How do I get tenants to pay for my mortgage and utilities ?

Question

I live in a one family house.  I live in the basement; 2bd 2bath.  My mom use to live upstairs.  My mom moved to florida so there is a 3 bd 1 bath vacant for the past 6 yrs. Ive been thinking of renting it for a while.  I know to look at other apartments in the area and get a ball park on what to charge for rent.  But if I live downstairs how are the house expenses divided?  I would like them to pay everything so i can live rent and utility free.   My mortgage is $1500 , Utilities are say $800 =$2300

How do i go about having my tenants pay my mortgage and utilities when they know that they are also paying for my use of electricity, gas and water too?

I was also thinking about say charging $2500 and having them pay utilities as well.

Side note ----There is a rental on my block that started asking for $2600  3bd 1 bath  2 months later they are now asking $2200  range in 3 block radius is $2200 - $2700

How do i set this up?  Can this be done?

Adam Bush · Answer

In terms of the rental income I believe it is taxed at a lower rate than W2 employee income.

Also, a question of my own for anyone who knows, would the rental income taxed be based off the full amount the tenants pay or just the cash flow?

Amy Maldonado · Answer

@ Anthony wick. My mortgage is really $1500. The electricity bill this month came out to $168.52. Only one AC. My gas bill this month was $40.91.

Mom says the bills are so low because it’s only me. If the house was full it would definitely go up. She says when my brother lived with his family and child and her and her husband it was much more ..... of course. So I guesstimated the bills ...electric , gas , water and cable.  at $200 a pop which came out to $800     In summer mom says electricity was $350-$400

I looked at Zillow and my area rents for a 3/1 are really from $2200 - $2700. Zillow estimates . These are the actual asking rents.  Like I mentioned in my earlier post .... a house on my block on the corner is asking $2200 3/1.

Thx

I really appreciate all the feedback

Is there a go to book that’s has all information I need    That I can just go by ?

Amy Maldonado · Answer

Great idea Jennifer T.  Thx

Anthony Wick · Answer

@Amy Maldonado

First, are those real numbers? Utilities can’t possibly be $800 a month. Second, I think you’re focusing on the wrong thing. Find out what the local rents are, and what the tenant receives for said rent. I’m assuming there is not separate meters for the house and basement where you live. If local rents are $2,400 with utilities included, them that’s the market. Having utilities in your name ensures they get paid as well. Again, find out what your area can bear for rents and see if that will work for you.

Jennifer T. · Answer

Yes, you will need to pay income taxes on rental income, even when it is for your personal home.  However, there will also be deductions you can make that go along with that.  I'd suggest speaking to an accountant about it, so you have a good general idea of how it will affect your income taxes.

Amy Maldonado · Answer

Thx.  Everyone.  I was hoping I didn’t have to share.  Simply because I’m alone and wouldn’t waste much on utilities.    But if 4 people move in let’s say I’ll be paying more out of my own pocket because of their use of utilities.   Does that make sense.   @ Kris L.  It’s shared. Single family home.  No separate nothing.

Will I have to pay more taxes if I rent ?  That’s considered income isn’t it

If I do decide to get my basement apartment metered , is that the smart thing to do ? Or will I pay more In taxes because of it ? Ball park how much to do that    Split a SFH

thx

Amy

Brian Van Pelt · Answer

@Amy MaldonadoCall a local realtor and ask for 3/1 apartment rental rate in your area. Say a 1/4 to 1/2 mile radius. Charge the average depending on the condition of your unit. I would also consider having the agent MLS list your unit at least for the first year so you can see how it's done.Also consider having the utilities split.

Bryan Devitt · Answer

Turn your unit into a legal and separate apt and then you can charge whatever someone is willing to pay. It doesn't matter if you own the house outright or have a mortgage for $3k a month, someone is only willing to pay what it is worth to them.

Kris L. · Answer

@Amy Maldonado are the units separately metered for utilities or is it shared?  If separated, it’s easy.  If not a 50/50 split would be the most logical.  As far as the mortgage, charge market rent.  If that covered the mortgage, great.  If not, you probably can’t try to overcharge to make it up as you would instead have a vacancy.