Renting Out a Room to a Friend? Here’s How to Do it Right

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There are many reasons someone may consider renting out a room to a friend. The friend may be temporarily relocating for work or saving up to buy a condo or home. It could be as simple as you having the available space. After all, a bit of extra income is never a bad thing. 

Renting out a room to a friend may be an excellent option for both parties. The person you’re renting to is more likely to take care of your home than a stranger, and you already have a solid rapport. That will certainly make those inevitable conversations about rent just a bit smoother. 

Still, renting to a friend isn’t without risk. Here’s everything you need to know about how to do it right so your friendship will withstand the lease — and continue going strong for years to come.

What It Means to Rent Out a Room to a Friend

If you’re even considering taking this on, have an honest conversation with yourself first. Do you even want to rent out your extra room, or are you doing it strictly because a friend needs a crash pad? Renting a room makes you a landlord, like it or not, so it’s not a decision to take lightly. 

You may be wondering how “officially” renting out a room is any different from letting a friend stay in your spare room for a week or two, and that’s a valid question. There are several responsibilities you’ll have as a landlord that you wouldn’t otherwise. 

You’ll need to:

  • Make it clear that you’ll be entering into a tenant-landlord relationship.
    No matter how long you’ve been friends with your soon-to-be tenant or how special the friendship is, it’s crucial to understand that when it comes to the lease, you’re the landlord — period. This dynamic can very easily get muddled, as it’s often difficult for a friend to view you as an authority figure. Before agreeing to anything formal, have a heart-to-heart conversation about expectations on both sides. Make it clear that you value your friendship, but you’re viewing your room rental as a business opportunity.
  • Draft a formal lease.
    In an interview, landlord Lucas Hill suggests “adding a room identifier to the property address in each lease, for each tenant.” For example, your friend’s lease agreement might have “Bedroom B, facing the backyard” added to the home address. Hall also recommends adding details like parking spaces, pets, and laundry use. Those things can make it easier on everyone and prevent uncomfortable conversations.
  • Don’t give special treatment.
    If rent is late or the lease terms are violated in any way, it’s important to take immediate action. Remember, a landlord-tenant relationship is one of business, even if that tenant is a close friend. It’s helpful to discuss your late payment policy and other possible infraction consequences from the outset so both parties know exactly what to expect. Similarly, financial advisor Ray Martin recommends always charging fair-market rent. 

Emotional and Personal Considerations 

renting out a place to a friend

Renting out a room — whether to a friend or a stranger — is a serious decision, and everyone will have several unique circumstances to consider. Here’s a list of things to think about to get you started. 

How do you to balance being a landlord vs. friend?

The best way to balance your friendship with being a landlord is to communicate with one another and keep the two relationships separate. Continue spending time together, confide in each other, and do all the things you’ve always done as friends. When it comes to the lease, treat your friend just as you would any other tenant, by requiring a lease and security deposit and enacting a late fee if rent isn’t paid on time. 

What type of friend will be renting the room?

Ask yourself what type of person your friend really is and how well you know him or her. Think beyond just how fun they are to be around or what they’re good at and ask:

  • Are they responsible? 
  • Do they carry their weight in terms of upkeep and chores?
  • Are they messy and disorganized or relatively clean? 
  • Is your friend quiet or loud?
  • Do they have good income?
  • Have they had trouble making rent at other apartments?

Some friends may need a place to stay while they save up to buy their own place or because they just started a new job and need to establish themselves, but others may have been evicted or otherwise left their previous house on bad terms. Knowing the answers to these questions can preserve your friendship and your home. 

How long you want to rent your extra room

Are you looking for a steady stream of side income, where a long-term rental makes sense, or are you hoping for a more short-term arrangement? It’s okay not to know right now, but you and your tenant should be on the same page. U.S. News & World Report recommends starting with a short three-month lease. From there, you can both determine if it’s a good fit longer-term and if it’s not, you have a built-in exit strategy.

Legal Considerations When Renting Out a Room to a Friend

Unfortunately, there are a lot of rental scams out there that even the most scrupulous landlord can fall victim to. Not that you’ll be facing a potential scam when renting out a room to a friend, but it’s still a good idea to do everything by the book and with proper legal documentation. That includes:

  • Having a formal lease.
    This is really the only way to protect yourself if things go badly and you find yourself in court. Don’t forget to include rules for things like common areas, quiet hours, and overnight guests. There are several low-cost and even free online lease templates.
  • Getting a security deposit.
    This may seem like overkill, especially for a longtime friend, but it’s better to be safe than sorry. For example, what if your friend’s dog damages the back fence? If you collected a security deposit, this is a cut-and-dry issue. If you didn’t, your friend may argue over the amount or whether it’s even his or her responsibility.
  • Defining a late policy.
    Hopefully you never need to use it, but having a clearly defined policy for what happens if rent is late can save you a ton of hassle later on. Include when rent is officially late, whether you’ll accept partial payments, and at what point the eviction process would start. 

There’s a lot to consider when deciding whether to rent a part of your home, but you don’t have to sort the process out on your own. Contact Nomadic Real Estate today to speak with one of our DC property management experts about best practices for renting out a room to a friend. 

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