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8 tips for renting a room to a boarder

Many retirees consider renting out rooms in their homes to help with income during retirement. We discuss the pros, cons and key considerations.

If you’re looking to boost your retirement income, there’s a good chance you’ve considered renting out a room in your home to a short- or long-term boarder. This can be a great way to make a little extra spending money or pay off your mortgage, while at the same time providing a social connection that may prove rewarding from a non-financial standpoint as well.

There are plenty of potential upsides to such an arrangement, but you shouldn’t make this decision lightly. Sharing your home with a stranger takes a willingness to communicate, compromise and be considerate of a new person’s needs. After all, your home is now their home too.  

Before you take the plunge, we’ve got some advice to ensure a positive experience and outcome for all parties – especially you and your existing household. Here are eight tips for renting a room to a boarder:

1. PICK THE RIGHT ROOM AND MAKE YOUR HOME READY

First things first: you need to decide which room of your house is most suitable for renting. This also depends on your income goals. For example, you will be able to charge a higher amount for a master bedroom with an ensuite bathroom than you will for a smaller single bedroom, but are you willing to sacrifice your own comfort and privacy in the process? Next, you need to prepare your whole home – not just the spare room – for the arrival of a permanent guest. Make sure the house is clean, organised, free of clutter, and that shared amenities, appliances, furniture and fittings are all in acceptable working order.

2. RESEARCH SIMILAR LOCAL RENTALS

To avoid building any unrealistic expectations, it’s a good idea to do some background research on similar rooms currently being rented around your area. How much are boarders paying and what is included in the price? An understanding of the local property market will make it easier to plan and prepare your listing. All the relevant information is available online.

3. LEARN YOUR LANDLORD RIGHTS AND OBLIGATIONS

You may feel that renting out a room in your own house is no big deal, but legally that room is now considered an investment property and you must treat it accordingly. This means you should check the relevant tax and insurance implications, plus learn your legal rights and responsibilities as a landlord. When in doubt, always speak to your accountant, lawyer or insurance company.

4. DECIDE THE DETAILS

You should carefully consider what you’re prepared to offer for the price moving forward. Will the room be furnished or unfurnished? Are utility bills (water, electricity, internet, etc.) to be split or included in the rental rate? Will off-street parking be available to the boarder? Deciding on the specifics in advance will help you attract suitable candidates and reach a favourable agreement.  

5. PROMOTE YOUR SPARE ROOM

With the specifics locked in, it’s time to create an ad listing the features, benefits, rent and any associated costs for the room. Take clear, accurate photos of the whole home as well as the room for rent, so people know exactly what they’re getting, and nobody’s time will be wasted. To promote your spare room, place the ad on websites like Gumtree, Flatmates.com.au and realestate.com.au, or join Facebook rooms for rent groups. Alternatively, mention the idea to people in your social circle and see if word-of-mouth leads the right lodger to your door.

6. DO YOUR DUE DILIGENCE

It’s up to you as a landlord to ensure you rent your room to someone reliable, trustworthy, and able to consistently pay the rent on time. It’s important to background check a potential renter. Organise a face-to-face conversation, ask about their rental and work history, check their references, and don’t be afraid to do a quick search of their online and social media profiles to get a better feel for their lifestyle, personality and values. In other words, do your due diligence to put your mind at ease. Note that while it’s perfectly fine to use your intuition when selecting an applicant, you must provide an equal housing opportunity and avoid discrimination. 

7. SET APPROPRIATE HOUSE RULES

The boarder could end up living in your house for months or even years, but the foundations of the arrangement are generally established in the first few weeks. Set appropriate house rules and guidelines from the start to avoid an awkward situation later. This includes a polite yet clear discussion about communication, privacy, security, housework and cleanliness, noise levels, guest visits, and any other needs or expectations.

8. CREATE A WRITTEN AGREEMENT

When you commit to turning your spare room into an investment property, it’s imperative to create a written rental agreement outlining key points including the cost of rent, the bond amount, payment dates, method of payment, obligations regarding bills, and general house rules. If it’s not in writing, you can’t rely on it.