Renting Rooms to Friends

[Kiley Harris]

Hi! I just bought a house and am having my current roommate (friend) move in with me + potentially adding another roommate to rent out the third bedroom. Are there any tips you could give me in terms of writing a lease or how to best serve all parties? How much to charge her (utilities included?), do I claim extra income??

[Alejandro B Yoon]

Lease templates are free online. They are pretty simple and standard, but I would recommend reaching out to some sort of property manager and maybe paying a fee to understand how to fill them out if you need guidance. Written leases are vital in protecting your home; verbal leases are a recipe for disaster. You can make up any and all the rules and fine tenants for not following them.

Look through facebook marketplace and roomies.com to find what market rates for rooms in your area can be. Some include utilities, some don't. It is up to your discretion. I personally don't charge utilities, as many renters don't like having some sort of variable payment. However, I have many controls to prevent overuse of utilities (locked thermostat, fees for excessive electric consumption, hot water in certain hours). Although it may sound harsh, a large bill can kill cashflow for the month.

As for the extra income, talk to your CPA/a tax professional, your scenario may be different than mine.

Keep us updated as things move on!!