real estate explains, You generally must report rental income on Form 1040, but it’s important to keep detailed landlord records throughout the year. These may include payment receipts, expenses used to keep the property in good condition, and other important pieces of documentation.

Help Rent Out Your Room with SmartMove Tenant Screening

Renting a room in your house can be a lucrative move and help you handle your monthly mortgage payments. However, if you’re not careful, you could turn your dream of easy income into a nightmare of destructive roommates and endless damages. Help vet who you’re sharing a roof with through fast, online tenant screening through SmartMove.

A criminal records check zips through millions of criminal records, looking for a potential match for your rental applicant. Meanwhile, an identity check helps you confirm they really are who they say they are.

Bringing in someone to help pay the mortgage isn’t helpful if they can’t afford your rent. A credit check can help you understand their financial track record. Then, get Income Insights to help confirm what your rental applicant earns what they claim on their application.

On top of that, included in every screening package, a ResidentScore is a proprietary calculation that helps predict future eviction risk 15% better than a traditional credit score alone.

Anyone can use SmartMove. You don’t have to be a major landlord or property manager. Even if you’re just renting out a single room, you pay only for what you need and only when you need it. There are no sign-up costs, subscriptions, minimums or hidden fees. Simply sign up and start screening immediately.

This year, help make the guest room work for you with fast, online tenant screening through SmartMove.

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