How can I rent a house as two separate rental units LEGALLY?

Question

Hi,

I want to rent my house 6 brs, 2.5 bas as two rental units without converting into a duplex. My concern is how to handle utility bills between two units without a disagreement. I find that converting the property into a duplex is a lengthy and costly process, and I want to start renting it legally without going through a long process, because I've spent for rehabs and don't want to put in more for now. I will appreciate your helpful advice.

Matthew Kwan · Answer

You'll either have to convert the house into a legal duplex by getting permits from the city or you install an electrical panel split so that you can track each units/bedrooms of their power usage.

In terms of lending world and being to use the rental income, the property needs to be a legal duplex meaning title must be shown as a multifamily and not a single family in order to use the rental income separately.

@Albert Bui @Carlos Valencia

Yamin Tun · Answer

Thank you for your information, Matthew. It seems to be more beneficial after converting it into a duplex.

Yamin Tun · Answer

Thank you for your advice, Greg.

Your explanation gives me an idea of what to do right now before converting it into a duplex.

Greg M. · Answer

You're going to have a hard time finding renters that want half a house. People wanting 3 bedrooms usually have kids and I don't think that you're going too find many families that will want to live with another unknown family.

The bathroom situation is going to be a problem. One renter is going to get one bathroom for three bedrooms. That's a more difficult sell.

You're likely going to have to rent it out as individual rooms, perhaps to local college students.

Assuming you're stuck on renting it as a "duplex", you write a lease for 3 bedrooms and the named bathroom (s) for each tenant. Who gets the garage? Who gets the driveway, if anyone?

Make it clear that the other areas are common areas. However, don't be surprised when there is conflict between the tenants. I'm assuming the house has one kitchen, one living room, one garage, etc. Also, if it is not furnished, that's going to be an issue. Who gets to furnish each room? Does tenant A dictate what is on TV in the living room since it is their TV? Can tenant B have their own TV in the living room? They can have dueling TV shows!

Utilities are the least of your worries. Roll it into the rent with a lease clause that anything over $X is split 50/50 between both tenants and you don't care who uses more water...

In short, spend some money and make it a legal duplex or at least make it two separate units.