How to make money turning your spare space into a rental
Own a home but have a lot of unused square footage because you’ve recently become single, an empty nester, better organized or otherwise? Seeking extra cash for unoccupied areas of your domicile? Consider becoming a live-in landlord and leasing out this zone. Your rental income could significantly help cover your overall housing costs.
“Renting can help offset your mortgage payment,” says Lauren McKinney, a Realtor with Asheville, North Carolina-headquartered Beverly Hanks & Associates. “It can also be appealing to your home’s next buyer to see a history of successful rental income.”
Renting out a portion of your home can also make you a good Samaritan of sorts.
“There remains a huge lack of supply for affordable housing, no matter the city or state you live in. Nationwide, even before the pandemic, the country had a shortage of 7 million affordable and available homes for renters with lower income,” says Atticus LeBlanc, founder/CEO of PadSplit in Atlanta. “The reality is that many people who work full time or those who are students cannot find an affordable place to live that’s close to their jobs or their school. So, by renting out unused space in your home, you can immediately feel good about helping to increase housing supply.”
In addition, cohabitating with a paid roommate can give you a feeling of security, as there will be more people occupying your home.
“Additional people onsite can also help with home management if those responsibilities are specified in your lease agreement. More people being present in a home can also produce an environment of companionship and interaction, which helps prevent loneliness,” says Shaun Larson, a real estate broker in Brentwood, Tennessee.
Good live-in landlord candidates include those who want to be financially stable, possess property management and handyman skills, are proficient in communication, and are punctual and responsive with repairs and tenant requests, Larson adds.
“You’ll need to be able to fully express your lease agreement, preferably in a written document, manage the rent payments, resolve any conflicts about the agreement, and perform your end of the agreement by providing the agreedupon livable space and all amenities in proper condition,” he says.
The best areas within a home to consider leasing out include a dedicated space with its own entrance, such as a finished basement, a separate live-in suite or a finished area over the garage or simply a spare bedroom or bonus room.
“You should think about if you have enough bathrooms to support the added room rentals and what areas of your home are allowed to be shared, including the kitchen,” LeBlanc suggests.
Consult local market data to determine what rooms are currently renting for within detached or attached homes. What you can or should charge will depend on a variety of factors, “including the market for a traditional one-bedroom or studio apartment in your area, your square footage offered, proximity to job centers and public transportation, whether or not the person will be paying for utilities, and whether or not they have access to their own bathroom,” LeBlanc continues.
Also, carefully ponder any rules you want to stipulate regarding guests, pets, off-limits areas, lease length, rental increases and late payments. All these items should be detailed in your lease agreement. For best results and to ensure you are legally protected, enlist the help of an attorney or rental agency that can help you draft your lease and check that all local/ state laws are complied with.
“Try to choose a tenant with a strong rental history and no criminal background. They should be tidy and respectful if there are shared common areas. Proof of employment or funds is important if you are considering a longer-term rental,” McKinney advises. “Also, be sure you agree on payment arrangements. Choose a renter who won’t interfere with your schedule and lifestyle. If you are uncertain that the renter will be a good fit, ask for references from previous landlords.”