Live in tenants: pros and cons.

Gilgamel · Dec 26, 2014

Alright, so here's my situation. My home is roughly 1900 square feet. Currently my younger sister is living with me while she finishes school, but she is moving out shortly. So I have this bigass house and an $800 mortgage that I'm not really using the entirety of. I'm thinking about renting out what was essentially her side of the house to someone to offset some of my mortgage costs. The tenant would get three pretty sizable rooms and a bathroom to themselves, with their own entrance; basically half the house. I'm trying to figure out if the headache of a tenant would be worth the offset of I'm guessing half the mortgage cost. I would have to factor in increased utility costs, potential rewrite of the homeowner's policy, etc. If I just chucked that extra $400-$500 at the mortgage it would cut a sizable chunk off my 15 year term, but I'm sure costs are lurking I'm not factoring in.

It seems like a reasonable decision, but I know a lot of people have bad experiences. Anyone gone down this road before? I currently live in a small college town with high(to me, in comparison to my Knoxville rates when I was in college) rental prices.

Crone · Dec 26, 2014

Going to depend entirely on how seperate they really can be, and if you can deal with that, and the tenants you get. Get a few college kids in there that party all the time and it will suck. Get a couple nerds in there that play video games all day, then it might be alright. haha!

Also, don't base your rent on your mortgage. That's dumb. If the going rate for 3 bed, 1 bath is $1000 a month, then charge that. Don't give a discount just because it's not costing you that much.

Nester · Dec 26, 2014

No way would I do that for $400, $800-$1000 maybe depending how picky you are and how you value your own space.

As crone said, base it on market values not your mortgage (which pseams very reasonable)

Commander Vimeseh_sl · Dec 26, 2014

Going to third charging around the market. You can hit the low end if you really want to get someone in fast. Do your homework before you rent though. Both about perspective tenants and what legal obligations/rights you have in regards to being a landlord/renter. You want to know how things can shakeout if you get some really bad tenants and want to boot their asses out.

Vaclav · Dec 27, 2014

Also it sounds like you'd be sharing a kitchen? Lots of potential nightmares there - be aware.

Troll_sl · Dec 27, 2014

Currently in this situation on the renter side. Works great for me as I'm going back to school and am basically a hermit and don't have the inclination or time to interact much with my landlords or fellow tenants. I'm either in my room studying, or typically not at the house.

Some things to consider: Utility costs, kitchen/bathroom space, "common" supplies, cleaning, parking space, pet policies, smoking/drinking/drugs, visitors, sociability...

Kedwyn · Dec 27, 2014

Not saying it can't work but familiarize yourself with the eviction process of your state in the likely event it doesn't. Even best of friends can have issues living together and a stranger is all kinds of potential dice roll.

Kuriin · Dec 27, 2014

My hubbie and I rented our downstairs to two tenants who were there for 11 years -- had to evict them because I moved in. They were not happy -- and they were getting a very good deal (going rate around here is 3-4k/month and they were getting charged 1.5k). Brother and I moved in and we upped the rent to help pay the mortgage as well as renovations. Now, we're on AirBNB charging $250/night, $100 cleaning fee, and an additional $50/night for each guest after 3 guests.

As Vaclav mentioned, sharing a kitchen will have its share of problems. Be very aware of that. You may want to bite the bullet and see if there would be a way to completely separate them and put in a cheap kitchen. You will have more potential for income and ultimately, less headaches.

Depending on where you live, renting could also have its share of problems, as well, such as contracts and evicting people. If for instance you lived in San Francisco, evicting someone would be incredibly difficult and be time consuming AS WELL as financially consuming. Do your homework of the renter's association for your area, make a good contract that states everything up front. Rules, etc.

Woefully Inept · Dec 27, 2014

After witnessing the bullshit my grandmother went through renting her first floor apartment out to friends, family, and friends of family do NOT rent to anyone you know and want to keep knowing. It isn't worth the drama and hassle.

BrutulTM · Dec 29, 2014

Sounds like more trouble than it's worth to me when you already have a cheap mortgage. Why not rent out the whole place for $1200 a month and get yourself another house?

Khane · Dec 29, 2014

Throwing an extra $500/mo at an $800/mo mortgage on a 15 year term would mean you'd pay off the house in like 4 years. Seems like a no brainer to go ahead and do it to me.

