Turn A Spare Bedroom Into A Monthly Cash Flow

May 20, 2013 in Finance by James L. Paris

Many people in this economy have made the decision to rent out a spare bedroom to help cover their mortgage and living expenses. I remember, while growing up in Chicago, that my grandparents seemed to always have at least one 'boarder' in their home.  Many of these people became part of the family and they stayed in touch with them for years.  While this arrangement may not be for everyone, renting out a spare bedroom can produce several hundred dollars per month in extra income and can really make a big difference in your personal financial picture.

How Much Is That Spare Bedroom Worth?

One site, RentOMeter, provides an easy way to determine just how much your spare bedroom may be worth in rental income.   Of course, you can always take a look at the ads in your local Craigslist as well. What has become especially helpful are websites dedicated to the rental of rooms.  Sites like RoommateLocator are excellent resources for those needing to fill an empty room.  Websites like this provide some great sorting options, such as gender, non-smoker, etc...  There are a number of other roommate finder websites and you can find them doing a Google search.  Many of them are specific to a certain geographic region, so include your city name in your search.

It's Just A Room Rental -  Do I Need To Do A Contract?

Even though you are just renting a room and the transaction may seem somewhat informal, you still need a written lease.  It is also a good idea to include specifics about what is and is not included in the rental.  For example, will your renter have full access to your kitchen?  Can they have guests over?  What other parts of the house will they have access to?  Do you allow smoking?  Are there any other house rules about things such as parking spaces, etc...?  Will there be any additional charges beyond the cost of the rent?  (this could include sharing utility bills, use of your wifi connection, and laundry facilities).  For those with a basement, or mother-in-law suite, it may be easy to limit your tenant to a specific portion of your home.  Of couse, each situation is different and the more details in your agreement the better for both parties.

What Type Of Screening Is Legal?

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A recent court ruling determined that the Fair Housing Act does not apply in transactions involving the rental of a room in a home.  This means that you have much wider latitude as to how you screen potential renters.  For the purposes of this article, and my target reader, what I am alluding to here is religious beliefs.  While you could not require someone to share your Christian faith in a typical rental situation, it appears that you can do so when renting a room in your home. A statement of faith and a pastoral reference may be a great place to start for Christians that would prefer to share their home only with fellow believers.  Sites like ChristianRoomMates.com are set up for this purpose.

Screening Tenants

Screen Tenants without Getting Yourself Into Trouble - Forbes How to Screen Tenants in 5 Easy Steps What's the best way for landlords to screen tenants? - Nolo.com

There is probably no more useful screening tool than to speak with a prior landlord.  Most landlords are fair in their assessment of a tenant.  You may want to get something to prove that the rent was paid timely, as well, and also verify your prospective tenant's employment or source of income.

Other Safety Considerations
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You may want to be sure that on the first meeting with a prospective tenant that you are not by yourself.  Criminals use such opportunities to get into a home as a rouse for a burglarly or worse. You may also want to think through how you would secure your valuables.  This may be include such measures as having a lock and key on your bedroom door or even investing in a safe.  If you have a security system, you will likely have to share the password with your tenant so that they can gain access to your home throughout the day.   Be sure to ask that they not share the access code with anyone, and, once the lease is over, immediately change your code.

Checking Your Local Ordinances

Before advertising a room for rent, be sure that you can legally do so.  Some communities frown on the practice and make it very difficult.  In most cases, restrictions are placed on the number of renters you may have and the nature of the arrangement.  For example, renting out by the night may be prohibited and a minimum of a six month lease agreement could be required.  If you live in a community with a homeowner's association, your renter may also have to go through a separate approval process with them as well.  The key here is not to take anything for granted.  It may be your home, but it is more than likely there will be some local ordinances you will need to comply with.

Competing With Hotels

While this is not allowed in all communities, many people are cashing in by offering short term rentals along the lines of a bed and breakfast arrangement (see video below).  The advantage of this approach is that you can decide when you want to rent your extra space and when you want to have your privacy.  Sites like AirBNB and 9Flats make the process of listing your short term rental easier than ever.

If you have ever rented out a room, I would love to read your story.  Please share your experience (positive or negative) in the comments section below.

Helping you make the most of God’s money!

James L. Paris Editor-In-Chief ChristianMoney.com Follow Me on Twitter Twitter.com/jameslparis Christian Financial Advice Jim Paris 24 Hour Radio