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How to Work Out How Much Rent to Charge for a Room

Written by Posted On Wednesday, 11 November 2020 20:57
How to Work Out How Much Rent to Charge for a Room Pixabay, CC0 License

Whether you’re an empty-nester or if you’ve simply got more house than you can occupy on your own, it’s fairly simple to make some extra cash by renting out a room in your house. Before you get started, double-check with your homeowner's association and take a look at your mortgage terms to make sure that there are no clauses that prohibit renting rooms to others.

Once you’ve checked to ensure that you can in fact make money by bringing in borders, it’s time for the next step: Deciding how much rent to charge for a room in your home.

Choose a space to rent

Believe it or not, different spaces carry different values based on size and amenities. As a general rule, rooms or mini-apartments with their own bathroom and perhaps even their own entrance command higher prices, so consider renting out your master or converting your basement if your main motivation is making the highest amount possible.

Decide what’s included

People who rent rooms in private homes are just like others in the rental market: They want a comfortable space that offers as many amenities as possible for their budget. You may attract potential renters faster if you include:

  • Safe parking (preferably covered)
  • A private bathroom
  • Utilities
  • Access to “extras” such as laundry facilities, outdoor recreation areas, etc.

Figure out what utilities and other upkeep will cost per year per person, and factor that into your final rental price.

Check the local rental market and price your room accordingly

Check to see how much your competition charges for rent, and be sure that you’re looking at similarly sized spaces with similar amenities. Here are some examples:

New York City: $700 - $1,500 

NYC room rentals are unique, with prices being higher in areas with greater demand. You’ll be able to charge a bit more for a nicely furnished room in a house or apartment with a kitchen. Rooms with access to a private bath typically fetch even higher prices.

Northern Virginia: $500 - $1,000 

The closer to desirable DC transit locations, great shopping, and dining, the more you can charge for a room rental in Northern Virginia. However, local Northern Virginia realtor Darren Robertson tells us, “Rental prices can vary widely across Northern Virginia; for condos in Fairfax you can expect to pay around $2,000 a month, in Newport News and Richmond the average rent is about half that, at $1,000 a month. The same principle applies to room rental prices.” Amenities matter here as much as they do in other locations. 

Florida Keys: $800 - $2,000

Live, work, and play around the Florida Keys, and make a little bit of extra while you’re at it! Take a look at Florida Keys real estate prices when you’re deciding how much rent to charge for a room here. Costs are typically higher than those found in less desirable parts of Florida, and room rental prices tend to reflect this factor. 

Texas: $500-$700 

Housing prices remain relatively low in Texas, meaning would-be landlords in the Lone Star State will typically find themselves charging less for a room than those in the Big Apple. Many of these rentals come with extras including utilities and a private bath, so renters generally enjoy a good value. 

It’s worth noting that these are only a few local averages. Once you’ve decided which room you’d like to rent, take a look at your local listings and use them as a guide when determining how much to charge. 

Finding tenants

Since you’ll be renting a room in your home, it’s likely that you’re going to be sharing common spaces with your tenant, unless they’ve got separate living space and a separate entrance, i.e., if you’ve transformed part of your home into a separate apartment.

Depending on your location, it may be very easy to find a tenant to rent your room. Social media outlets, local papers, and online services of all kinds can help you find a suitable tenant. You might even wish to work with a realtor who can help you find the ideal match.

Not only do you need to find someone who’s capable of paying the rent, but you’ll also want to screen potential applicants by looking into their credit scores and criminal background, where it’s permitted. There are a number of helpful screening services designed just for landlords, and using one of them can help ensure that you’re bringing someone trustworthy into your home.

Final thoughts (and a little more advice)

Remember, you’re officially a landlord once tenant(s) move in. Check your local laws to make sure that you’re in compliance every step of the way, define your boundaries as you show the room you have for rent, and decide whether you’ll collect rent weekly or monthly. Remember to document your income and expenses since the money you make from renting a room in your house is tax-deductible.

There’s a lot to remember as you prepare your space for your first tenant. Knowing how much to charge is an important part of the puzzle, though, and will put you firmly on the road to success with renting a room in your home.

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David Trounce

David is a freelance writer and publisher living in New South Wales, Australia. David writes on a wide range of topics affecting the property, e-commerce and real estate investment market.

realestate.com.au/

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