Renting a room in my house

[Adrian Ballou]

Hi all!

I'm looking to rent a room in my house, and I'm trying to figure out a fair price for it. Does anyone have tips for determining this amount? My mortgage is $1622.68 (including taxes and other fees), and over the winter I spent an average of $674.14 (!) in utilities. (Getting better insulation is definitely on my list!) There are two available rooms, both on the second floor, and the front door entry is right in front of the stairs. Laundry is available in the basement, and there is a full-appliance kitchen (including dishwasher) and parking available.

It looks like 3-bedroom apartments in the area are going for about $1900-$2100/month, but this is a single-family home. On the other hand, they'll be living with their landlord, which most people would see as a drawback. I have a severe allergy to fragrances, so I'm specifically advertising to others with the same condition. We often have trouble finding housing, so the value of what little accessible housing exists is higher.

I did the math and, when I thought that we could just split the bills like I did with roommates, things looked pretty reasonable. But then I found out that rental income is taxed, and I think it will be more difficult to charge reasonable rent that also covers a split of my expenses. If I factored in an extra $200/month for repairs, alongside the 27% tax rate I will incur for rental income, renting out both upstairs bedrooms to one person would be $1385, and with split costs of utilities (increasing slightly for additional heat/electricity/water costs) would be $1805. That is just too high!! It doesn't seem fair to a potential tenant, at all. (And this is with the assumption that utilities payments aren't also taxed.)

If a potential tenant rented just one room upstairs and things were divided by 3, it would be $1015 without utilities and $1435 with utilities. This also seems way too high for just one room.

I'm wondering a few things:

1) How to calculate market rate when most rentals available in my area are apartments, not single-family homes

2) How to account for living with a landlord in this context, alongside the other "unusual" situation of the housing being accessible

3) If folks have advice on how to set up agreements/expectations with tenants living in the same unit

4) If there's anything else I've missed. I'm a new homeowner and have only ever shared housing when we've all been tenants before.

Thanks in advance for your help!

Adrian