Pros and Cons of Renting Out a Room in Your Home
Deciding to rent out extra space in your home to help cover the cost of living is a step that needs to be considered carefully.
Having tenants for a second flow of income has become a popular trend, with 73.7% of homeowners renting out a room in their home for extra cash. However, there are many pros and cons to consider before diving in.
Renting Out a Room in Your Home — The Pros and Cons
Let’s go over a few pros and cons of renting out a room in your home.
Renting out a spare room can increase your monthly revenue.
Having a little extra income from a renter can help you manage mortgage payments, utility costs, and property tax payments. If your mortgage is paid off, you could add to your monthly savings. This gives you more wiggle room when expensive surprises come up. For example, roof, foundation, or plumbing issues.
Depending on your state, you may qualify for a tax deduction when you rent out a room in your home. We recommend reviewing how to correctly report your rental income and expenses to avoid inaccuracies. When you don’t qualify for a deduction, paying rental income tax could take away from the monetary awards of renting and be deemed a con.
While home prices are set to level off, inflation and interest rates are still very high. As a result, renting is more appealing and finding qualified renters is easier.
In order to get tenants, you may need to update your home, especially in the spaces you’re renting out. If you’re wise about it, the updates can be a good long-term investment. There are some easy ways to renovate your home, especially if you don’t know who to ask. But adding something for the purpose of renting out a room might not appeal to every buyer in the future.
Most reliable homeowners are quick to fix an issue, whether it's a cracked window or a bursting pipe. When you rent out, you may be under contract to fix the problems promptly.
This means that you might be liable for any issues that may occur. Having a list and getting to know professionals in your area, like the best local professional plumbing service or heating and air company, can help you in a tight spot.
It’s always a good idea to have insurance that covers issues with the home. You should also advise your renters to acquire rental insurance. This will protect their belongings in case of damage or theft.
Sharing a space with a stranger can create uncomfortable situations in the home. Following tenant screening protocols can help you gain a little peace of mind. But unless you know the person beforehand, you don’t really know what it is like to live with them.
Renting Out a Room Short-Term vs. Long-Term
Platforms like Airbnb and VRBO make it easier than ever to rent out extra space in your home short-term. While you’ll need to invest in updates, decor, and furnishings for these renters, it can pay off, especially if you live in a popular tourist area.
When a more steady stream of income is needed, a long-term renter who can pay monthly might be the option for you. You should consider the price increase on utilities. However, splitting the utility bills can ease the higher total.
You won’t need to clean up after them or check a new person in and out as often. But you will have to share common spaces with the person if they don’t have a separate washer and dryer, kitchen, bathroom, or living area.
As you can see, there are pros and cons to any kind of rental situation. It’s best to consider all aspects of renting out a room in your home to ensure you make the best decision for your situation.
Always conduct a background check and make sure you understand the laws and regulations in your state. Creating a thorough contract will help you rent to qualified renters.
Before you open your place to rent and decide on the price, understand your location, the housing market, and what you are offering. This way, you can put your space on the market for the best price. Consider talking to a licensed real estate agent for guidance and professional advice.
About the Author
Roshelle Anderson is a freelance writer and editor from Oklahoma. From a young age, she was notorious for writing down humorous anecdotes about events on family vacations. She enjoys working with others to produce a well-crafted story no matter the subject. Roshelle is experienced in copy editing and proofreading for both fiction and nonfiction. She currently lives with her husband and three dogs, writing and fostering puppies for a local rescue.