Home Complete List of Side Hustle Ideas Rent Spare Room
Earnings Vary
Rent out a spare room in your house or apartment to someone else to earn a relatively passive income and save on living costs.
| Time to First Earnings | 1 week to 6 months | |
|---|---|---|
| Work Location | Remote or In Person | |
| Startup Costs |
$0–$4,425
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If you have an extra space in your home that you’re not using, then you’re sitting on a passive income gold mine. Renting out unused space in your home is one of the easiest and most lucrative side hustles out there.
That said, there are a few pitfalls to watch out for and tips that can help you earn more and make the most of your room rental side hustle. Here’s what you need to know.
Just because you rent or own a property doesn’t mean you have free reign to do whatever you want with it. Certain laws and regulations will apply to you, depending on your circumstances.
For example, renting out a room in a house you’re already renting yourself is very different from renting out a room in a house you own. Each option has its own rules and restrictions.
Renting out a room that you’ve rented first is called subletting, and the contract that you would use with your renter is known as a sublease. Before you sublet your space, check your tenancy agreement to find out whether subletting is explicitly forbidden. If there are no stipulations against subletting, check your state’s tenancy laws to find out whether you must first get your landlord’s written permission.
Even if you’re not technically required to get permission from your landlord, it’s a good idea to run the idea past them first. This way, everyone is on the same page and you reduce the risk of tension or disputes.
From there, the relationship with your renter will work very similarly to how it might if you owned the home, with one caveat: You will be fully liable for your renter’s actions if they break the rules of your own rental agreement with your landlord. For example, if your renter causes damage, you’re ultimately responsible for paying for that damage and settling up with your landlord.
If something breaks, your tenant will pressure you to fix it, but you have to get your landlord to fix it. Likewise, if your landlord has a problem with your tenant, it’s your problem, too, and it’s up to you to make your landlord happy.
Check your local, state, and zoning laws as well as city ordinances to ensure there are no restrictions for landlords renting out a single room within a home. For example, you may need to abide by local regulations regarding how much you charge for rent or security deposits. Some jurisdictions also have separate rules for short-term and long-term room rentals.
If there are no restrictions, you may still find that you need to first have the property inspected or pay certain fees before you can rent out the room. Consider consulting with a local attorney to ensure you’re adhering to all local landlord-tenant laws.
If you’re part of a homeowners association, then you may find that the association restricts renting out rooms. If this is the case, then you won’t be able to rent out a room in your house.
Lastly, check with your insurance provider to understand how your policy may be affected by having a renter within the home. In some cases, you may need to buy additional insurance, such as landlord insurance.
One of the biggest mistakes you can make with a room rental is to rush into an agreement without taking adequate preparation measures. There are certain steps you should take to prevent disasters and ensure everything runs smoothly.
You’ve researched laws and regulations for renting out a room in your area, but that doesn’t mean the research and preparation stage is over. To ensure you can handle the commitment and obligations involved in renting out a room in your house, you need to fully understand what it means to become a landlord.
Local or state landlord-tenant laws will dictate what you’re legally required to supply to your tenant. In most cases, these requirements are related to tenant safety. For example, you may need to install a certain number of smoke or carbon dioxide detectors and guarantee you have proper escape routes in the event of a fire.
You also have other responsibilities once a tenant moves in. In some jurisdictions, you must give notice and receive permission before entering the space your tenant has rented. In others, you may have to provide requested repairs within a certain timeframe.
Overall, your job as a landlord is to provide a fully functional, comfortable, and safe space to your tenant and then ensure the space stays that way.
Since you’re only renting out one bedroom within a house that you also live in, you’ll need to decide what areas of the home your tenant can access.
Will you share the kitchen with them? What about the laundry room or garage? Can they hang out in the backyard all night long if they want to? If you have personal spaces or storage areas in your house, then you’ll also want to consider installing locks.
These decisions about space access will influence not only your tenant’s comfort but also how much money you should charge for renting the space. For example, renting out a master suite with a private bathroom can fetch a much higher rental fee than renting out a smaller bedroom that requires the tenant to share a bathroom with you or other residents.
Once you’ve decided what you’ll offer your tenant, you can then decide on a rental fee. A lot of different factors play into the value of a room rental, and setting the right price will help you secure a great tenant while maximizing your earning potential from renting out a room in your house.
When setting the rental price for a room in your home, consider these factors:
Start by adding up all the costs you will incur by renting out the room. Add to that a representative fraction of the costs that you’re paying for the house yourself. The final amount should be a fair price that allows you to attract tenants while also turning a profit.
Beyond just performing these calculations, however, it’s a good idea to do a little research into rental rates for similar rooms in your area. Comparing your rates with those of other landlords will allow you to spot errors in your calculations and ensure that your price is competitive and fair.
As you decide on the total monthly rental fee, also think about your preferred rent due date, rent payment method, and any rent grace period.
Now that you’ve made all the big decisions that come with becoming a landlord, it’s time to create a room rental agreement. A professional can help you draft up a legally binding document, but you can just as easily create a tenancy agreement on your own.
Just make sure your room rental contract covers the following points:
The more specific you can be with your rental agreement, the better. You can find plenty of room rental templates online that can help with this process. Just make sure that you and the tenant both meet in person to sign and date the agreement.
