Renting out a spare room is an excellent way to make cash. This guide will cover the basics so you can begin attracting tenants.
Do you have a spare room that you don't use for much? Why let it collect dust when it can make you money?
Renting out a spare room is a great way to generate passive income. Select your tenants, charge them rent, and live your life as you normally do while bringing in the cash.
How do you get started renting out rooms? How much money can you make, and how do you choose quality tenants? We'll answer these questions and more coming up!
Renting out spare rooms requires a rental space, a room rental agreement, and a basic understanding of landlord-tenant laws.
You provide a living space for rent to a tenant or tenants. Many who offer this service don't rent a room in their home, as that's like having a roommate. Instead, they'll allow tenants to live in a rental property, vacation home, or secondary home.
You determine the rent price in the rental agreement. You also make all the house rules, including quiet hours, conduct, and decorating protocols.
Tenants will pay an initial security deposit and then issue rent on a date you select, such as the 1st, 10th, or 15th. You can continue to cash in the checks throughout the lease agreement.
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Determining your potential rental income by renting a spare room is difficult since there’s no specific rate to charge. Prices start as low as $300 for a spare bedroom and as high as $5,000 a month.
RentCafe states that the average rental cost in the United States is $1,702 for an 802-square-foot space.
You can also research the costs of rooms for rent in your neighborhood, and consider the cost of maintaining the property when determining your price.
The utilities provided also dictate the price. A tenant who pays for their electricity and water will rack up a higher monthly rent payment than a tenant who doesn't. However, you incur the fees if you don't charge your tenants.
The biggest cost of this side hustle is the apartment, condo, or home itself. Quicken Loans reports that the average mortgage price in the US as of 2022 is $1,768 per month.
The next substantial cost is the utilities, provided you don't charge the tenant for these. Utility costs vary by state, with Alaska, Hawaii, Connecticut, West Virginia, and Georgia having the highest fees, according to Forbes.
Here is a breakdown of monthly utility costs after reviewing nationwide data:
You might decide to redecorate the room ahead of welcoming tenants to make the space more appealing. This can cost several hundred to several thousand dollars, depending on how extensively you decorate.
You should also learn about federal fair housing laws for renting out a room, how taxable income for rental expenses works, and how to legally rent a room in your house. You might consider taking a course or two, which can add several hundred to several thousand dollars to your overall expenses.
After you've got the spare room ready, the next step is finding tenants to rent it out. This section will review your options, whether you seek independent room rental resources or gig economy platforms.
You might decide to hire a realtor to maximize your rental opportunities and map out a lease agreement. Some real estate companies to look into are:
You can also skip the realtor and operate independently, writing a listing for the available room and uploading photos. You could explore resources like Zillow, Trulia, or Movoto to post your listing and generate tenant interest.
The most popular gig economy resource for renting a spare room is Airbnb. This platform for condo and vacation home rentals allows room owners to post about any type of available property, from treehouses to castles. You could even start an Airbnb business.
You should also look into Vrbo, another top-rated platform for renting and listing spare properties that attract global tenants.
Making money from a spare room can be a hands-off side hustle once the kinks are worked out. Here are some motivating reasons to pursue it.
Before you dive head-first into this lucrative gig, consider these issues with renting a spare room.
The more square footage, the better. Consider that a tenant might live in the room daily. They won't expect the same space as an apartment or home, but several hundred square feet is comfortable.
Follow the one-percent rule to determine what to charge for your spare room. Determine the property's market value, then charge 0.8 to 1.1 percent of that value.