Legal Considerations for Roommates vs. Normal Tenants

[Anthony McDougle]

First of all -- I apologize if this is in the wrong section.

I recently purchased a house, hoping to rent out the rooms for a while, to kill two birds with one stone -- start on the path to being a RE investor, and find a place to live. Unfortunately, duplexes in my area (Charlotte, NC) are in areas I'd rather not live.

I originally had some people I know lined up to move in, but they backed out once the house was purchased. That's fine, I'll find someone else.

I understand that, when a prospective tenant applies, you cannot legally reject them for a lot of reasons (race, age, they have a family, whatever). Does that still apply if I'm looking for a roommate? Not that I'd turn someone down for being a certain race or whatever, but as a 20-something recent grad, maybe I don't want to live with an older couple or a family with a small child, as one example, right? What are the constraints here, are they the same/similar as if I was renting an investment property?

Thanks!

[Karen Margrave]

@Anthony McDougle Check with your states real estate laws. Usually, if it's a room in a house where you are living, you can choose who you want to live there. However; if it were a boarding house, and you didn't live there, that would be a different set of circumstances, as it would be open to the public. In some areas you can also do an agreement where the tenant agrees to vacate without notice if they fail to pay rent or behave irresponsibly. (many houses for transitional housing, drug rehab, etc. use this) Though check with an attorney as to your states laws.

[Anthony McDougle]

@Karen Margrave thanks! I've been looking around online, and it looks like according to federal law, I can't advertise these things, but I can make decisions on them as long as I'm living in the property. However, I can't seem to find anything about NC law. I was hoping someone on BP who has experience in NC might have some insight before I go off and spend a ton of money on a lawyer, but we'll see.

It's just a 3/2 SFH, I'm staying in the master bedroom and hoping to rent the other 2 rooms.

[Jon K.]

With a roommate setting with shared common areas, you can choose whoever you want. Just don't advertise your preferences. I'm not giving advice about NC law.

A few tips: don't accept couples, kids, or anyone below around 25. Couples will be a living nightmare for you, plus they'll run up the utilities, make more noise (or fight), and one of them would be living there for free. That's not cool. 22 year old recent college grads still want to party, don't know how to maintain a home, and are whiny-- in general. You don't really want a retired or unemployed person either-- they'll run up the utilities that you're paying for all day. Don't accept a "work from home" person-- they'll be home 24/7 and annoy t he crap outta you. Ditto with people with "full-time" online school. Find someone with an actual job or school that they attend so they're not home 24/7 running the utility bills up (and annoying you). Do not accept a smoker-- not even an outside smoker. No drugs, no drunks. And no pets, especially not cats. Most pet owners aren't as responsible as they say they'll be.

Verify their rental references and school/job. Look up local court records in every city they've lived (Intellius is your friend) for evictions. You would be surprised how many inquiries you'll get with people even being evicted right now.

Casually inquire about their lifestyle preferences (party house vs. quiethouse), general daily schedule, how clean they like a place, do they like to cook, etc. when interviewing them. Think about what sort of lifestyle you're willing to tolerate--- parties every weekend? friends over every night? loud music playing or someone playing the tuba in the house? "artists" and the mess and potential tacky paintings that will adorn your walls? are you ok with someone who likes to cook 5 hours every evening (noise and they're in your way when you're cooking)?

Do you want them to bring any common area furnishings, or only use yours? Discuss this beforehand. You don't want people bringing furniture they picked up on the side of the road/dump if you have nice furniture already. Your styles won't match if they bring theirs, and you're common areas might just look tacky.

Have a solid lease. Specify utility costs, what's allowed (pets, no smoking, etc.), cleaning (they'll never clean as often as they say they will-- consider splitting required cost of regular maid service), lawn upkeep, parking, overnight guests, parties and guest policy, locking doors, and roommate issues as well.

Tell them upfront what's acceptable and what's not. Don't cave to their preference. Tell them what you want and what you expect in YOUR house-- and stick to it. If you say no wall paint, don't allow wall paint. If you say no pets, don't cave and let anyone get a pet. What's not acceptable to me:pets, smoking, regular overnight guests (more noise, utility costs, parking, wear/tear, cooks in the kitchen). I set a specific number of nights per month in my lease. I also discuss parties in my lease, as well as that guests in general should not disturb the quiet enjoyment of other people. No wall painting-- don't allow it under any circumstances. You'll end up with badly painted crap brown balls or something equally tacky. Specify this in your lease-- no wall paint, cabinet paint, nails in crown molding or cabinets, etc. Specify that they get 1 fridge shelf, 1 freezer shelf-- whatever-- if not in the lease, do it before they sign the lease. That way they don't whine a few months later "but you get so much space and I don't." Yeah, I'm paying for this place-- I get an extra shelf. Big wow. Seriously, specific everything. Think about if you're cool with them playing loud music, TV, etc. in the common areas. You're living there. You don't want someone's boyfriend/girlfriend to move in, mooch, and live free.

Short-term tenants who bring no furniture/crap are nice and usually aren't as whiny as long term tenants. They don't have enough time to stop appreciating what they've got (nice home) and find minor annoyances (internet down, kitchen not so clean) if they're only there a few months.

Short-term tenants mean more turnover.