Finally, it’s time to list your room for rent. Great online platforms for posting a room rental listing include Zillow and Craigslist, although you can also simply advertise your available room in local Facebook groups and through other social media channels.
Be sure to include lots of details about what the room offers as well as fees. You’ll also attract substantially more interest in your room if you include plenty of high-quality pictures that present the room in a neat and orderly state in good lighting. The more professional the listing, the higher the quality of applicants you’ll receive.
Most people will want to see your place before they agree to rent your room. However, if you experience a high volume of responses to your listing, you can always ask applicants to submit an application first and then invite the top candidates for a tour of your property.
Responses to your listing may come in slowly, but you can expect the highest volume of messages shortly after advertising your room. To avoid wasted time for either you or a prospective tenant, it’s a good idea to ask applicants to share a few details about themselves and their expectations and intentions when staying with you in your home before you invite them out to your house.
Screening your rental applicants is essential, and it’s not a process you should take lightly. After all, you’ll be renting out a room in your house to a stranger, which can be dangerous if you choose the wrong tenant.
Some landlords ask potential renters to fill out a formal application. This is a good way to legally protect yourself and set yourself up for the best chance of finding a reliable tenant. Alternatively, you can vet prospective tenants through face-to-face interviews.
A rental application is easy to draft up (though a professional can help), and should ask for information like the applicant’s past rental history, employment, income, and references. If an applicant looks good on paper, call their references and ask about any issues.
For added security, you can also use a third-party company to run a tenant background and credit check. Just make sure that you have permission from the applicant to do so beforehand. If everything looks good, then you’ve found a qualified tenant.
Lastly, once you’ve identified your potential tenant, ask for a security deposit. This security deposit will cover any expenses you need to pay if your tenant violates the terms of their rental agreement. For example, it’ll cover the cost of property damage, cleaning services, or lost rent if your tenant skips out without notice.
If no damage occurs, you will be legally obligated to return the security deposit to the tenant at the end of the rental agreement. You can ask the tenant to pay you the security deposit when you both sign the formal rental agreement.
Set yourself up for success by following pro tips to avoid legal trouble and ensure a positive experience for everyone in your house.
The Fair Housing Act is a federal law that’s in place to prevent landlords from discriminating against tenants and ensure that everyone has fair access to housing. It prohibits you from denying a potential tenant or changing the rental terms on the basis of their race, sex, religion, color, national origin, sex or gender identity, sexual orientation, familial status, or disability status.
This law applies to most landlords. However, you’re exempt from these stipulations if you meet the following conditions:
These are specific circumstances, and if you’re not exempt from this law, then you’ll need to be very careful that you don’t use discriminatory language in your rental listing or turn away a prospective boarder for the wrong reasons.
Rent payments are taxable, but renting out a portion of your home is almost like a business. Accordingly, you’ll be able to write deductions off your taxes related to the cost of keeping your rental “business” running.
For example, you may be able to deduct a portion of your utility costs, mortgage interest, maintenance expenses, and real estate taxes. To understand exactly how this works, check out the tax guide to renting residential property by the Internal Revenue Service (IRS).
When it comes time to file your taxes, a qualified accountant can also help you ensure that you take all deductions possible. Before tax time, though, be sure to hold on to any receipts you have from expenses related to preparing the room for rent or upkeep.
Eventually, your tenant may want to move out, or you may want to end your rental agreement. In the most unfortunate cases, you may want to evict your tenant.
However the tenancy ends, it’s important that you know what to expect when the time comes to part ways. Ideally, you included a tenancy end date within your rental agreement. This sets clear expectations and ensures your tenant won’t try to stay indefinitely without your approval.
Start by checking your local or state requirements regarding the mutually agreed end of a tenancy. You may need to provide certain documentation or return the tenant’s security deposit within a certain timeframe.
If you need to evict a tenant, certain local or state requirements may also apply. For example, in New York State, you may only evict a tenant if you have a court proceeding and judgment of possession. This is a long, stressful, and expensive process that’s best avoided.
In the unfortunate event that you encounter any legal or tax issues related to your rental agreement, you’ll need proper documentation. Make sure to get everything in writing.
Here are some items you’ll want to hold on to for your records:
Complete, comprehensive record-keeping is your friend anytime you’re renting a room within your home.
Renting out a room in your house can be incredibly lucrative and easy to do, but it’s also tricky business. There are a lot of rules and regulations involved in renting out a room in your house, and you could get yourself into legal trouble if you’re not careful.
Before you commit to allowing someone else to occupy a room in your house, make sure you understand the positives and negatives that will come with this passive income side hustle.
Pros:
Cons:
You need to be willing to put in a bit of time and effort into ensuring that you’re providing your tenant with a safe, livable environment before you rent out a room in your house. If you’re the homeowner, then the process is simpler than if you’re subletting the room, which involves a whole different set of obligations and liabilities.
It’s also worth noting that renting out a room in your house is much different than renting out a whole house. You will be living with your tenant, and the two of you will essentially be roommates. Unless you’re renting out a suite with its own kitchen, living space, and bathroom, you will have to share common spaces.
