The population of the United States continues to grow every year as more people flock to the US. With this growth, the demand for rental housing is growing.
Between 2006 and 2016, the number of US households grew by 7.6 million. The number of new homeowners did not increase over the same ten-year period.
Invesco Real Estate, one of the world’s largest real estate investors, has committed $5 billion to Mynd to purchase 20,000 US homes (in 2021) over three years on behalf of pension funds. Invesco isn’t the only major corporation to dip into the private home rental (SFH) market.
In March 2021, Allianz Real Estate and private equity group Centerbridge invested $1.25 billion in Upward America Venture, a partnership with residential builder Lennar Corporation, to acquire over $4 billion worth of new single-family rental homes in the United States. dollars.
Historically low mortgage rates encourage corporations to invest large amounts of capital in SFH rental properties. As these corporations buy more real estate, the logical outcome will be that more people will need housing as renters.
If you own a house and want to make extra money every month, here is a guide on how to rent a room in your house.
Renting a room versus renting a house
Renting a property is very different from renting a room in your own home. When you rent out a room, you will be sharing the space with that person. Conversely, you don’t live with your tenant when you have a rental property.
Renting out a room in your home requires even more consideration for potential roommates because you live in the same house as them. Many of the same guidelines apply to property rentals and space rentals, however there are significant differences.
How to rent a room
Step 1: Competitive price for your room
Before you decide to take on a roommate, you should figure out how much money you can charge for rent.
Be sure to look at various room listing websites to understand your rental market. Sites such as Spareroom.com, Facebook Marketplace, and Craiglist offer the ability to search for a specific zip code.
Be sure to set up a search within a few miles of your zip code and look at various advertisements.
Are the advertisements short and vague?
Do their photos look like they were taken from a flip phone?
If you can see these shortcomings, it will allow you to improve your listing and attract higher quality potential roommates.
Once you have attractive ads and photos, you can charge 10-15% more than your local market due to the extra work you put in.
Before you receive your first month’s rent, you will need to create a stellar room advertisement.
Step 2: Be accurate in advertising your room
The easiest way to make your notifications light up after an ad is posted is to be vague. The roommate ad should support your desire to find the perfect roommate and reveal the specific characteristics and attractiveness you want in the roommate.
Don’t hesitate here. Analyze your previous experiences with roommates and think about the good, the bad, and the ugly.
What annoyed you about your previous roommates? What did you like about your last roommate?
Don’t forget to include all of these dislikes and desires in your roommate ad.
My room ad is over two pages long and contains over 500 words. I’d rather get three phone calls a day instead of twenty. Yes, this happened once, and no, I would not recommend it.
The more specific you are about what you want, the better the result will be. You don’t want phone calls from unqualified potential roommates. This makes the process cumbersome and time consuming.
Do not include your email address. Potential scammers will only communicate via email.
Instead, only communicate by phone using your Google Voice number, so you don’t have to share your actual mobile number with anyone.
Finally, ask yourself: if I were looking for a room, would I call this person?
If your answer is yes, you are on the right track. If not, make the necessary changes until you’re happy with the result.
Step 3: Ask the right questions for review
As soon as the ad becomes active, people will start calling you. Prepare some questions to ask them to understand who they are and if they are right for you.
Here are three crucial questions you should be asking everyone who calls you.
Do you have first month’s rent and security deposit for today?
Ask this question first to weed out all unqualified callers.
If you rented a room for $500 per month, you would need $500 (first month’s rent) plus $500 (security deposit), for a total of $1,000.
If they say anything other than a firm yes, politely end the call. Tell a potential roommate that you are only considering candidates who have money saved today.
Someone who doesn’t have $1,000 saved up is either in financial trouble or doesn’t manage their money well. To minimize any problems in the future, do not consider those who are economically unstable.
Again, the higher your standards, the better roommate you will find.
Where do you work?
You need to know how they will afford to pay rent every month. Your best bet is to ask if they’ve worked at the same job for more than six months.
If they are new to the job, ask what happened with their previous employer and see how they outline the details of their departure. Ideally, they moved to a new company due to higher pay, perks, or culture.
If they berate their previous employer, you should take that as a negative sign.
You want to find someone who has a permanent full-time job. When the pandemic hit, many people lost their jobs. Some of these people couldn’t find new jobs and didn’t pay rent for months. This situation is a nightmare for any landlord.
Choosing a reliable roommate or tenant is your responsibility 100%. Consider only candidates with a permanent work experience.
Why should I choose you as my roommate?
If they meet the financial and work requirements, you can move on to more personal matters.
You will quickly know whether this person has read your ad or not. If they seem clueless about the room’s ads, it means they probably scrolled down and called you.
Reading the ad takes only a few minutes. If they don’t want to go through with it before the call, skip them.
If they can’t articulate why they will be of net benefit to your life, discard them.
Have them either come up with a big story about being the best roommates or not. After a few minutes of conversation, it will become clear which story is true.
Step 4: Have a firm lease agreement
Make sure you have everything in writing.
You want all of your relationship with your roommate to be in writing.
The other side will not try to play foul with anything written in writing. Written agreements are real and tangible.
Landlords who rent out new rooms get in trouble when they rent them out to a mutual friend without a written agreement. This new roommate takes advantage of a lord friend and it ends up ruining the relationship.
Whether you’re renting out to your cousin or someone you met on Craigslist, make sure you include two elements in your lease.
Rental period
Most premises are rented monthly (MTM). MTM rentals are the easiest for both landlords and tenants due to their flexibility. As a landlord, you may also charge a nominal amount more for rent due to rent volatility.
Renting an MTM allows you to evict someone if they don’t meet your expectations in the beginning. Similarly, a roommate may move out if he is not happy with his housing situation. This flexibility is a win-win for both parties.
Failure to pay rent
Working with someone who is not paying rent for whatever reason can be stressful.
When you have everything clearly in your lease, you, as a landlord, have a way forward.
You want to include a default section that states that if a roommate decides not to pay rent, you will evict them.
The last thing you want is to end up in small claims court and the judge will rule against you because you were ill-prepared. You want to be prepared if you ever have to evict an unreasonable person.
Step 5: Treat It Like a Business Venture Business
Treat the agreements you have with respect.
When a roommate pays late, charge a late fee. This suggests that you don’t play games and your roommates will respect you more for it.
Once you start compromising here and there, you can start compromising in larger areas.
Ready to become a landlord?
Having roommates who live in your house isn’t easy. Even with years of experience, you will always learn more about human behavior and become a better roommate.
However, being a landlord can be great because it allows you to earn passive income that requires a bit of full-time work.
You can earn extra money by making sacrifices and planning for each situation.
This article originally appeared on Wealth of Geeks.