House Hacking By Renting Rooms

House Hacking By Renting Rooms

House Hacking By Renting Rooms

House hacking by renting out extra bedrooms can be a very lucrative way to build equity and help cover your mortgage payments.

While some house hackers prefer to find multi-unit properties to rent, single-family homes are often more accessible, especially for first-time homebuyers. In addition to being less expensive in general, they often also require lower down payments, and many neighborhoods in the United States have them in abundance.

The extra work associated with renting by the room can be especially troublesome for those interested in house hacking as a means of earning passive income. However, many homeowners have found it profitable and well-worth the hassle. 

How Do You Keep Your House Secure When Renting Rooms? 

In order to keep your house secure when renting rooms, you’ll want to invest a bit of time and money into preventative measures, including screening potential roommates and setting up security where appropriate.

While doing so might cost a bit of time and money up front, it also ensures you won’t lose money for avoidable reasons in the future.

Screen Potential Roommates 

Make sure you have a good idea of who you’re renting to by carefully screening potential roommates with an online service like TransUnion SmartMove.

Screening services will help you run a background check on your potential tenants, check their credit score, and view reports on any potential criminal or eviction history.

With TransUnion SmartMove specifically, you have have the potential tenant pay the screening fee directly, so you don’t have to come out of pocket at all.

In addition to screening a tenant, you may want to set up in-person or video interviews with potential housemates.

You are likely going to be sharing common areas with your tenant(s), so it’s best to make sure you are on the same page and that things are going to be a good fit for everyone.

Install Security 

It’s also a good idea to install security measures to keep your property safe and give you some peace of mind.

For example, you might want to install locks on your bedroom door or any other private rooms that you don’t want your tenants to be able to access. 

You might also install security cameras in areas of the house tenants shouldn’t need to go. That might include hallways leading up to other bedrooms, or areas of the house containing valuable objects.

If anything goes missing or you have an issue with property damage, all you have to do is review the footage and find proof of what’s going on in your home.

Is It More Profitable to Rent By the Room?

Yes, it’s often more profitable to rent out a home by the room rather than renting it out as one unit. However, it might be more difficult to manage as you will likely have greater tenant turnover when renting by the room.

house hacking room for rent

Depending on the area where you are looking to house hack, you may find that temporary one-room housing is in high demand among college students and young adults. 

At the same time, you might be able to rent out your extra rooms on a shorter term basis with something like AirBnB. Turnover will be high, but your income might be significantly higher.

Just make sure your local area allows AirBnB rentals, as many cities have enacted harsh restrictions against short-term rentals.

Be Prepared For Additional Expenses

House hacking by renting rooms can be very lucrative for first-time homebuyers and experienced investors alike.

However, there are some additional expenses that come along with opening up your home to multiple tenants, and you’ll want to stay prepared by keeping some extra cash in reserve. 

For example, more tenants will generally mean higher utility expenses. You might not legally be allowed to pass this cost off to your tenants unless you can provide them with an accurate meter reading of their consumption, which is difficult to do when you’re dealing with shared space in a single-family residence. 

Most of your potential tenants will be interested in your listings because they are looking for a short-term stay or they are looking to save on housing costs by renting out a single room in a shared residence. In this case, they might also prefer a room that already comes furnished.

And furniture can be expensive. You’ll have to replace it from time to time, so prepare your budget accordingly.

If you’re renting out extra bedrooms and offering shared access to common spaces like the kitchen and living room, you might have to pay for greater maintenance expenses since wear and tear on appliances might be greater.

Generally speaking, the greater the tenant turnover, the more you’ll have to spend to maintain the unit.

But it can be well worth it for greater income potential.

Find a Good Deal

Above all, in order to make your house hack as profitable as possible, try and find the best deal that you can before buying.

Get to know the area that you’re interested in and research several different properties in the neighborhood. This way, you should be able to identify a good deal when one comes along. 

A good real estate agent may also be able to help you find a good off-market deal.

And you can often earn a greater return long term by opening up your search to fixer-uppers and completing effective rehabs, but your initial investment might be significantly greater.

Whatever the case, run your numbers carefully and don’t pull the trigger if the deal doesn’t make sense!

Is Renting by the Room Worth It? 

key for rented room

Even though renting out your extra bedrooms means sacrificing a bit of space and privacy, it can be a great way to help cover your mortgage payments while you build equity in your home. 

What’s more, a good deal in the right neighborhood combined with good house hacking practices can sometimes allow you to live for practically nothing, or even for free. 

If you finance the property with an owner-occupied loan, it is also a great way to make some extra cash for the first year or so when you will likely be required to occupy the home as your primary residence.

You can always consider renting out the entire home as one unit once you fulfill your lender’s occupancy requirements or you’re ready to move. 

That said, renting to more tenants usually requires that you spend more time on the managing side of the operation. Handling calls, complaints, and maintenance requests can be a lot of work, as with finding and screening new tenants.

For more on this potentially lucrative strategy, check out this house hacking guide to renting out extra bedrooms in a single-family home.

This website, and any communication stemming from it, should not be taken as financial or legal advice for your specific situation. Consult directly with a licensed financial professional should you need investment advice and consult directly with a licensed attorney directly should you need legal advice. Assume all links are affiliate links. I am an Amazon affiliate.

Jack Duffley

Jack Duffley is a real estate investor and attorney based in Houston, TX.

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