We would not argue about renting spare rooms in your house for extra income; however, it's a different story if the possible lodgers are your friends - or the people you shared an apartment with for years before you finally bought a house. How could you say no in that case?
But is it a good idea to rent out to friends? While we cannot answer that very personal question for you, we can give you tips to successfully go through that venture without ruining friendships in the long run. Remember, when it involves contracts and written guidelines, friends and family are more difficult to deal with than others most of the time.
However, first establish if you can even have renters. According to Matthew Reischer, attorney and CEO of LegalAdvice.com, there are some municipalities that require permit before rooms can be rented out. Also, check with your homeowner's association regarding rules on this matter.
And when you get the go signal, Trulia recommends that you settle these following considerations before you throw that welcome home party:
They are tenants and not 'roomies'
By having a concrete understanding that this is a tenant-landlord relationship and not a friend-renting-to-a-friend situation beforehand will make a huge difference. After all, isn't it odd to have former roommates as your tenants?
Without setting that mindset at the beginning, there's a tendency for lack of respect and broken boundaries and the relationship wouldn't be the typical kind that exists between tenants and landlords. Just take for instance a long time co-worker that you suddenly have to report to as your boss.
Lucas Hall, whose been a landlord for already half a decade has this to say: "Having been a live-in landlord for three years, I know firsthand that roommates have trouble seeing the landlord as an authority after they've seen you in Shrek pajama pants."
According to him, the best approach in this situation is to not get too emotional over dirty dishes or occasional overnight guests but instead focus on setting stringent rules for timely rent payments, equal sharing for utility costs, and the other nitty-gritty details.
Draw up a lease
And it's not a lenient, fluffy, Mickey Mouse lease that we're talking about here but a rock-solid, state specific lease, that is written and sanctioned by a lawyer, says Hall.
Hall also suggests to do a standard landlord/tenant lease which should include a room identifier to the property address in each lease for each tenant.
The basic things to be included are the lease period, the amount of the lease, and the rent's due date. Since these are your 'friends', it would help to also nail down guidelines for sharing food, the laundry schedule, quiet hours, and parking space. Trust us, doing so will save everyone from future arguments... and save friendships.
Set a concrete guideline for paying the bills
Unlike stay-out landlords that could easily just put utility bills to the tenant's name, being a live-in landlord is much trickier.
Include specific terms for bills payment in the lease. You could either already include utilities in the rent charge or, charge it separately by having it split evenly among everyone every time the bills come out.
Be firm when the rent is late
Now this is a tough one. What would you do if your 'friend' somehow forgot to pay their rent on time? Wait until they remember? No. That's why it's important to impose a late-payment policy beforehand.
This policy should set the corresponding 'penalties' for late payments. A day of delay would correspond to a 'nastygram', two days would entail a penalty fee, or one week would mean a "Pay rent or Quit" notice from the state laws.
Prepare for when it's no longer working
Your lease agreement should most definitely include guidelines for unfinished lease contract; this would be necessary when your tenant-friend decides to move out prior to the set lease date.
Stipulate in the terms that your friend cannot just leave before the lease period is up and skip the rent unless you give them permission or find a replacement renter.
Until a replacement is found, your friend is bound to pay the rent and utilities until the lease's end date.
For the worst case where they just bail out without paying the rent, you have the option to sue, but that might be more trouble than it's worth.
