If you’re like many people, you may have considered getting a side hustle or working a second job—or you’re already doing it. Freelancing in addition to your day job can definitely help you make money, but there are only so many hours in the day. Fortunately, there are other ways to bolster your income. Depending on your current living situation, you might consider renting out a spare room. However, you should only do so after careful consideration. Answer the following questions before deciding.
Is it allowed?
The first question you’ll need to answer is whether you’re allowed to rent out your spare room. If you live in an apartment, you’ll need to check your rental agreement carefully. Even if you think it’s allowed, it’s best to consult your property manager as well, just in case.
If you live in your own home, you’re definitely allowed to rent out a spare room—as long as your homeowners’ association (HOA) allows it. HOAs can place lawful use restrictions on private houses. If you live within an HOA neighborhood, check the Declaration of Covenants, Conditions, and Restrictions (CC & R).
What are the local requirements?
In addition to checking your rental agreement or CC & R, you’ll need to check your local municipal regulations. Pay careful attention to the housing laws to determine if your rental room will meet the requirements. For instance, some cities require rentals to have direct outdoor access or to have a window large enough to be used as an exit in case of fire.
Will the income bump up my tax bracket?
Yes, the income you earn from renting out even just one room in your home is indeed taxable. First, consider how much you might charge your new roommate per month. Then, multiply that figure by 12 to estimate your increase in yearly taxable income. Use that figure to consider whether the income would significantly raise your taxes, and then decide if it’s worth it.
Will I be able to live with a tenant?
There are a lot of disadvantages to being a landlord, such as the possibility that the tenant will be loud, damage the property, refuse to pay the rent on time, or even refuse to leave the property when the rental agreement expires or is violated. When the tenant lives in your home with you, these problems are magnified. The best way to deal with these potential problems is to reduce the risk of them happening. You’ll need to carefully screen potential tenants and interview them extensively to ensure compatibility.
There are definitely many obstacles to renting out a room. Yet, if you can do so successfully, you’ll be able to raise your monthly income without having to take on a second or third job.
