What are the pros and cons of renting out a part of your primary residence?

Question

I'm thinking that this may be a good way for me to start in r/e.

Kyia M. · Answer

Thank you all for your responses! @Silvestre  Madrid, I think it would be good because It seems like the easiest way to get started as my funds are really low. and by really low I mean non existant. :-)

@Kanise Kelley and Steven Walter My house does have a separate entrance. There's actually 2 separate entrances to that part of the house as one of them was temporarily sealed.   I would like to eventually move elsewhere and turn the home into 2 units. a basement apartment and the upper 2 stories I would like to remain the same (3 bedrooms) to accommodate a single family.  Privacy is very important and so is being able to walk around "scantily clad" LOL.  I wouldn't have considered this if there was not a separate entrance to the home.

Mehran Kamari Thanks for mentioning a lot of things that I hadn't thought about such as screenings, bookkeeping and maintenance requests. . .This is all good stuff!

Thanks again for your input. :-)

Mehran K. · Answer

Kyia M.
PROS:
Rental Income
Learning experience as a landlord (Getting the place rent ready, advertising, showings, leases, SCREENING, move-ins, collecting rent, handling maintenance requests, move outs, bookkeeping, taxes, etc!)
RE Investment Tax benefits on the rental portion of your home (either by square footage or room count).

CONS:
Less Privacy/More Noise
May deal with bad tenants
Rental income won't be counted by conventional lenders as income towards your DTI unless your home is a multi-unit (rented out rooms don't count)

Steven Walter · Answer

A lot will depend on your temperament. Before I met my wife, she always had room mates, but she's the ultimate extrovert. I tried it once and was lucky I didn't end up either in jail or hauled away to a rubber room.

Kanise Kelley · Answer

Kyia M. do you have a house with a separate basement entrance? that would probably be ideal.

Pros:
-cut your expenses in half and save money
-use the extra money to pay off debt or use towards REI
-if you get a nice person, a roomie can be fun and make you more comfortable at night (for me anyway lol)
-you can keep an eye on the person
-you get a bit of landlording experiences because the roommate holds you accountable for timely repairs and maintenance

Cons:
-if you decide to claim it on your taxes, they count the extra money as income so put aside a portion to pay back
-a bad roomie can be a nightmare as you can imagine
-you can't walk around naked (maybe that's just important to me lol)
-they may have unsavory friends and guest over

like Silvestre said make sure to thoroughly screen everyone. A graduate student or military person may be ideal. And I would shy away from renting to friends.

hope everything works out for you ^_^

Kanise Kelley · Answer

Kyia M. yes of course, not "if" but "when" you put it on your taxes

Mehran K. · Answer

Welcome to BiggerPockets Kyia M.!

I'll respond to this in detail sometime tomorrow(heading out to work right now). I currently rent out my two spare rooms and can share some of my experience/views on it.

I'd just like to add that there is no decision to be made about whether you claim the income on your taxes or not. Kanise Kelley,not claiming the income is illegal!

Silvestre M. · Answer

Hi Kyia M. welcome! May I ask why you think this can give you the start you need? I'm assuming to reduce expenses & save capital? Obviously you'll also gain some land lording experience in the process, if that's the route you want to take. I've actually done this myself but it really depends on a number of things. I was in a situation where I was working 12-14hrs 7 days a week so I was never home, and there was never any conflict. It also helped that it was a co worker of mine so I knew them already. All in all it was smooth for me but I'm sure there's some horror stories out there. I'm no expert in this area but these are just my two cents.

Pros
 Reduce expenses
 Gain land lording experience

Cons
 Hey who ate my lunchables!?
 Having to evict someone that is under the same roof..things can get awkward/scary/weird fast!
 
 If you know someone that is looking for a place that would be ideal..but if not you can advertise online and screen screen screen! I'd like to think the screening process is even more thorough than if you were renting out another property, only because this person will be under the same roof! Google Voice is your friend so setup a phone number on there, which in turn you can use to advertise on craiglist etc. Good luck!

What are the pros and cons of renting out a part of your primary residence?

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