Author Topic: Experience with Renting out Room in House?  (Read 10971 times)

jrhampt

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Experience with Renting out Room in House?
« on: June 11, 2012, 10:33:20 AM »
Anyone here want to share their experiences with renting out a room in your house?  My husband and I have a 3 bedroom, 2.5 bathroom house, and it's just the two of us.  We may downsize in 4 or 5 years, but probably not before since the market is down in our area, and besides wanting a more favorable time to sell, we do like our house.  I was browsing craigslist the other day and saw the "housing wanted" category and started thinking about it.  Here are my concerns:

How do you screen people?
Is it impossible to evict people if you're just subletting a room?
Do you draw up a contract/lease agreement?
What about lawsuits?
Utilities: we don't have cable, don't really use the A/C, and tend to keep the thermostat low in the winters.  Does all that change with a roommate?

kudy

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Re: Experience with Renting out Room in House?
« Reply #1 on: June 11, 2012, 12:37:53 PM »
Some discussion about this topic already happening here:
http://www.mrmoneymustache.com/forum/real-estate-and-landlording/live-in-landlording/

When I rented the room I had a month to month tenant agreement, as well as a roommate agreement that set forth some common rules and courtesies that we both agreed to; if the terms of the agreement aren't honored, it should at least be clear what is expected out of residents at the house, and could help clarify why you ask someone to move out, if you have to.

tannybrown

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Re: Experience with Renting out Room in House?
« Reply #2 on: June 11, 2012, 02:51:57 PM »
We've rented out a room for the past 2 years -- ever since we purchased our first home.  I highly recommend it to anyone in the "accumulating" phase of FI.

-Our real screen is done via a couple one-to-one interviews, to get a feel for the person both in our house and then again at a bar.   But a background check is also a good idea, as is a call to the last landlord (get the needed info filled out by renter on a rental application, given on the first 'interview' in the home as they're seeing the room).  Cheap background checks are available online.  Exprian offers a free-to-the-landlord service to check their credit ($15 to the renter).

-Eviction, I believe, is still possible, but I have no experience here

-We do have a formal agreement set up.  We looked for a good free template online, but I know there are some paid services available, too.  Our agreement is fairly extensive (8 pages) and sets forth a 6 month lease that transitions to month to month after that.

-No experience with lawsuits but typically your agreement should have a Hold Harmless clause

-We charge our roommate 1/3 of all utilities.  This prevents a moral hazard that could occur if utilities are simply rolled into the rent (e.g. - Renter is paying $500 regardless of his or her utility usage, so he figures he should crank the AC)

The best advice I can give is to recognize that it's your renter's home, too.  Try to take their input as much as you would an 'equal' in the home.  Of course, your rights are ultimately greater but trying to create equal footing when it comes to decisions re: what to keep the thermostat at, what volume the tv should be at, etc. really helps create the kind of environment everyone's happiest in, IMO.

« Last Edit: June 11, 2012, 02:54:54 PM by tannybrown »

JohnGalt

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Re: Experience with Renting out Room in House?
« Reply #3 on: June 11, 2012, 04:14:47 PM »
It may depend on you specific location, but, in Texas, eviction is definitely possible (in fact, I believe it is the only legal means to remove a tenant from your house if they will not go voluntarily).  I'm going through the process now and spoke with real estate attorney regarding the procedure.  It shouldn't take more than 2 weeks or be very expensive.   Going through the process myself drives home the importance of tannybrown's advice on screening and having formal agreements in place. 

Grigory

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Re: Experience with Renting out Room in House?
« Reply #4 on: June 12, 2012, 12:45:24 AM »
I spent a few years renting a house and then renting out rooms in it to 2-3 people at the same time. There were a few bugs and I learned a lot about being a landlord (we were all in the 18-24 age range), but for the most part it was fairly easy.
How do you screen people?
Very, very carefully. Make sure they have a job, then google their name (put it in quotation marks to ensure you get the most precise results - i.e. "John Smith" as opposed to just John Smith) and see if they were in any legal trouble. (That's how I found out that one of my potential roommates was a convicted felon - no thanks!) Check their facebook, myspace, twitter, etc to see what kind of people they are.
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Is it impossible to evict people if you're just subletting a room?
Of course not. Even if you rent out a tiny room, that automatically makes you a landlord and entitles you to the same legal protection as people who rent entire apartment complexes.
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Do you draw up a contract/lease agreement?
That would be best. That way, in the worst-case scenario, you can use it in court or during the eviction process. Make sure to use a notary pad to write a receipt if they insist on paying in cash. (At least I think it's called a notary pad - you know, the kind of notepads where you get to keep the other slip?)
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What about lawsuits?
In my experience, most people are decent human beings - especially if you screen out the bad apples. On the off chance that things go bad, a mere threat of a lawsuit is usually enough to get them to cooperate, especially if you have all the paperwork in order.
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Utilities: we don't have cable, don't really use the A/C, and tend to keep the thermostat low in the winters.  Does all that change with a roommate?
Depends on the kind of roommate you're getting - a shy Japanese college student or a spoiled brat from California who likes the temperature to be above 80 degrees. (I've had plenty of experience with both - the former is the best roommate you can find and the latter is the worst...) Make sure to discuss it beforehand.

