The four basics of renting out your space
With the collapse of the homeowner’s market, more and more people are renting. If you have extra space in your home, or even an extra living space, you can make money by renting that space out. Before posting your ads, there are a few things you should do to protect your wallet — and your sanity.
1 – Consider the local market
Before you try to rent out space, do your research. Take a look at newspaper ads, Craigslist, and online services for spaces similar to yours. Make an appointment with a few landlords and take a look at spaces similar to what you are renting out. Once you have made comparisons with similar rentals and considered how much money you need to bring in, set your rental price.
2 – Research the law
Every state, and some cities, have varying landlord/tenant laws. Even if you are just renting out a single room in your house, you should research these laws. Most areas have at least one landlord association that offers information on the basics of the law. Landlord/tenant law can dictate everything from what you need to provide in your rental to how much notice you need to give before entering the rented space.
3 – Consider credit
Not everyone has perfect credit. As a landlord, you need to think about whether you want to check the credit of your potential renters. A credit report indicates the history of a person’s finances and bill-paying. Running a credit report on a potential renter, however, will cost you between $75 and $100. You do not have to check credit in order to rent out, but you should be reasonably confident that your renters can afford what you’re charging. Checking references and employment history is the best way to gauge a consumer’s ability to pay.
4 – Deposits, leases and paperwork
You should never rent a space to someone without paperwork. Paperwork protects both of you, and it provides documentation that could be needed for financial transactions and even proof of residency. You can find standard rental agreements for your state online or through landlord’s associations; read through the agreement carefully and make edits as you see necessary. Even if you are friends with your renter, you should charge a deposit of some kind. If something goes wrong — no matter how good of a friend your renter is — cleaning up after a renter moves out can be costly, and a deposit can pay for that.
Even if you plan on just renting out a single room to a good friend, you should make sure to price your space appropriately, know the law, consider the finances of your renter and do the paperwork. If you do the work on the front end, renting out a space can be a relatively low-stress way to bring in extra cash into your wallet.