What to Know Before Renting Out a Room in Your House

Renting out a room in your house can be a good source of extra income but generally isn’t something you want to do on a whim. From legal and financial considerations to aesthetics, there are lots of things to think about before offering the space to a potential housemate. Let’s take a look at some things to know before renting out a room in your home, so you can make a decision about renting with all the facts at your fingertips.

Is Renting Out a Room in Your House a Good Idea?

As more older Americans have decided to age in place instead of sell their home, there’s been a growth in the number of retirees interested in renting out a room in their home. Simultaneously, younger homebuyers (who came of age in the sharing economy) are facing higher purchase costs and may also be interested in taking in a tenant to help cover monthly mortgage payments. Indeed, for some homeowners renting out a room can be a good solution to financial challenges, provided an owner is willing to give up some privacy and convenience and can find a responsible renter.

What Are Some Room Rental Options?

Renting out a room in your house doesn’t have to mean having one long-term renter, although that’s certainly one way to go. Here’s a look at a few different rental options.

Short-term Rental

One option you might consider is offering short-term rentals through a service such as Airbnb or Vrbo. This could be a good choice if you live in an in-demand tourist area or have a home in an out-of-the-way locale that might attract someone looking for a place to relax and unwind. Some travelers prefer to stay in a home setting versus a hotel. Many local governments have taken steps to regulate these rentals, so check rules before proceeding.

Recommended: 25 Things to Know When Renting Out an Airbnb

Long-term Rental

Having a housemate who rents a room in your home for an extended period of time can be one way to have a steady income. It’s a good idea to have a formal rental agreement that clearly outlines expectations of both parties.

Furnished or Unfurnished Rental

Whether to offer a furnished or unfurnished space will probably be determined by the type of renter you’re looking for. If you live in a college town, prospective renters might not have any furnishings of their own, so will likely be looking for a furnished rental. As with a short-term rental mentioned above, a furnished rental will probably be a given. A potential long-term housemate, though, may have their own furnishings to bring to the space.

Financial Considerations When You Rent a Room in Your Home

For some people, the sole reason for renting a room in their house is to have extra income. With income, though, generally comes expenses.

Track Your Return on Investment

It’s not likely that a spare room is ready for a renter without some common home repair costs. Keeping a record of how much money you spend preparing the space will help you determine if you’re coming out ahead financially. It may take some time to recoup the money you spend before you make a profit. And it’s a good idea to have a record of any ongoing expenses you incur to make sure you’re charging enough rent to offset those costs. If you make upgrades to your property in preparation for a renter, try to focus on home improvements that increase value.

Recommended: What Is Considered a Good Return on Investment?

Don’t Forget Taxes

As you think about how to rent out a room, you’ll want to consider the tax implications. It’s wise to treat renting a room in your house as a business of sorts. The IRS considers the rental of part of your property, such as a spare room, as taxable income. And as with some business expenses, certain expenses related to this type of rental can be tax deductible. Any deductions claimed must be directly related to the portion of the home that is used for rental purposes.

If you deduct general household costs such as property taxes, the deduction is generally calculated as a percentage of the home’s total square footage. You may want to consult a tax professional who can answer detailed questions about rental income.

Setting Rent and Pricing Your Room

Looking at potential repair costs and tax liability will be important as you determine how much to charge for the space you are renting out. You’ll also want to look at similar rental offerings on local real estate sites. You may think the room in your home is worth about $1,500 a month, but if other listings are priced closer to $1,200, you may have to adjust your expectations.

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Legal Considerations When Renting Out a Room in Your Home

It’s wise to look at your state’s landlord-tenant laws if you’re thinking about taking in a tenant. Some states are more landlord friendly, while other states have a wide range of protections for tenants, putting more limitations on landlords’ rights.

Even if you’re just renting out a room to an acquaintance, you’ll likely still need to adhere to regulations that apply to your situation. The Fair Housing Act protects potential tenants from discrimination except in limited circumstances. Shared housing is one of those circumstances because the government concluded that sharing one’s personal space has “significant privacy and safety considerations” in a U.S. Court of Appeals ruling.

Local Permits and Zoning Rules

Before you embark on your rental project, you’ll need to check your town’s rules around short- and long-term tenants. Some towns restrict short-term rentals, such as Airbnb, while others have rules around both short- and long-term tenants. While towns don’t typically prevent long-term rentals, they may have rent guidelines. Oregon and California have statewide regulations governing rent increases.

