Hey guys, Max here!
I've been renting out rooms in my house for about five years now. I have had a 100% success rate of rent being paid, though not always on time.
Here are the three biggest mistakes I've made that you can avoid when renting out a room.
Renting out a room in the first place.
Do you have a lifestyle that allows for this? Now, when I say lifestyle, I mean, do you have the wherewithal to give up having access to your bathroom all the time? Perhaps the kitchen, the living space? You have to really ask these types of questions.
Am I able to share and do it without complaint? Because the reality is when you have roommates, it's really difficult to complain about them being in the bathroom. The reality is this when you have roommates, you have to sacrifice things.
Does your lifestyle life for that? That's a really important question to ask. And then even more than that, there's having to deal with the interpersonal problems of having more than one roommate.
I've had to break up a potential fist fight. It's really not fun. So those are some of the conflicts that you may have to deal with, especially if you're renting to fellows.
Ladies, probably a more covert operation when it comes to conflict. But guys would straight up want to fight each other. I've had that many times. So are you ready for that?
That is the question. I remember having some friends of mine. It was friend of a friend, actually. And they were renting out three rooms, one to a young woman, two to some random guys they met on Craigslist or Facebook or whatever it was. They didn't know them.
And they themselves had two young daughters, like a second grader and a 7th grader or something like that.
Now you can do it however the heck you want it's your life. I just know if I had two young daughters, I would not be bringing any strange men, or anybody, for that matter. Strange into the house, but that's their life. So think about that. Do you have the lifestyle that allows for something like this?
If not, then you should not rent out rooms. It's really that simple. If you can't say a resounding yes, I have the right lifestyle for it, then the reality is, you shouldn't rent out rooms.
It's really that simple. Here's a solution, though. Create a lifestyle that allows you to rent out rooms, earn an extra income on the home you own. Now, if you have a mortgage, let's say $1,000 a month, you rent out two rooms at 350 a piece. There's $700.
Now your actual cost to live in the house is $300 plus whatever utilities there are. That's a really good deal if you ask me, but it takes sacrifice. I moved into an RV for four years. I lived in a frickin RV on my property.
Yes, I went to go buy a RV for $3,000. The RV paid for itself in about three, four months, which was really nice. But you want to make that sacrifice? It's really hot. Living in RV, thankfully I had air conditioning.
But it takes sacrifice to create financial success and then financial freedom. It doesn't happen just overnight and it doesn't happen just because you will it to. You have to make actual sacrifices, which seems to be a taboo thing in today's culture.
Renting to the wrong person.
You have to ask the right questions when you're talking to someone for the first time. The reality is, if you have your sleep schedule messed with or they have their sleep schedule messed with it's going to make a very, very, very not fun experience at home. And the reality is when you come home, you want it to be an oasis, a time away from the stress of the rest of the world. Well, that's how I look at it.
I want to come home and have a stress free environment or at least as close to stress free as possible. I one time had a roommate. Shame on me again for asking the wrong questions. He worked the graveyard shift. So he was awake all night pretty much until the wee hours in the morning and then slept all day.
Well, that's kind of hard when you have a normal job and you work during the normal daylight hours like most people do. So really ask those questions. Those questions are super important. The last thing you want is to have your sleep schedule messed up or their sleep schedule messed up. When sleep deprivation is in the question that makes for not very much fun at all.
Another dynamic that might not be sustainable is a couple. You don't want to deal with their family or relationship issues. My goodness. One of my big rules: never rent to a couple ever.
I do have a solution though. Get access to the resources so you can ask the right questions because the last thing you want is the wrong person in your house. It's not fun kicking someone out of your own house.
At some point I'll tell the story about how I had to kick, shall we say, an unwilling party out of the house. Stay tuned for that.
Alright, so you have completed the following. You have figured out your lifestyles, the correct lifestyle to rent out rooms.
Check. Good job. Second one, have you found the right person? If you have. Awesome.
When you do not have a lease or roommate agreement set up.
Now this is the one that I feel I see most people stumble on, is not having the correct paperwork in order. I don't care if it's your brother. I don't care if it's your nephew. I don't care if it's your significant other. I don't care if it's somebody from Craigslist or Facebook. You need to have things in writing. Things in writing will keep everyone on the same page. When you have something in writing and people actually sign it, it makes it real.
It makes it legitimate. It's not just “Yeah, pay me on the first. Pay me when you can.” I don't ever use that word, first of all.
Don't ever say pay me when you can, say pay me on the first. That's the fact; I always have things in writing. Things in writing makes things a hell of a lot easier for you in the long run just in case you had to involve an attorney. I hope you never have to do that. I have not had to do that quite yet, although I've had to reference people. “Hey, we signed this. Remember on this date when we signed this lease together? Yeah, that right there. Yeah, let's follow through on that. And how can we work on following through that?” You just want recourse and you want to be able to show someone hey, you signed this. Let's follow through on this. Keep everything on the up and up. Everything legal, but you don't want to have any questions about when the renters do default on rent, what the process is when they move out or they're hopefully not evicted. But what the process is when they move out, when they're going to get a deposit back.
I do have a solution, though. You don't have to create your own lease agreement. I've created one. This is a really, really good one. I've used it for, I don't know, probably about three dozen roommates. If you go to maxmymoney.org/rentyourroom you have access to it and you go to it right here. It's just a simple lease agreement. It goes over the stipulations.
Everyone's responsibilities, the rental agreement, making sure everyone signs. You want to make sure everyone is on the same page. The last thing you want is people not on the same page. You want everybody on the same page.
Everyone needs to know what's going on, especially you and especially them, because the reality is this: I've had people who it's their first time ever being in a new place, as opposed to mom and Dad's house, so they have no idea how this thing works. You want to make sure they understand in a very simple way.
It's actually pretty easy to understand. Make sure everyone knows what's happening.
You might also enjoy
here are 3 simple and easy steps to help you
Here are 7 ways that I was able to save
Here are 7 ways you can start investing in yourself