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Rent your apartment
The Risk of Renting Out a Room in Your Apartment
Weigh the risks of renting out a room in your apartment
- 1 Laws on Renting a Room in a House With No Lease
- 2 Tenants’ Rights When Renting a Room In a House
- 3 What Kind of Lease to Have for Someone Renting a Room
- 4 Evicting People Who Are Not on the Lease From Your Apartment
If you have a little extra space in your home or apartment, renting it out may seem like a great way to make some extra cash. If all goes well, you’ll help someone else keep a roof over their head and make a few bucks for yourself. When things go wrong with this type of arrangement, however, they tend to do so in spectacular fashion. If you’re considering taking in a boarder, make sure you can do so legally. Remember that rental income has tax consequences and that you’ll have to follow the same rules as other landlords. Make sure you have adequate insurance and clear ideas about the rules you wish to implement, such as no pets or overnight guests. Perhaps most importantly of all, avoid taking in someone you can’t get rid of by planning your exit strategy first.
A friend is a friend until he becomes your business partner. Renting out a room in your apartment is a business arrangement and should be treated as such, whether you’re renting to a friend, and especially if you’re renting to a stranger.
Breaking the Law
Before you even think about renting out part of your home, make sure you’re allowed to do so. If you’re renting yourself, check your lease. Some leases forbid subletting or allowing anyone not on the lease to live in the dwelling. If you do so anyway, your landlord may be able to evict you. If you can’t find the information in your lease, talk to your landlord. Even if you own your home, renting out part of it may get you into trouble. Some local municipalities forbid taking on boarders, as may your homeowner’s association. Make sure you’re allowed to take on a tenant before you do.
Suffering Tax Implications
If you’re considering getting a roommate, it’s probably because money is tight. It’ll get even tighter, however, if you run afoul of the IRS and have to pay penalties and back taxes. If you charge someone rent, you have to report and pay taxes on the income. You can also deduct certain expenses, like the cost of repainting their room or installing new carpet. You can’t deduct more than you make, however, if you’re using the property as your own residence and living there with your tenant. Tax rules get complicated in a hurry, so enlist the help of an accountant or tax attorney.
Know Your Landlord Limitations
The instant you charge someone rent in exchange for a place to live, you’re a landlord. That means you’re bound by your state’s landlord and tenant laws. In California, that means you must fix any problems that may present a safety issue or health hazard for your tenant. Your tenant may legally demand an implied warranty of habitability, and he can break his lease or make repairs himself and deduct them from his rent if you fail to fix certain problems. The law also guarantees tenants the right to quiet and undisturbed use of their rental. If you walk into your tenant’s room without giving him 24 hours notice, you may have violated the law. Laws also mandate what you can do with money received for a security deposit. To make sure you understand what you can and can’t do as a landlord, it may be a good idea to consult with a real estate attorney or expert.
Investigate Insurance Issues
So long as you’re still living in your home and not renting out the entire structure, most home insurance providers won’t give you a hassle. They may, however, help you to further protect yourself. You might want to increase your liability coverage. The more people you have in your home, the more likely it becomes that someone may get hurt, including your tenant or one of their guests. Ask your agent if they would recommend any additional insurance. If, for example, you would suffer a fire, you might have to break the lease with your tenant. Ask about insurance that covers the cost of putting your tenant up elsewhere or protects you if the tenant successfully sues you for breach of contract. Make sure your tenants get coverage, too, by stating in your lease that they must obtain renters insurance.
Some of the people interested in renting from you will be nice, normal, responsible people. Others may move into your home and create problems. It’s generally a good idea to interview all your prospective tenants and run background checks on them. Before you start interviewing and checking, however, have an attorney help you draft a lease with your specific policies in it. You need to set the rules about all types of potential issues. Consider whether or not you wish to allow overnight guests, pets or smokers in your home. Outline which areas will be the tenant’s private space, which parts of the home you will share and which parts of your home are off limits. You should also specify quiet times when you won’t tolerate loud televisions or music. Will you grant the tenant use of your washer and dryer, or will they need to go to the laundromat? You may let the tenant use your mailbox or request that they obtain a post office box. Clearly outline how you plan to deal with utility bills as well, and always ask for a security deposit in case someone damages your property.
Leave Yourself an Out
Even if your tenant turns out to be a dream come true, you’ll likely want them to leave at some point. If things do go wrong, you’ll want them out sooner rather than later. Craft your lease in a way that clearly explains when rent is due and what happens if it’s late. Detail which lease violations are grounds for eviction and make it clear that you will start eviction procedures without hesitation if necessary. Never call a handshake or a verbal agreement good enough. If things go badly, you’ll want written proof of the arrangement when you go to court or schedule an eviction hearing. Establish guidelines for either of you terminating the lease.