Renting Out a Spare Room
Our Side Hustles Breakdown
We recommend renting out a spare room as a convenient way to supplement your income. By utilizing unused space in your home, you create a steady stream of revenue. The initial setup and occasional maintenance are the key concerns, but with efficient management, it proves to be a financially rewarding endeavor.
- Privacy Concerns: Less personal space and potential issues with tenants.
- Maintenance Costs: Regular upkeep and repairs are necessary.
- Legal Obligations: Need to understand and adhere to rental laws and regulations.
- Additional Income: Generate steady monthly income without a significant time investment.
- Flexibility: Choose when to rent and the terms of the lease.
- Networking: Meet diverse individuals, making connections and friendships.
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!
An Overview of Renting Out a Spare Room: A Primer
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.
How Much Can Renting Out a Spare Room Earn You?
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.
How Much Does It Cost to Start a Side Hustle Renting Out a Spare Room?
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:
- Energy bill: $80 to $177
- Internet bill: $20 to $50
- Phone bill: $114
- Natural gas bill: $32 to $164
- Water bill: $21 to $91
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.
Where Can You Find Guests to Rent Out Your Room?
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.
Where to Independently Find Guests to Rent Out Your Room
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.
Gig Economy Companies That Can Help You Find Guests to Rent Out Your Room
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.
Why You Should Consider Renting Out a Spare Room as a Side Hustle
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.
- Passive income: Once you prepare the room, you have to do little except check in on the property occasionally and pay the bills (as applicable).
- Moderate work required: Most of the work you’ll do when renting a room happens in the initial stages, such as renovating the space, listing it, and choosing tenants.
- Long-term profits: Renting a spare room can turn into a long-term side hustle if you have consistent tenants or continue to build your tenant list.
Problems With Renting Out a Spare Room for Money
Before you dive head-first into this lucrative gig, consider these issues with renting a spare room.
- Property ownership: You have to own your property to rent it, and even then, homeowner’s association members might run into snags.
- Diminished income: You don’t get 100 percent of the rent you make from tenants. Your income is taxable, and Uncle Sam will take his cut. You’ll also need liability insurance, which can get expensive.
- Renters don’t always leave: What do you do if a tenant will not pay rent but refuses to go? You must legally evict them, which means understanding local laws if you wish to avoid a lawsuit.
Frequently Asked Questions
What Size Room Do I Need to Rent It Out?
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.
How Much Should I Charge to Rent a Spare Room?
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.
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Renting out my spare room transformed my financial situation. The additional income is a relief, covering many of my bills. It's crucial to screen tenants properly and be prepared for maintenance duties, but overall it's a fantastic and feasible side hustle for anyone with extra space.