Renting out part of your home? Be careful
Considering renting a spare bedroom or perhaps even an entire floor in your home to generate a little extra cash flow? As evidenced by the growing number of listings in newspapers and websites such as Craigslist, more folks than ever are doing just that.
Would-be landlords should be extra cautious when letting space in their own homes. It’s one thing to lease a house to someone. But when that person is living under your roof, the landlord-tenant relationship can be a little too close for comfort.
Most novice landlords get themselves in trouble when they treat the process too cavalierly. They think that because the tenant is going to be living right under their noses, they don’t have as much to worry about.
Yet just the opposite is true. You should be even more careful when the space being leased is right down the hall.
Before you advertise, check with your owners or condominium association to make sure that they allow the type of rental you are contemplating. Ditto for your zoning department. Even if your local jurisdiction has no rules against room rentals in otherwise private residences, be aware that your fellow owners may frown on it.
It’s always wise to check out potential renters, to the point of paying your bank or real-estate agent to run a credit check for you. Generally, if you can’t verify the background of a would-be tenant for any portion of the last two years, stay away.
The applicant’s employment and rental histories are important signs of stability. The longer and more uneventful the tenures, the better, so check with his or her employer and the most recent two landlords.
Why two landlords? Because the current one might say the prospect is a good tenant just to get rid of him or her, you may get a more accurate picture from a previous landlord.
As important as these background checks are, the candidate’s credit history is probably the key determinant. If his or her credit is bad, chances are the prospect will make a lousy tenant.
Even if he or she is late on charge accounts but always pays the rent on time, stay away. After all, it’s a lot easier to get away with stiffing a neophyte than a sophisticated property-management company with a staff full of lawyers.
Obviously, a reliable tenant will be one who can afford to pay the rent, so be sure yours can. The rule of thumb here is that monthly income should be four times the monthly rent. But because you’re not renting an entire house, this shouldn’t be much of a problem.
If it is, however, either say no or ask the prospective tenant to have someone cosign the lease. This could be a parent, friend, employer or anyone else who is financially capable of paying the rent if your tenant doesn’t.
Speaking of leases, many people who rent out a room treat the deal as an arm’s-length transaction without a formal agreement, especially if they’re renting to a friend. That’s another recipe for disaster.
A lease is your only protection should the tenant turn out to be less than desirable after he or she moves in. Also, it’s usually a lot easier to maintain a business relationship with a stranger than a friend, and renting any part of your property is nothing if it isn’t a business deal.
Stationery stores often carry standardized lease forms that conform to local landlord-tenant laws and customs, but there’s more to a good lease than filling in the blanks. For starters, rent should be due on a specific day. And if it’s not paid within five days after that date, a late charge should be imposed.
The lease should be short-term, perhaps only on a month-to-month basis, so the relationship can be terminated if you decide you and your tenant are not compatible. And it should cover everything you can think of: What share of the utilities will your tenant pay? Are water beds permitted? Are kitchen privileges included? Will you allow commercial activities such as telemarketing or mail order? How about overnight guests? Or smoking and drinking?
If you’re renting to more than one person -- a young married couple, for example, or perhaps a pair of college students -- each one should sign the lease, and their obligations should be spelled out clearly as “joint and several.”
This makes each person on the lease responsible for the entire rent. That way, if your married tenants separate or one of your pre-med students moves out, the remaining tenant is responsible for the entire rent. When the lease is signed, collect the first month’s rent in advance, plus a deposit.
Finally, a word about being an unreasonable landlord. Just because your tenant is under your nose doesn’t give you the right to set excessive rules or pry into your tenant’s personal affairs.
Your tenant should be allowed to come and go at any time, day or night, for example. So if you find it bothersome when the door opens and closes in the wee hours of the morning, you shouldn’t be a landlord, at least not in your own house.
At the same time, however, when and if the time comes, you have to be hard-nosed enough to enforce your stated position in the lease. Remember, leasing any property -- inside or outside your home -- is a business deal. And to be successful, you have to defend your interests.
Distributed by United Feature Syndicate Inc.
