How to Rent out a Room in Your House in 10 Steps

room rental

If you are a homeowner with extra space in your house, renting out a room to collect rent may seem like an enticing option to earn extra cash.

Renting out a room on your property requires careful consideration of legalities, financial implications, and interpersonal dynamics.

To help keep you out of potential legal trouble and start earning passive income, here are the complete steps to rent out a room in your house.

Note

If you’re a tenant looking to rent out a room on your current property to a new occupant, check our subleasing guide instead.

Step 1: Understand Landlord-Tenant Laws

Landlords

Once you rent a room to another party, you have established a landlord-tenant relationship. Understanding the landlord-tenant laws in your state and local area is the first step to a successful rental experience.

Landlord-tenant laws cover a wide range of topics, including the rights and responsibilities of both landlords and tenants, eviction procedures, security deposit regulations, and more. Specifically, these laws generally require the landlord to:

In addition to landlord-tenant laws, you should also learn about your local laws and regulations, as there may be restrictions around renting rooms in your house, such as from your neighborhood association or your co-op board.

Step 2: Check with Your Insurance Provider

Like mortgage lenders, most homeowners insurance companies request that you inform them before renting a room in your house.

Note that basic homeowners insurance often does not provide adequate protection from any damages caused by a renter, as your property no longer qualifies under an owner-occupied or single-family insurance policy.

Look into landlord insurance coverage. It can cover the cost of repairs to your home or lost possessions while allowing you to recover any outstanding rent payments. In addition, it acts as liability insurance in the event of personal injury to your tenant and will help you offset legal fees should you ever be sued.

If you’d like to take additional precautions, ask your tenant to apply for renters insurance. It can be taken out in your tenant’s name and will protect their personal belongings in case of any accidents (e.g., a fire).

Step 3: Decide Which Room to Rent

While renting out a room in your property has certain benefits, it has some downsides you should consider.