Good luck! :)

Psychstache

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Re: Experience with Renting out Room in House?
« Reply #5 on: June 15, 2012, 06:31:55 PM »
Speaking from the other side of the coin, I rented out a room from a guy for 2 years while I was in grad school. We met a couple of times to see if we would be a good fit and I feel like he basically did an eyeball test for screening. I showed him my proof of enrollment and a letter saying i had a job with the school (he was also going to classes at night). I did sign a pretty generic lease for the first year, but after that we had a good rapport and just went month to month.

If I chose to do it, I feel like I would want to lean towards a serious college student. I was working during the day and going to class nights and weekends, so I was really just looking for a cheap place to keep my stuff and a bed, and he was looking for a little bit of side hustle with little to no effort.

cosmie

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Re: Experience with Renting out Room in House?
« Reply #6 on: June 15, 2012, 08:58:59 PM »
Utilities: we don't have cable, don't really use the A/C, and tend to keep the thermostat low in the winters.  Does all that change with a roommate?
Just discuss this with potential boarders. Let them know that you don't have cable, and if they wish for it then they would need to cover the cost (or 75% of the cost, if you believe you guys will be utilizing it as well).

As for the thermostat, cover that with them as well. If possible, it's good to find someone with the same habit. If someone is iffy about that but are willing to deal with it, offer to cover the cost (via a rent deduction, or directly) of a small electric heater for their bedroom. You can find some that are extremely safe, if you're worried about a fire hazard. That way they can keep their room at a temp comfortable for them to sleep at.

bananabread

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Re: Experience with Renting out Room in House?
« Reply #7 on: June 17, 2012, 09:36:46 AM »
One alternative to making a quick buck with a spare room is AirBnB ( http://www.airbnb.com/info/how_it_works ).

The gist of it is that you rent out your room on a day-to-day basis to travelers. I've traveled extensively through them and have had nothing but awesome experiences. It's a bit non traditional but it may be worth looking into.

jrhampt

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Re: Experience with Renting out Room in House?
« Reply #8 on: June 18, 2012, 08:06:05 AM »
I like the airbnb idea...much less of a commitment than a longer-term renter.  Does this really work if you're not in a typical tourist town or major city, though?  I'm in central CT...*I* like the location, just off hiking trails, nearby a large apple orchard, but it's not exactly a tourist destination.

bananabread

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Re: Experience with Renting out Room in House?
« Reply #9 on: June 18, 2012, 09:07:15 AM »
No idea. Though hiking trails and an apple orchard sound like a decent vacation place to me! Try looking at listings in your area - are there any? Do they have reviews? Looks like there's almost 200 listings in CT - http://www.airbnb.com/search?location=Connecticut

You could try listing for a month and seeing if there are any bites - if there aren't, then the volume is probably not enough to sustain a decent income anyways.

fastcar88

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Re: Experience with Renting out Room in House?
« Reply #10 on: June 21, 2012, 02:18:41 PM »
Hi I currently rent out a room in my house in Massachusetts.  Rules will differ based on your location, so please read keeping that in mind.

How do you screen people?
1. I suggest going with the fundamentals: credit report, last couple of paychecks, so you see steady income & calling a couple of references, preferably former landlords.
2. Interview!  Since this will be shared space, you want to make sure their personality/lifestyle fits with yours.  I got a great tip from a landlord which was to peak inside their car to gauge it's tidiness.  If it's messy, there's a good chance they will be messy, too.

Is it impossible to evict people if you're just subletting a room?
Not sure, but what you can do is set up a month-to-month tenancy and state that no reason needs to be provided as long as you give 30 days notice.  Let it be okay for them to do the same so that it is not unfair.

Do you draw up a contract/lease agreement?
I strongly recommend that you do.  At least in Massachusetts, people can have squatter's rights, i.e. claim to residence if they have been there long enough.  This could be problematic if this renter takes a turn for the worse.  I actually spent a ton of time getting advice from landlord forums and blogs putting together a rental agreement for homeowners renting out a room in their place.  Please feel free to use! :)
<a href="http://www.paperwell.com/docs/467-room-rental-agreement-for-homeowner-on-site">
http://www.paperwell.com/docs/467-room-rental-agreement-for-homeowner-on-site
</a>

What about lawsuits?
I think that's why you want to have a solid agreement in place!

Utilities: we don't have cable, don't really use the A/C, and tend to keep the thermostat low in the winters.  Does all that change with a roommate?
You will probably need to change your lifestyle a little bit to accommodate your renter, but the rent you are charging probably offsets this extra expense.



bogart

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Re: Experience with Renting out Room in House?
« Reply #11 on: June 21, 2012, 03:25:56 PM »
In the US, I believe eviction law (etc.) is state-by-state, so it's worth checking what the rules are in your state.  Many years ago I evicted a roommate (in NC), and I believe it took 3 months, start to finish, and required that he violate a written contract (which he had, by not paying his rent to me on time).  It was a pretty unpleasant 3 months (and yes, better checking references, etc. probably would have spared me -- hindsight...).  Procedures others have noted (e.g. month-to-month/30-days notice) may also work, but it's worth checking. 

Lawsuits:  you can talk to your insurance agent about what sorts of protection your homeowners/renters insurance would provide.  If a pipe bursts and ruins your roommates heirloom quilt, are you liable, and for how much?  What about if they slip on the snow because you fail to shovel the walk?  I wouldn't sweat this too much, but it's worth knowing what sorts of things you might need to protect against.  Bear in mind that if you don't have much in assets/insurance, suing you may not be all that attractive, as long as you don't do something truly negligent (and maybe even if you do).  It may be useful to write things into the rental agreement (e.g. to note that renter's belonging's aren't covered by your policy, if they're not), just so you have a record.