Have you considered renting out your spare rooms or the entire house altogether? While renting out separate rooms is very profitable, you should know what you are getting into – a sticky situation…
Let’s talk logistics. Renting out separate rooms means having separate lease agreements for each bedroom in your home. If you do not know the renters beforehand, not only will you have to come up with house rules pre-arranged, but you will also have to share your space i.e. the kitchen, bathroom(s), living area, backyard, etc.
The Listing Real Estate Management, a Property Management Company in Orlando, Florida, would highly encourage homeowners to avoid renting out their rooms separately. Typically, the lease agreements per room are either month-to-month or a 6-month lease agreements, which leads to our next point. The turnover rate for renting by room is extremely high, which causes the owner to constantly come up with new lease agreements, and rules, move-out cleans, and deal with complaints.
As you can see, the amount of time that an owner spends on doing all of these extra things is lost time, of course, lost money, and extra stress added to their plate.
Is the extra cash flow worth it?
According to homes.com, 74% of homeowners said they opened their doors to strangers, family, and friends to earn extra money. Another 33.3% said they rented out their rooms to help pay for their mortgage, 22.4% said they used the extra money to cover property taxes, and 18.6% used their rental income to help pay for utilities.
While all of these reasons are excellent ways to help a homeowner financially, there are a lot of hidden costs when renting out your rental property partially. On average, homeowners spend almost $700 on paint alone to update each room before or after a tenant moves in. There can be upwards of $10,000 in hidden costs when renting out a spare room. A few examples of these hidden costs are, but are not limited to:
All of these examples can far exceed the rental income. It may feel like extra cash flow, but in reality, is it really??
How do you know if your tenant will be troublesome or not?
Living with housemates can be very difficult, especially if you don’t know the person beforehand. While you can screen tenants, you still never know what you’re getting yourself into until something hits the fan. Imagine having stranger(s) in your home at all times of the day. How do you know you can trust them in your home with all of your belongings? How do you know they won’t steal or damage something? The answer is you don’t know.
- Extra money, which is the most obvious and usually most desirable
- Help around the house
- Peace of mind knowing a tenant is watching over your home
- Making new companions
- Sharing your space with a potential stranger
- Extra time and money wasted
- Housemate conflicts
- Damage in common areas/your belongings
How Do You Enforce the Lease Agreement or Evict?
Well, the short answer is you can’t. Many homeowners and landlords do not have valid lease agreements, making it very difficult to remove a tenant, causing nonpayment issues, HOA violations, etc. For example, in Florida, you must have a valid lease agreement to evict a tenant.
Property Management Tips for Success
If you have the ability to rent out your entire home, then this will be the best option for you. A long-term tenant will produce a higher return and lead to successful rental property investment. We’ve seen homeowners and accidental landlords enjoy falling into owning a rental property that produces passive income without doing any work at all.
Here are a few tips for success when renting out your home.
- Hire a Professional Property Manager or Property Management Company
- Understand How Much You Can Get for Rent
- Screen Each and Every Prospective Renter (or ensure your Property Manager does this.)
- Put Trust in Professionals – Property Managers do this for a living, so trust they know what they’re doing
Orlando Property Management Summary
Money is definitely the driving push to rent out your rooms as a homeowner, but is it worth all the stress and troubles that come with it?
If you decide to rent out your rooms in your home, be aware of the risks that come along with renting out your space. At The Listing Real Estate Management, we highly recommend having legally binding contracts and documents beforehand if you choose to rent out your rooms. Most importantly, screening your potential tenants is crucial if you decide to go this route.
If you have any questions about whether or not you should rent out your rooms in your property, feel free to contact us at The Listing Real Estate Management – You’re Boutique Orlando Property Managers. We would be happy to answer any of your questions pertaining to your rental property in Orlando, Florida!