Other Rental Restrictions

It’s also a good idea to examine your neighborhood or homeowner’s association rules, if you have one. And if you rent your home or apartment, your lease may specify whether you’re allowed to sublease or if you’re restricted from doing so.

Your homeowner’s insurance policy may also include a clause related to leasing part of your home. Some companies may allow you to rent a room in your home without any change to your policy, while others may disallow it completely. There’s a chance you may see an increase in your premium, as well. To be on the safe side, it’s a good idea to let your insurance agent know of any change in your home’s occupancy. While you’re at it, check into what if any help you might get from your insurer if you encounter repairs related to your tenant. What is your plumbing issues coverage, for example?

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The Rental Agreement

Having a formal, written lease in place will go a long way in protecting both you and your renter. A thorough agreement might include:

•   The leasing period — it’s typical for a lease to be for one year, but if you’re renting a room to college students, you may consider a shorter lease for the duration of the school year. This section might specifically note the move-in and move-out dates.

•   Rent amount — including the due date, how you would like to collect it, and any late fees you might charge.

•   Security deposit — the amount and conditions for returning or withholding it at the end of the lease.

•   Utility costs — are they included in the monthly rent or will the renter be responsible for paying their share of the total bills?

•   Shared spaces — expectations around common areas like the kitchen, living room, and bathroom.

•   Guests — what if any restrictions do you want to put around guests, including overnight guests, and parties. Is there a maximum number of guests you will allow?

•   Pets — are they allowed or not, as well as policies about pet messes and noise.

•   Cleaning and maintenance — will the renter be responsible for regular house cleaning, including private and common areas, and home maintenance, inside or out?

•   Parking — if there is a parking space available, is it included in the rent or is it a separate charge?

Covering a wide variety of things in a rental agreement can go a long way in avoiding misunderstanding and miscommunication between you and your tenant. Having an attorney review the agreement is a good way to make sure you’re not missing important elements. Lease agreements are legally binding contracts when signed by both parties.

It’s also a good idea to do a walk-through of the room with the tenant before signing the lease and again before they move out. Any damage can be documented so it’s clear that the tenant isn’t responsible for that damage. (Some landlords require tenants to obtain rental insurance just in case.) A final walk-through can be done before the tenant moves out, during which any additional damage can be documented and accounted for.

What Are the Costs of Renting a Room in Your House?

You may encounter costs preparing a room to be rented as well as ongoing expenses related to having another person living in the home.

Preparing the Room for Rental

Safety for you and your tenant are important concerns. You may want to make sure doors and window locks are in good working order. Your tenant will likely want their room to be private, so a keyed lock on their door can go a long way to easing any concerns they might have about living in someone else’s home. Providing a combination safe for the tenant’s valuables might be a nice gesture.

Installing locks on doors to any areas you don’t want your tenant to have access to is another layer of safety you may want to consider.

Fixing loose railings, sticking doors or windows, flooring trip hazards, and doing other home maintenance that could mitigate safety issues is important in making your home and the individual room an attractive rental prospect for tenants.

You may want to make some cosmetic changes, too.

•   Painting the walls a neutral color may allow a prospective tenant to imagine their belongings in the room, instead of bright colors that might be a distraction to them. Using an easy-to-clean paint finish, like satin instead of flat, may also save you some effort after your tenant moves out.

•   If the room is carpeted, you might consider having the carpet cleaned, either professionally or using your own carpet cleaner. If the room is furnished with upholstered furniture, it can also be cleaned. Doing so will help the room look and smell fresh.

•   If you’re renting a furnished room, make sure the furnishings are clean and in good condition. Even used furniture can be presentable.

•   If the tenant will have a private bathroom space, the fixtures should be as modern as possible, but more importantly, clean and working. If the faucet drips, the bathtub leaks, or the toilet runs, make the repairs before renting the room.

•   Is the bathroom a shared space? Consider adding baskets or another type of storage for the tenant’s personal hygiene products. Making a cabinet available for their own use would be nice if there is space to do so.

•   Cleaning, decluttering, and updating other shared spaces such as the living room and kitchen can make your home look more inviting, possibly increasing your chances of finding a renter.

