Renting out rooms (house hack) what kind of contract?

Question

If I were to rent out 2 of the 3 bedrooms I have in a place I own, how would I cover myself (legally) with a contract. Do I draft up a sub-lease and have them have a security deposit and what not just like any other rentals? I feel like there is a way to do this right, not just a verbal agreement but something that is legally binding where you can evict them if you run into issues- but it is a grey area since they'll be renting out a "room" and not the whole house. I'm essentially looking to house hack.

P.J. Bremner · Answer

@Peter Kim

I've been doing this type of setup for nearly 5 years with several houses.  I used only month to month lease, $300 deposit per room.  Month to month is good because if the tenant sucks, you don't evict but simply don't renew their lease.  The way I pitch it to other people is, "I want you to make sure you're happy here, so I will have to work hard every month to make sure you stay here a long time.  If I have you sign a year lease, I don't have to work hard because you're trapped for a full year."  It's a great selling point for most people, even though your real motives are self-serving (being able to get them out without evicting).  I keep my deposit small because most people renting a room don't have that much cash, so I want to get the most people applying for the room and pick the best of the bunch.

Hope that helps, I'll be more than happy to share renting rooms if you have further questions.  Send me a colleague request and hit me up anytime you wish.  Best of luck!

*Edit* Very important tip!!!  It always worked out best for me to tell my tenants that I was the property manager.  The first 3 homes I bought and did this, it worked out just fine.  When I moved out, it was even better.  If you're the owner, then you have the power to make decisions.  More importantly, if you're the one making the decisions and the tenant doesn't like the decision, then you're a #### and the living situation can get real awkward real fast lol.  Just have a backup story ready.  Nobody even checked the title of the homes to see who the owner was, but if they ever did, I would tell them that I was part of the investment using my credit to help out and do the management, but ultimately my boss gave the money and had the control.  EzPz.

Kathy Henley · Answer

@Peter Kim Whoa there! A lease is the guide to the obligations of the landlord and the tenant. A handshake might be an agreement, but it doesn't spell out the promises made to one another. How will you share the common areas?  What if the person is a slob? Write a clear lease with guide lines and deadlines. One must know how 'break-up' when things don't go well.

First, read the local laws on renting.  The eviction process will be laid out in the local rules. Second, those that are sharing a home with you must agree to your house rules. It is called a lease.

Peter K. · Answer

@P.J. Bremner Thanks, helps a lot.