I am a landlord so I am not nearly as risk averse to this as many other people so take that into consideration. But if you do go ahead and fill it with a tenant make sure you do a real, legitimate background and credit check through an accredited agency. It will cost between $50 and $100. I always charge an application fee that covers this cost. It lets me know the prospective tenants are serious about wanting to rent and allows me to check them out at no cost to me.

McCheese · Dec 29, 2014

I wouldn't want to do it, but my brother seems to be in a similar position as the OP: big house with a modest mortgage in a college town, renting out the finished basement (2 bedrooms, 1 bathroom, small living room and separate entrance) and use of the single, common kitchen. However, being in a college town, he is charging absurd prices (1000/person, which includes utilities) and he's never had trouble finding tenants. In fact, demand is so high that he has his pick of them. For the small annoyance of occasionally dealing with his tenants in the kitchen, he is making enough money to fully cover his mortgage, utilities, internet/cable, and have some left over to pocket.

If you're in a college town and you really want to get some extra money, you could probably stick 3 college kids in there and make a fortune.

Kuriin · Dec 29, 2014

Brutul makes a good point. If you are financially stable and in a good location with lots of potential rent income, it might be better to just rent out the entire house for a large amount and buy another place. Have a permanent income property.

Khane · Dec 29, 2014

That really depends on the market. Around here single family homes do not rent well in comparison to mortgage prices and having a roommate is a lot more cost effective than renting out the entirety of a place. For instance I could probably rent the apartment I'm in (live in second floor apartment of a duplex I own) for 1100 a month if I moved out. But I can easily charge 700 a month for a roommate, and I have two extra rooms. If I wanted to rent both out 700 each is feasible, 600 is more likely. That's more money AND I don't have to pay for another place. Of course that's a lot less private so that's the trade off.

Of course if you can cover the mortgage and make a decent profit it's something to consider. I wouldn't do it unless it was at least a 50% profit

Lejina · Dec 29, 2014

I own a three bedroom house. Going rates around here for a room is 800, up to around 1300 if it includes a private bathroom and kitchenette.

Problem is most renters in the area are oil field workers with often little regards for the house. I went for a Filipino foreign worker. 800 is out of her budget but I let her have it for 600. She's quiet as a mouse, often clean more the house than i do and even shovel the driveway on occasion even tho she doesn't own a car.

My point being, losing some dollars on rent fees can be worth it to get the right renter.

Vaclav · Dec 30, 2014

You're Canadian though, I can't imagine ANY renter being that polite down here.

Antarius · Dec 31, 2014

I'm a renter in someone's house. I pay 300/month, that includes decent internet connection and all utilities (2 bathrooms shared between 3 people).. I realize that I'm getting an insane deal. Everyone wants to shit on me because I make "enough" money to live alone, but I prefer roommates, and 300/month is just INSANE. Even for Ohio.

Heylel · Dec 31, 2014

We charge a friend $100 a week for a bedroom and use of shared common areas, but she's home maybe 1 day at week at most. Over the holidays, it's been since before Thanksgiving since she's slept here. She mostly stays with her boyfriend.

It's worth it for a rainy day fund. There was a period of time where the family she was nannying for had her taking the kids out during the day and she would drop in for an hour or two, and that kinda sucked. I hadn't signed up for dealing with someone else's kids, and I worried about the liability implications if one of the kids got hurt. Glad that's over with.

I've just pretty much always had roommates, so my fiance and I don't mind it.

Khane · Dec 31, 2014

Haha, looks like someone really hates the fact I charge an application fee to rent my apartments.

Wuyley_sl · Dec 31, 2014

As long as the application fee included a background check and the basic legal files needed I can see that as being acceptable. Just charging a fee and then nickle and dimeing on top of that is bullshit. Not saying you do that but you get my point.

Live in tenants: pros and cons.

A Man Chooses....

Bronze Baronet of the Realm

Vyemm Raider

shitlord

Bronze Baronet of the Realm

shitlord

Silver Squire

Just a Nurse

Karazhan Raider

Good, bad, I'm the guy with the gun.

Got something right about marriage

SW: Sean, CW: Crone, GW: Wizardhawk

Just a Nurse

Got something right about marriage

(╯°□°）╯︵ ┻━┻

Bronze Baronet of the Realm

Lord Nagafen Raider

Trakanon Raider

Got something right about marriage

shitlord