It's one thing to own rental property. It's quite another to rent out a floor in your own home. Learn some key lessons this couple found out the hard way.
The following post comes from Teena Stewart at partner site The Dollar Stretcher.
Many people these days are strapped for cash, but if you have extra space in your home, think about renting out. It worked for us.
As empty nesters rattling around in a big three-story home – the ground floor of which is a finished basement – my husband and I decided that renting out the downstairs would be a good way to supplement our income. Our basement area is almost a self-contained apartment, with its own living space, bathroom, and entrance. The only thing lacking is a kitchen. Having had two different renters now, we’ve learned a few things you may want to consider before renting out…
1. If at all possible, rent to someone you know. Or at least who comes recommended by a friend or business acquaintance. Renting to complete strangers is much riskier, since you know little about them. Verify that the renter is employed and has his/her own transportation. Had we verified this information, we could have avoided an awkward situation with our first renter – who quickly ran short on cash and began needing rides.
2. Get good references. Anyone can list a friend who may tell a little white lie to help out a buddy, but an employer or former landlord will undoubtedly tell you the truth regarding how responsible their employee or former renter was. You may want to require that one of the references needs to be an employer, a former employer, or a former landlord.
3. Draw up a rental agreement. It should specify the length of time the contract is good for. You might wish to start out with a three- to six-month lease. This will allow both you and your renter time to adjust. If, after the allotted time, you find things are not working out, then you won’t have to grit your teeth to get through several more months of tolerating each other.
4. Require a deposit. Your rental agreement should make it clear that damage to your rented space will mean the renter will forfeit the deposit. Even though we specified a no-smoking policy, a former renter had a visitor who smoked in the room – and burned a hole in the carpet.
5. Require that your renter provide you with at least one emergency contact. When our first renter (who admittedly was in recovery) disappeared without a word, we thought something had happened to him, but had no number to call. We later found out that he had relapsed and gone on a drinking binge.
6. Determine what perks the renter gets. Will he/she have access to your kitchen or your washer and dryer? Will you share common areas like your dining room and living room? Will the renter be allowed to hook up to your cable, dish network, or Internet?
Renting out space in your home is not the same as renting a full-fledged apartment. With an apartment, you may never see your renter. When someone lives in your home, you may encounter each other daily. Under these circumstances, the landlord/tenant relationship can be more complicated than if someone is living separately. You get to know each other and care for each other and the line between renter and landlord can become blurred. You want to make sure you can cohabitate with as little conflict as possible.
Clearly established rules and expectations can make the difference between a miserable experience and a happy one. With a little preplanning, you can create a win-win situation for you and your renter.