Not sure which part of Phx you stay in but if that area gets a lot of tourists (like Scottsdale for tourists/Tempe for students) you could consider putting up that room/other rooms on airbnb.com
We currently rent out our couch by the night on airbnb - from our 1bed apt. Granted it not always fixed income and its a bit time-consuming but its great to meet new people and talk to them - some of them have interesting ideas which might just inspire you.
The advantage, I would think, of temporary boarding is that if they're really horrible then you aren't stuck with them. How do you determine who is acceptable for a night on your couch? I live in a touristy metro area, so this may be a better option. I just can't warm up to the roommate concept. Just found this great article on airbnb and others:
http://money.usnews.com/money/personal-finance/articles/2011/11/07/5-rules-for-short-term-house-rentalsand
http://www.foxbusiness.com/personal-finance/2011/09/14/how-to-safely-make-money-on-short-term-rentals/Just one example: I provided the room "furnished" and included a fan because the house was not air conditioned. I came home one hot night to discover that she had taken my fan from my bedroom. When I confronted her she said, "well, I didn't like the fan you provided and I do like this fan so I just took it." She couldn't understand why that was inappropriate.
UGH! My buddy rented a room while waiting to move his family and he said the owner had locks on all the doors - which is a great way to prevent these issues - however it would feel weird to have locks on all the doors in my house. The woman from whom he rented got the house in a divorce and it was far too much space for one person, so she's got a renter for three spare bedrooms and they're likely paying her mortgage and then some.
Maybe it just comes down to how much you're willing to detach from the notion of privacy in your own home. I'm trying to imagine total strangers on my couches, watching my tv and the airbnb concept sounds even more appealing.
I'd have to do some work on both the spare bedroom and guest bathroom first but an additional $500-1000 would pay that off quickly. Maybe renting to students doing summer internships?
Now here's a Mustachian question -- what are the tax implications of renting within your home, at what point do you have to report these additional earnings? Can you deduct portions of your repairs/electric/internet as a business expense? http://www.real-estate-owner.com/renting-a-room.htmlor
Some answers from fivecentnickel:
http://www.fivecentnickel.com/2009/02/17/save-money-by-renting-out-a-room/- Stuart Says:
February 17th, 2009 at 9:32 am
While I certainly agree that renting out a room can be advantageous, doing so will not be completely tax free. On the other hand, renting out a room can actually decrease your tax burden, as I found out doing my 2008 taxes.
First, you have to declare the rent money you receive, because it is technically income, not gift. However, rent is considered business income, and the prorated portion of your house becomes a business. As such, prorated depreciation, mortgage interest, *and* property taxes become business expenses, coming off above the line with its attendant benefits.
So, if the rent is low enough, you can save a significant amount on your taxes just by collecting rent. If it’s high enough, it is extra money to offset mortgage and utilities. Either way, rent is a nice thing. - 15 Sarah Says:
February 17th, 2009 at 2:01 pm
I just purchased a home this past year. I have two friends renting the two extra bedrooms. It works for me, but when one moves out (she is getting married) I won't search for a replacement. The risk of ending up with someone difficult is just too high. But I know these girls well and the situation thus far as been fantastic.
My question is this: I was confused doing my taxes this year (with the first time home buying and the renting and whatnot) and sought professional help (TurboTax phone consult). The guy told me that because I was charging them well below market rent (which I am doing on purpose because for other reasons, long story) and because we split utilities, groceries, and other expenses evenly 3 ways, that I don't need to report the income for taxes. He said he would count it as expense sharing (such as a rooming situation where I didn't own the property) because I am not really profiting from it. But ultimately, I am profiting right? It is more income than I would have and utilities are cheaper than if I just lived alone? Even if I could be charging more? Thoughts on this? I trusted and went with his advice but after reading this now feel nervous about it. Is the IRS going to agree with the tax guy? If not I feel like I need to amend my tax return. Any advice???
16 Stuart Says:
February 17th, 2009 at 2:08 pm
The TurboTax guy is right: the money you collected for utilities & grocery expenses is expense sharing in this situation. In addition, if the rent is that low, you could probably include rent as a part of expense sharing and not have to report it.
However, it is in your best interest to report the rent, because then you can claim depreciation, which you wouldn’t be able to otherwise. Claiming depreciation would reduce your tax burden, giving you a bigger refund or reduce the amount you have to pay.
At this point, it probably is not worth it to deal with amending your taxes, but you might keep track of the rent you charge your remaining roommate for 2009 and include it in your 2009 taxes.
I'd probably get a consult from a tax expert first to determine what makes sense tax and income-wise and to what extent can I deduct expenses, HoA fees, property taxes, mortgage expense and any upgrades I'll need to make to the bedroom/bathroom prior to renting....
