I have a friend at work that has experience what it’s like being a Landlord, even though he doesn’t own rental property.
My friend (let’s call him Phil), has a 4 bedroom house but only 2 kids. So one year my friend and his wife decided to rent out their extra room.
I believe this is an excellent way to creep into the Landlord/”rental property” owner role.
Here’s why:
- You don’t take the financial risk of purchasing rental property and trying to make a profit off of it. If you rent out a room in your house, so you should be able to be profitable each and every month.
- You don’t have to go through the process of getting a mortgage for the room since you already either have a mortgage or you own your house mortgage free.
- You still have to deal with collecting monthly rent, but if your tenant misses a payment, it doesn’t hurt as much since you don’t own any extra expense from renting your room out.
- You draw up a contract between you and your room renter!
- If you tenant leaves, you are still in great shape financially.
- You learn to put ads in the paper for renting a room. This should transfer pretty well to the same process for renting out a rental property. Plus you get to learn what works and what doesn’t at a low-cost.
- You get practice running background check! This should give you experience when you really do take the plunge and buy rental property.
Taking it to the next level, rental property!
Another great thing about renting a room before jumping into the real estate market, is that you can save money from renting out your room, and over a few years you can use that money for a down payment on a rental unit. This way you reduce the hit on your own personal checking/savings account since the money from renting out your room is money you wouldn’t have had anyway.
Conclusion to Renting a Room
While there are could be some negative to renting out a room in your house, I believe that this reduces that big step from not owning rental real estate to owning it! I really believe this could make the transition much easier (especially if you are single).
Good Luck,
MR
Interesting thought. Personally, I wouldn’t want to have anyone living with me in that capacity. We have had a couple foreign exchange students in the past which was OK.
I think you’d really have to screen applicants very well. My buddy took in a young college student that was also a singer.
If you have a split level house, you can convert the lower level into a separate apartment. That’s what my grandparents did. They only rented the lower level out for a few years though. They found out they didn’t like dealing with tenants.
One of the best places I lived during college was a red barn that had been converted by the property owner into two apartments. He had a little investment with the cost of remodel, but little risk except non-payment by the renter.
Wow, that sounds like a great place for an apartment! Kudos to you former landlord, I’m sure that place is never short of tenants!
personally i’d also like my privacy at home – but i agree with the advantages listed. this can be a good first step for a novice just getting into the game. you’d think there is also lesser risk of excessive/unnecessary wear/tear as your tenant will always be “in front of your eyes” per se
I know of an older female lawyer in Washington that does this with college girls. She seems to enjoy the process, but I don’t think I would enjoy it either because of me having a family.
If I didn’t have kids, well then perhaps…
We rented out our spare bedroom for 2 1/2 years. It was an easy $500 a month towards our then $740 mortgage, but I wouldn’t do it again. Once you get used to having complete privacy again, it is hard to go back. Plus, I’ve turned that room into my home office now, so…yep, we are out of the landlord game for a while. 🙂
It’s awesome that you did that! Kudos to your and your husband for being so clever!
Although I think it’s a good idea, I don’t think I would do it now.
I worked as a property manager for discounted rent for a few years. I dont think the hassle was worth the $100 bucks a month.
I can imagine. Seems like a lot of stress for just $100
When we first bought our house and before we had kids, we rented out one of our rooms. It was just like being in college again and all sharing a house. It was me, my future husband and a good friend of ours though.
I’d have a hard time renting to a perfect stranger when there are no separate living spaces though. I’d be worried about my stuff getting stolen, etc.
I did it and it works well if you can find someone you know and trust. Networking with friends/coworkers/family is the best way to find someone reliable.
Yes, I think you found the optimal solution! Very clever of you renting out to a friend!
I think if I were to rent out a room in my house, I would definitely want to go through friends or someone that they personally know and can vouch for.
Nice job renting your room out, it almost sounds like a fun experience in your case!
One of my friend purchased a 4 bedroom house when he started working and rent out 3 rooms. This paid for all his expenses and he made a lot of great friends to boot. It’s tough once you are married though.
Wow, that does sound sweet. I never thought about trying to make money from your primary residence. I would just be hoping for some help paying down the mortgage. Sounds like your friend was very clever!
Being married with children, the only way I would rent a room out of my house at this stage in my life would be if it were a relative.
It would have to very unusual living situation to rent out a room. I would be giving up a great deal of privacy for the money received. Personally, I would only do it if I needed the money.
I agree with you on that one. I don’t think I could do this unless I was still single and in need of some cash. I am not a fan of giving up my privacy for a little extra side income. I find another way to make that cash!
Yes, hmmm Rich Dad Poor Dad called a house a liability, but the renting out rooms aspect makes it an asset.
You point about rent out a room if one needs the money confirms that a house is an asset.
I’m with you though, I won’t be renting out any room soon if ever. If I was in college in my teen or early 20s, then I would consider going that though.
Yep, definitely something I have done before. In fact, I’ve got this nice au pair unit in the basement that I rent out. Might as well, as it’s just extra space, and I don’t use it!
Best, Sam
Wow, very clever Sam! It’s really a great way to go about it!
Housing being one of the larger expenses, why not get help with the mortgage or make money off of it!
Kudos to you for seeing the money potential of renting out that extra space!!!
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I think this is a great opportunity for single parents out there. It would be a great deal for all involved if you could rent out a room or two to another single mom and her kid(s).
It would save both of you quite a bit of money and assuming you knew each other, trusted each other and didn’t take advantage, it would be a great opportunity to split some of the household duties and child care!