As a homeowner, it’s normal to think, “Hey, I have a room to rent in my house; why shouldn’t I do it?” After all, renting a room in your house to a family member, friend, or even a stranger can create a nice source of income.
But before you start focusing on questions like “How much should I rent my room for?” it’s best to take a step back. The legalities of renting a room in your house can be surprisingly tricky and, if you don’t handle the situation correctly, you could find yourself in hot water.
If you’re thinking about renting out a room in your house, here’s what you need to know.
How to Rent Out a Room in Your House
If you’re wondering, “Can I rent out a room in my house?” the answer is usually “yes.” However, you have to use the right approach. Here’s how to get started.
Review Local Landlord-Tenant and Roommate Laws
Landlord-tenant and roommate laws vary by city and state. Since that’s the case, you’ll want to see what’s allowed in your area before you start looking for possible tenants, even if you’re planning to rent to family or friends.
Check Local Zoning, Ordinances, and HOA Rules
In some cases, zoning or HOA rules may bar renting out rooms in your home or may limit how you can approach the arrangement. The same goes for local ordinances. Again, you’ll want to review any requirements and limitations in advance.
Get an Application and Lease Prepared
While having a formal application or lease isn’t always a legal requirement, it’s the better way to go. It ensures that you and the tenant agree on various points of the arrangement and that all parties know what sort of actions might lead to an eviction.
If you aren’t familiar with local laws, you may want to work with a real estate attorney or a lawyer specializing in landlord-tenant law. That way, you can ensure that the requested information and clauses align with requirements in your area.
Prepare the Space
Taking a moment to prepare the rentable space is a necessity. You want to make sure that everything is in good repair. Additionally, you might want to add a lock to the room’s door, ensuring the tenant has privacy.
If you’re leaving the room furnished, have a thorough inventory of every item. Also, take pictures right before the tenant moves in, giving you evidence of the condition of the room and any property you’re allowing the tenant to use.
Choose a Price Point
Figuring out how much rent to charge for a room is usually easier than you’d expect. You can look at the prices for similar rentals in the area as a starting point, factoring in the costs you incur relating to the space and the tenant’s use of household amenities and utilities.
Screen Thoroughly
No matter who you’re renting to, you want to conduct a thorough screening. This can include background checks, credit checks, employment verifications, and other steps. Just make sure that you apply them equally to everyone you’re considering.
Prepare for Taxes
Rental income is typically taxable. However, you’ll also be eligible for certain deductions relating to the room. You’ll want to keep thorough records to ensure you can properly report everything. Log rent payments as they’re received, measure the rented-out space in advance, and track any repairs or operating-style expenses.
Roommate Law in New York
There are several regulations and codes that do put some constraints on roommates. Along with state-wide regulations, you may encounter separate roommate laws in NYC or other cities. As a result, reviewing the rules is essential before seeking out a roommate. That way, you can make sure you’re following the law.
New York Real Property Law 235(f) – commonly referred to as the “New York State roommate law” – focuses on occupancy, specifically in regards to unlawful limitations. Essentially, it outlines what landlords can or can’t ban by outlining who can live in a home or apartment. However, it also creates some limitations, such as how many people can potentially live in a single house or unit simultaneously.
NYC Administrative Code dictates that renting out single rooms isn’t broadly allowed. Instead, occupants have to form a “common household,” all having access to community-style spaces like living rooms and kitchens. Having at least 80 square feet of livable area per person is also required by the Housing Maintenance Code.
Plus, it limits a dwelling to three unrelated occupants in total. Otherwise, you’d have to officially convert the home into separate dwelling units, a complex process involving permits, updates to certificates of occupancy, and more.
The Implications of Renting a Room in Your House
Considerations for Homeowners
If you’re a homeowner, you might assume you have carte blanche when it comes to renting out rooms. However, you do have to follow local landlord-tenant law, including if there isn’t an official lease. Additionally, if you want the roommate to move out and they refuse, you may have to turn to formal eviction proceedings, a complex and lengthy process that can cost a surprising amount of money.
It’s also important to note that your homeowner’s insurance policy usually has to be updated if you bring in another occupant as a rental tenant. Policies only cover specific situations. Since bringing a tenant in changes the paradigm and alters liability, you might need a new policy to cover those shifting needs.
If you were hoping to complete a garage conversion to add a room to rent out, you’ll also have to ensure you stay on the right side of the law. Even if you don’t remove any walls, turning an area like a garage into usable living space isn’t something you can do on a whim. It requires permits, and you’ll have to follow building codes, potentially making the project a much larger undertaking than you’d expect.
Considerations for Renters
If you’re renting a property and want to rent out a room to another person to secure some income, that might be an option. However, you’ll need to make sure that renting a room out doesn’t violate the lease agreement.
While New York has some laws to ensure landlords don’t place unnecessary occupancy restrictions on tenants, that doesn’t mean they can’t set any limits. For example, they can have requirements to ensure that the unit complies with overcrowding regulations. If you rent out a room and violate that clause, you could put yourself at risk of eviction.
Additionally, you need to consider the other potential risks. For instance, if the roommate damages the apartment or home and you’re the only one on the lease, you may be legally responsible for the damage.
Further, if you want the roommate to move out, you may have to go through eviction proceedings. In most cases, an eviction lawsuit is required regardless of whether there’s a formal rental agreement, making the situation fairly complex.
Deciding Whether to Rent Out a Room in Your House
In many cases, renting out a room in your house is a shockingly complex undertaking. Roommate laws aren’t always easy to navigate. Plus, whether you’re renting a room out in your house to a friend, family member, or stranger, not having a lease doesn’t protect you from having to follow the law or use formal eviction procedures to get them to leave if the need arises.
At times, this can make alternative approaches a better option. For instance, renters might want to formally add roommates to the lease, making them legally responsible for damage and a portion of the rent.
Homeowners might want to consider going with an ADU instead of renting out a room. Along with giving you privacy, it may be easier to navigate than renting out a room in your house in some cases. Plus, you can typically charge more for an ADU rental, allowing you to bring in additional income.