•   You might consider adding some storage space for a tenant’s use. It could be as simple as a stand-alone cabinet or a designated area in a basement or garage. The rental agreement could specify what isn’t allowed to be stored (e.g., no hazardous chemicals) and how much storage space is allotted. A prospective tenant might feel more comfortable storing belongings if the space is able to be secured.

Recommended: 20 Renter-Friendly House Updates

Increased Utility Costs

An extra person living in the house will likely increase utility usage. Costs for gas, electric, water, sewer, and other utilities will probably be more than you typically pay without an extra person in the house. You may want to calculate your average utility costs over the past year to have an idea what an extra person’s use might add to those costs.

Some landlords include the cost of utilities in the cost of rent, while others might require the tenant to cover a percentage of each monthly utility bill. When renting out a room in your house, it may not be convenient to have separate utility connections for a renter.

Covering the Cost of Making Your Room Rental Ready

Depending on how much work is needed, getting a room in your house ready for someone to rent could be a few hundred dollars or a few thousand dollars. You may be able to keep costs down by doing some of the work yourself, but you might want to hire a professional contractor for some tasks you feel comfortable doing on your own.

If you don’t have cash on hand to cover these costs, you could put the expenses on one or more credit cards. But because credit cards carry such high interest rates, you might want to avoid racking up a credit card bill you can’t pay down any time soon.

Financing options should be on your list of things to explore before renting out a room. Homeowners who have equity in their home might consider taking out a home equity financing such as a home equity line of credit (HELOC). These secured loans use your house as collateral. The application process can be lengthy and typically requires an appraisal of your home. Also, you risk losing your home if you don’t repay a home equity loan.

Another option is to apply for a personal loan. Personal loans are typically unsecured loans, which means you don’t have to put up any collateral to qualify for them. Many personal loans also have fixed interest rates. Home improvement loans are specifically designed for property upkeep and enhancements. For qualified borrowers, personal loans are usually approved and funded more quickly than home-equity-based financing, another plus.

Tips for Finding and Managing a Good Tenant

Finding the right person to share your personal space may take some time. You likely have certain things you’re looking for in a potential renter along with other things that might be deal-breakers. Maybe you’re looking for a non-smoker who has a solid rental history. A rental application is one tool that can help you find a housemate that fits the bill.

You may want to run a credit check and a background check on any applicants who are truly interested in renting a room in your house. These checks generally have fees associated with them, and it’s a good idea to specify in the rental application who will be responsible for paying for a credit and/or background check.

The applicant’s permission is required to run either of these checks and they are entitled to know if the results of either a credit or background check resulted in the denial of their rental application.

The Takeaway

From assessing your personal comfort level for sharing your space to formulating a rental agreement and making plans to pay for home improvements, there are lots of to-dos before you’re ready to rent out a room in your house. You can likely more than make up for upfront costs in rental income, but in the short term you’ll need to figure out a financing plan for your home repairs. A personal loan could provide the short-term infusion of cash you need to get a rental business off the ground.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Is renting out a room considered taxable income?

The money you receive from renting out a room is taxable income, according to IRS regulations. For this reason, it’s important to track both your revenue and your expenses associated with any rental property. Work with a tax advisor to make sure you capture any deductions you are eligible for, including depreciation and repair costs.

Do you need a lease agreement when renting a room?

Whether or not you need a formal lease agreement when renting out a room in your home will depend on your local or state regulations. But even if you aren’t required to have a lease when you rent out a room, it’s a good idea to have a legal document spelling out each party’s responsibilities in the arrangement. This protects you and your tenant and helps set clear ground rules for your landlord-tenant relationship.

How do you determine rent for a room in your house?

To set the rent for a room in your home, you’ll need to weigh your expenses associated with the home’s upkeep as well as the rental price of similar rooms in your local market. Ideally you will come away with a figure that is on par with market rates and that will cover your costs and allow for you to make some income on the deal.

Can you rent a room without being a landlord?

A landlord is defined as someone who rents out a room in a property that they own. So even if you are renting out a bedroom in a home where you live, you would be considered a landlord. If you are a renter and you sublease your room to someone else, you might not technically be a landlord (that would be the owner of the property with whom you signed a lease). But you’ll likely have obligations to the subtenant as well as to the building’s owner.

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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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This article is not intended to be legal advice. Please consult an attorney for advice.

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