It is possible to rent out a room in your home and earn extra income or pay off your mortgage. Online survey data shows that 24% of home buyers believe it is important to rent out a part of their home. Therefore, before you market your spare bedroom, it is important to learn how to rent out a room in your home and decide if it is right for you.

Tips for renting a room in your home

Examine the laws governing landlord-tenant relations in your state

Local laws may apply to renting out rooms in your house. These laws are similar to the rental of your home.

There are restrictions on who can live on a property. In some cases, cities and states may restrict the number of unrelated persons can have.

There are rules that govern the maintenance of a dwelling's standard of habitability. You could be responsible for maintaining the toilets, heat, and locks as well as access to natural sunlight and other amenities. Your tenant might be legally able to withhold rent if you don't maintain the property.

• Landlord Obligations:

  This may include handling late payments, home repairs, and when you can enter the tenant's space.

• Rules and restrictions within a homeowners association:

  If you accept a tenant, make sure to check the HOA's bylaws.

To find out more about renting a room in your community, it's a good idea to call your local housing authority.

Talk to your insurance agent

To determine if you should add landlord insurance to your homeowner's policy, check it. If you have tenants, some insurance agencies might prohibit renting. In addition, the risk of property damage and liability that comes with renting out a room can also affect your insurance rates.

Get ready to decorate the house.

To rent a room, you will need to inspect your entire house to ensure it is safe and conforms to all applicable standards. These are some of the things you might want to do:

• Each bedroom should have a keyed deadbolt.

• To prevent lockouts, remove self-locking knobs.

• Lockboxes and safes are good places to store valuables.

• Repair or maintain anything that is broken, such as appliances, stair railings, and fixtures.

Choose which room you want to rent

Many homeowners desire to keep their master bedroom private. Is this the best choice? If there is a master bedroom, it may be more difficult to find tenants. In addition, you may be able to charge more rent. A basement with a small kitchen and bathroom is preferred for landlords and tenants, especially if it has a separate entrance.

Calculate the rent you should charge

A study revealed that San Francisco is the most expensive place to rent a room at $1,375 per month. On the other hand, Pittsburgh is the least expensive at $650 per month -- an astonishing $725 difference. These factors can affect the renter's willingness to pay more for a room.

• Private bathroom

• Personal kitchenette

• Private entrance

• You have access to a swimming pool and a fitness center.

• A deck, barbecue, or other outdoor amenities

• Washer and dryer available on-site

• Garage space, or any other off-street parking

It is also important to establish how tenants will pay for gas, water, and electricity utilities. You can choose from two types of rent pricing to include utility payments.

• Fixed rent price:

  A flat monthly rental fee that covers the cost of utilities.

• Variable Rent Price: 

  The base rent price, plus a portion of the month's utility costs, is the price you pay to rent the space. This can vary depending on how often you use it.

Post a room-for rent ad

You can advertise your room for rent online. Your rental advertisement should accurately reflect the living spaces and location:

• Dimensions of the bedroom

• Private bathroom included

• Shared spaces such as the laundry, kitchen, or living room

• Off-street parking

• Smoking and pet policies

• Convenience to shopping, parks, and restaurants

• Additional perks include access to a hot tub, pool, or other recreational space

At least ten photos of the interior or exterior should be included. Also, information about the lease length, security deposit amount, and rent price and how the rent will be charged must be included.

Here's an example of a room available for rent:

• Renters interested in renting a property should complete a rental application

  You become a roommate when you rent out a room. Also, you are a landlord and a live-in landlord. This means that you must comply with fair housing laws and landlord tenants. To determine if the applicant is a trustworthy renter, you must complete a rental application. This will allow you to:

  Find out more about their rental history. Get in touch with past landlords to determine if rent was paid on time. Also, check if neighbors complained or were there any problems.

• Allow applicants to give reasons for their dissatisfactions

  Include details about previous bankruptcies, evictions, and notices that could affect your decision to accept an applicant. These details will help prospective tenants explain the issues.

• Determine if they can afford to rent a room

  Look at the applicant's income, and work history to determine if they meet your income-to-rent ratio.

• You can disqualify renters who do not meet minimum requirements

  Your lease agreement must clearly outline any house policies that may exclude renters.

Do a credit and background check

Once you have determined that an applicant is qualified, it's time to screen them and verify their information. Tell them why if you have to reject an applicant due to a screening issue. In the application, you should indicate who is responsible for paying screening fees.

In a rental agreement, define boundaries

Once you have found an applicant that meets your criteria, you will need to discuss your house rules with them and whether they are negotiable. To ensure that you and your tenant are on the exact same page, draft a standard rental agreement.

A rental agreement must include:

• The term of the lease

• When and how much of the security deposit amount can be withheld

• Rent amount

• How much rent is due, and how it is collected.

• The renter can choose to pay utilities or include them in their rent.

• Expectations about shared spaces such as the laundry room, kitchen, and living room

• Who is responsible for cleaning and maintaining the property?

• Policies regarding parking, pets, smoking, and quiet hours for guests

To ensure that you have covered all points, take your lease agreement to a lawyer or legal advisor. Then go over it with the tenant. The lease agreement is legally binding once you have signed and dated it.

Rent income and expense deductions should be documented

Renting a room in your house is tax-deductible income. You might consider opening a separate checking account for your business to keep track of your rental income and expenses related to upkeep.

You can deduct many common home expenses, but the details vary depending on your location. For example, if the tenant occupies 20% of your home's total square footage, then you might be able to deduct 20% of the following categories.

• Upgrades:

  These could include painting, windows, or flooring.

• Repairs and replacements: 

  These include plumbing, roofing, and other repairs that will keep your home habitable.

• Utilities:

  This category typically includes basic utilities such as water, gas, electricity, and trash.

• Insurance: 

  You can deduct some of your homeowners or mortgage insurance.

• Security:

  This category contains features such as locking gates or a security system.

• Depreciation of your home: 

  Be sure to follow the regulations established by the IRS.

Be sure to record any discounts or credits you offer your tenant. You may be able to deduct this expense if, for example, you agree to take $100 off your monthly rent in exchange for yard work.

The pros and cons of renting a bedroom in your home

Sharing a living space has many benefits. It is important to make sure all residents are satisfied with their living arrangements. This is why it is crucial to review the pros and cons of renting a room.

Renting a room is a great way to save money

Many homeowners rent their rooms out to make additional income. However, there are many benefits to having a roommate.

• You can pay your mortgage off faster

• Additional funds to pay for home maintenance and upgrades

• Extra hands for chores

• If you live alone, you will feel more secure

• If you are out of town, someone to look after your pets

There are downsides to renting a room

While roommates can bring certain benefits, renting a room in your home has its downsides.

• Safety concerns if you don't know your roommate

• Living in an uncomfortable environment

• Beware of theft and damage

• Tenant invites unfamiliar guests

• Living habits or personalities that are incompatible

Are you considering renting a room?

Before you decide to rent a room in a house, it is important to assess your current situation. These are some factors to consider before you make a decision:

• Are you able to comfortably accommodate someone else? 

  You may feel uncomfortable renting a room to someone you don't know.

• Are you able to live with others? 

  Renting out a room in your house can reduce the privacy many homeowners value. Are you able to get along with people of different personalities? Do you feel comfortable compromising on certain aspects?

  Do other members of the household live in your home? 86% Most buyers have a roommate. This affects everyone in your home. It is important to discuss this with everyone in the household.

• Do you have any places in your home that you don't want tenants to see? 

  Renting a room means sharing living and dining spaces. Installing a lock to your door is a good idea if you have a private room or office that you don't want the tenant to access.