Read this before you rent a room! by Michelle Brady
Are you thinking of renting rooms or your house for a major event, on airbnb, or to attract a local group that looks like it could produce good renters (i.e., college, destination site or large employer)? While that idea may be appealing it will only be fiscally beneficial if you avoid potential expensive consequences. This author has been room-renting for over 25 years.
Below are some of the issues and advice to consider.
1. There are legal and liability items to investigate – are you protected with enough insurance? I recommend a call to your insurance company checking liability insurance limits. This is even more necessary if you have high liability items such as a swimming pool or hot-tub. Also check compliance with your City landlord rules. One rule that will be universal is complying with fire prevention city codes.
2. Define your Policies. To prevent problems consider spelling out your rules about these issues:
• Payment terms and policy if there’s a problem (i.e., fees and response if a check bounces?).
• How about guests? Any limits? What if they sub-lease or bring others with them to move in?
• Security concerns such as access and how many keys you provide? Will you change the locks or install a changeable coded lock?
• Noise or neighborhood quite times?
• Pets policy besides handicap support, which you’d be required to take.
• Is smoking allowed on your property?
• Any space use limits – i.e., can you use the attic, the garage items, etc? You might consider removing valuables or locking them up.
• Parking & cars – do you have location requirements? A car limit?
• Utilities – are these all-inclusive or do you want to charge for the amount used?
• Any cleanliness expectations? Will you offer daily cleaning, towel change, garbage removal or vacuuming? Are you going to clean it after the rental or hire a service?
• Damages – how will you handle that?
3. Will you do a tenant screening? You could request employment verification considering that many employers do extensive security screening.
4. Security Deposit? Charging a significant security deposit maybe a Landlord’s best protection to encourage property care. If charged you need to define how the renter gets it back. You might also want to take general area before pictures to compare to after pictures that could be used to document damages.
5. Has your lawyer checked out your terms or lease? I use pre-paid legal called Legal Shield to review my lease and ensure it complies with state and city requirement. This service also helps if I have renter issues that requires legal action (i.e., payment or damage collection).
6. Taxes – You need to claim the income and do careful record-keeping. I work with a qualified CPA to minimize tax consequence and claim expense deductions.
I’ve listed important issues any Landlord has to consider. My upcoming book The Money Room: a guide to creating a room rental income stream helps prevent issues. You can follow my blog at SageForwardTraining.com to get you started if you plan to rent your property.
Michelle Brady is the author of The Money Room: Create an income stream renting rooms . Find it on Amazon, by Motivational Press. Contact her through www.SageForwardTraining.com