A good way to generate another stream of income is by renting out rooms in your house. It can even help you out cover the mortgage.
Nonetheless, like with any rental property management, you need the right approach and mindset to be successful and avoid any issues that typically come with being a landlord.
When you set up a room rental business, you need to acquaint yourself with several regulatory and legal implications. Overlooking these not only widens the chances of you ending up with bad tenants who you cannot get rid of, but it opens yourself to potential lawsuits.
If you are an owner-occupier who is thinking of adding another income stream by renting out rooms in your house, this article is just for you. Read on to learn more about the various aspects of the room letting that you need to be aware of.
1. Learn More About Your Lease, HOA Rules, and Local Laws
Before you start renting out your home, you need to consider the following things:
If you are currently on lease and want to sublet, you need to double-check the lease agreement you have with your landlord. In some cases, a lot does not allow subleasing, but others do so long as there is another written agreement on the matter.
If you are part of the homeowners’ association (HOA), you need to check with them if renting out rooms is allowed.
Apart from the two, you need to double-check your local laws. In some cities or towns, short-term rentals are heavily restricted. The number of full-time residents as well might be limited based on the house’s square footage.
2. Research Your Local Market
After doing your research on the legal aspect of your business plan, you need to do your study and learn about the dynamics of the rental market of your locality.
Analyzing the local market helps you get a better view of your potential customers, the type of rental property in demand, and meet those needs.
These are some of the things you need to find out:
- The typical renter persona in your neighborhood.
- The demand vis-a-vis the supply.
- The average rental price for properties is similar to yours.
- The type of amenities offered by these rental properties.
3. Write Down the Numbers
To be a successful rental property owner, you need to sit down and crunch the numbers. You need to assess the financial aspect of running a rental property.
First, figure out how much it would cost you to rent out rooms in your home. Second, factor in expenses such as insurance, repairs and maintenance, internet fees, property taxes fees, registration fees, income taxes, fees for running a background check, and credit check.
Having a clear picture of how much the entire cost structure of your rental allows you to figure out the minimum standard for how much you should charge for monthly rental. Furthermore, being able to monitor your investment ensures that you are generating as much return as possible.
Who knows, if your rental business booms, you might be able to afford another property like the house and land packages and turn it into another real property investment.
4. Establish Your House Rules
Setting up house rules is crucial to ensure every housemate is living harmoniously in your rental property. These house rules should be included in the rental agreement, and be sure to have this agreement signed by you and the renter.
Once the house rules have been established, they should not be changed unless they are upon written agreement.
These are some of the policies you have to include in the house rules:
- Overnight Guest Policy
- Laundry Privileges:
- Parking Privileges:
- Entry to Rooms:
5. Prepare the Unit
While being a property owner, you might think your home is appealing to you. It might be different from a prospective renter’s view. Thus, before putting your house on the listings, be sure to do necessary repairs and aesthetic improvements to make your rental property more attractive.
It does not call for you to make a major overhaul of your house, just those improvements deemed necessary.
Going into the real estate business is both exciting and terrifying. But with the right planning and attitude, surely your rental property business would prosper.