I bought a house recently in Frederick Maryland and I'm curious what kind of work this entails. I've had roommates before when renting so i'm familiar with that process. I'm more wondering about the taxes, fees, escrow accounts, things i'm legally obligated to do besides provide the tenant with a livable arrangement.
I will be living in the house so would I be able to pick someone as I would a roommate? Meaning I don't live with people who smoke, drink or use alcohol in an abusive manor. (I've been in recovery for nearly a decade so it's more than just a preference). That being the case could my lease have a clause that if any drug use is discovered or I feel that they are drinking to excess, that they can be evicted?
I'm especially curious about taxes from the extra income and how that works. That income will be used to pay for the mortgage, I've read somewhere that makes a big difference.
Any help about this would be great!
Yes you can rent rooms but you really shouldn't rent a room that doesn't have egress like a basement. For this type of situation you might try a weekly/monthly rental situation rather then a 1 year lease. You can discriminate on those points you state as an owner occupant check fair housing it has an exception for owner occupants. Not sure if your excessive drinking clause would work you would be better off just using a month to month or week to week agreement and you give notice to them when its not working out. Check your local town regulations if there are any restrictions on number of people in the home etc.
Money wise you really just need to read this site and others about the financial aspects. The income is technically reportable but if you are just getting one roommate not everything you read here will be relevant. The percentage of your house you are renting them will determine the percentage you depreciate and the percentage expenses deductible so for one roommate it is about the income that it brings in vs your expenses. Might not be much reportable.
I think more detail needs to be provided, such as is the basement finished ? Are their any real bedrooms in it with windows in case of a fire? Do you have a door that could access the basement ?
You could possibly do short term rentals. That may be lucrative depending on how close you are to downtown Frederick. That area always seems to be visit with events and all. I don’t believe the state of Maryland has an excessive drinking clause in its laws.
If you have the capital you could turn the basement into a 1 bedroom apartment with kitchenette. You could add a inexpensive pullout bed and advertise on Airbnb, Home Away and VRBO. That would definitely add some add some value to your place. Good luck in your journey.
@Dominic Courtney About 80% of the basement is finished, it's a walkout basement and has full bathroom. The remaining basement is a laundry room which is sectioned off from the living area from the rest of the basement.
Has the basement been permitted as a living space. To have a bed room in a basement requires building permits to insure the space meet building and fire codes. If it does not you could void your home insurance policy by renting it out. First chck with your building department and your insurance company before proceeding.
@Dominic Courtney I agree more details is needed and I should have phrased it you shouldn't rent a room like a basement that doesn't have egress anotherwords if it has egress like a walkout FROM the bedroom in our area it would be okay. If the walkout isn't from the bedroom that might not be ok. Short term rentals would need that too.
@Jamie Bennett Like Thomas said check for permits. A big problem with bathrooms below grade is that you need toilets that have a macerator and sometimes DIY people don't put these in. Did you have a home inspection? The inspection report should pick up some but not all deficiencies. Start by reading the home inspection for that space and checking with the town about permits, sometimes they have online permit records.
Frederick does not require any licensing to operate a rental. How you handle your taxes on a roommate situation is up to you. Some would just have the tenants pay them in cash and not sweat it.
The most important thing is to be careful who you lease to. You are allowed to discriminate against smokers and drinkers. Pop an ad up on Craigslist and you should find plenty of potential tenants. Basements in Frederick rent from $700-850. You'll get more rent if you install a small kitchenette in the space.