Long-term tenants/roommates get whiny and start to go from "wow, this place is amazing" to "omg, no one has cleaned in months ... .(whine)."

Short-term tenants I've had tend to have been more appreciative and less whiny.

I like to be able to give them 30 days notice to vacate the property with short-term leases. This goes both ways, however. I would try to figure out a way to make move out days occur only on the last day of the month. Otherwise you'll get people saying they want to move out December 7---- then you're stuck trying to find a tenant for either Dec. 15 or Jan. 1 and you loose money this way.

Also, decide if you want co-ed or just males. If the two other tenants will be sharing a bathroom, it's going to be hard to find co-eds willing to share with the opposite sex. You might want to choose roommate gender according to how many inquiries of each that you get. I get tons more guy inquiries than gals.

Require a deposit and first month's rent at lease signing. Lease signing should occur before move-in and money should be required to hold the room. You don't want to hold a room for someone then they back out at the last minute and you lose money for a month.

Overall, it's not as profitable of a situation as one might think after the added utility costs (tenants will be careless with utilities in a bills paid situation).

Plus, wear and tear on your house, expect some minor damage to occur and things to break, and be ready to deal with their noise, guests, etc. Also, nip whining in the butt from the get-go-- if they whine that your internet service is down, remind them that they're welcome to buy their own internet service at their own expense and that you're only sharing your service as a courtesy to them as is. Ditto if they whine about fridge space or whatever-- remind them of the great price/deal they're getting, while you're paying the mortgage, taxes, etc. etc. and upkeep, doing maintenance, etc. Also set expectations about temperature in the winter/summer. Utilities can be very expensive.

Other issues:

- insurance -- will your homeowner's insurance even cover it? house and contents?

- utility costs-- if you over it "bills paid," your roommate will make ZERO efforts to be energy efficient and not run up the utility bills. They'll whine when you tell them they can't set the thermostat to 80 in the middle of the winter. Split utility costs. Don't give them internet... they'll whine every time it goes down. Let them buy their own.

- liability -- have insurance, and also have a solid lease that attempts to indemnify you of any and all loss to their person and property, as well as their guests.

I ban fire pits, swimming pools, trampolines, fireworks, waterbeds, etc. Safety issues and liability concerns that my insurance has.

- wear and tear on the property

- income taxes

- zoning- does your city allow 3 unrelated persons living there?

[Anthony McDougle]

@Jon K. wow thanks for all of the advice!

I'm actually a 20-something recent grad myself, so I'm not as concerned about that kind of lifestyle, although I do know my own preferences and, like you said, I'll definitely need to make them clear up-front. I'm used to the roommate situation though (had several all throughout school).

I just wanted to see if anyone knew about how legal it is to reject applications based on those preferences. I assume there's no state law against it in NC (seems to be a fairly lenient state in terms of personal liberties and, for that matter, landlording laws) but I guess I'll have to dig a bit deeper to be sure.

Thanks again!

[Elizabeth Colegrove]

@Anthony McDougle

We did the roommate thing, rented an in law suite from a family and rented out rooms in our house. I have never seen it being an issue if you choose the candidate that best fits your desires because it is a room in your house.

I always liked craigslist because I could list my requirements and than not respond to someone that did not meet them. Than I wasn't providing any of my information to those I didn't want to have my info.

Once you decide on a candidate, I would create a "Detail" written expectation/contract on both sides. In mine, I had it range from temperature on the thermostat to visitors to cleanliness to laundry/kitchen use to number of people over night.

We talked over the phone and made it SUPER detail. When we had roommates for a year while my husband was in training. The one thing that caused "friction" was when the "oral" agreements were not followed to the same extent by both sides. Some examples, instead of them "Splitting" the time, the girl friend was ALWAYS over. After a while he wanted to stop using baby gates to prevent the dog from our area even though that was the agreement. One side always discussed when friends would be over and the other side NEVER asked.

Honestly, these are petty arguments. All in all this were the major issues and honestly it worked out really well overall. Just at the time, small things can cause friction in a good thing.Therefore I recommend you put EVERTHING in writing and discussed everything before hand.

Had we put everything we discussed in writing. It have been easier when issues did arise.

[Anthony McDougle]

@Elizabeth Colegrove hmm, that's a thought -- just don't respond if they don't fit what I'm looking for. I did notice that it's illegal to advertise what you're looking for (such as "no families/children") so how do you get them to tell you those things without asking them directly? Just put in the ad that they need to provide details in their response? Is that legal?

Like you said, though, I've had roommates for years and only ever had one issue (freshman year in the dorms when I got paired with someone without getting to meet them/ask them those questions/whatever myself)

Thanks for the iinput!

[Elizabeth Colegrove]

@Anthony McDougle

I would only respond to those that meet your qualifications.

I would write something ambiguous.

XXXXX about your house

Mid twenties male professional who socializes on the weekends and focuses on his career during the week looking for like minded individuals to rent out two of his rooms.

Than honestly wouldn't respond to anyone who doesn't fit your requirements. At first I thought this was rude. Than I saw the amount of "Spam" I received. Whole families wanting to share a tiny room. Since I don't respond to spam in my email I don't respond to spam from craigslist. Once you start talking you cannot fall off the planet. At that point you should say thanks but no thanks.