Renting out a room to cover your mortgage payment is a very financially savvy technique that could save your financial life. If you're in a tight financial spot and own your home, why not use the assets you have (bedrooms) to offset your liabilities (not enough money)?
Renting out a room is much easier than people think, and it really can make a huge difference in your personal finances. This is especially true if you're having a hard time covering your mortgage payment every month. Regardless of how you found yourself in the position to where you're considering adding a room mate to your household, renting out an extra bedroom can add much-needed cash into your checking account.
You might even be surprised to learn that renting out a room or two can actually offset your mortgage all together. And you might be even more surprised to learn that many of the world's most financially adept individuals rent out rooms - even if they aren't financially desperate. Why? Because people are willing to pay decent money for a roof over their head, and if you've got the extra real estate (i.e. bedrooms and bathrooms), it'd be crazy not to capitalize off the idea.
Why Renting Out A Room Can Help You Cover Your Mortgage Payment
A mortgage payment is almost always the biggest monthly expense any home owner faces, so it's no surprise that when finances run dry, it's also the biggest burden. Imagine if you could knock several hundred dollars off that monthly mortgage amount? That's exactly what you'll do by renting out a spare bedroom.
And unlike other ways to find emergency cash, renting a room includes residual income. That means you can count on that money every month (so long as the room is rented and your tenant pays up). Think about that for a minute - no other fast-cash method offers this benefit. Selling stuff on eBay, pawning your jewelry and other techniques only pay you once. Then where are you at next month? Exactly, the same spot you're in now.
How To Find Someone To Rent Out A Room
Your local newspaper and online classified websites are the most common place to find room mates, but personally I find it's best to "put the word out" amongst your local friends and family first. On the off chance that one of them is looking for a short or long-term place to stay, then you can avoid the headaches of bringing in somebody you don't know very well.
That's not to say that previously unknown people make bad room mates. In most cases it's quite the opposite. Many life-long friendships are forged through room rentals. But there is an element of uncertainty any time you take a chance on someone you don't know personally. You'll skip all of that if you can find a friend or family member to take your room. Or possibly, a friend or family member will know somebody looking for a room - which means they'll come with "references." That should help alleviate most concerns.
How Much Should You Charge Someone To Rent A Room?
Check out your local newspaper and online classified websites (such as Craigslist) and see what other rooms are going for. Be sure to compare apples to apples. What I mean is: Make sure to compare your room to similar ones, in terms of size, neighborhood and amenities.
Also, be sure to note what those rooms include. Some land lords include utilities in the monthly payment, whereas others will add a share of the monthly utilities once the bills come in each month.
If you've got the time, I'd strongly suggest starting with a higher price, and then gradually adjusting it down until someone bites. That way you'll never feel as though you left money on the table. Of course if you need money now, you won't have this luxury. In that instance I'd recommend finding the average advertised price of similar rooms and start there.
If you price your room right, you shouldn't have any trouble finding well-qualified tenants.
Which leads me to another point: Don't purposely undercut the competition to fill your room quickly. I'm not saying this from a moral/ethical business standpoint, but from the "I don't want you to get stabbed" standpoint. It'd a sad fact that there are some less-than-desirable people in the world, ranging from criminals to folks who simply don't pay their bills. And by offering the best price in town, you'll likely attract this crowd. It's not worth renting out your room to cover your mortgage payment if the person you're renting it to never pays you, does it?
Alternatives To Renting Out A Room
If you're not sold on the idea of renting out a part of your home to another person, here are just a few ideas on how to make your monthly mortgage payments a little more comfortable:
Refinance Your Home Mortgage. Changing the terms of your mortgage could take the monthly pressure off your checkbook, particularly if you refinance to a lower rate and have already made a substantial dent in your mortgage principle. Just be aware that many mortgage brokers charge a Closing Costs fee, which often costs several thousand dollars up front.
Pick Up A Second Job. If your income isn't matching up with your expenses, maybe it's time to add an entirely new paycheck. You'd be surprised at how many places are looking for part-time employees, and many of them pay very well. In many instances you can find a second job that works around your main job.
Get Rid Of A Monthly Expense. After the mortgage, the next biggest monthly expense most people face is a car payment. If you can alleviate this expense, do it. Maybe that means trading down to a lower-priced vehicle? Or perhaps you can refinance your remaining balance to better terms (i.e. a lower payment). Another common area of expense is food and entertainment. Think about what you spend money on, and how you can cut back. Maybe instead of a $5 gourmet coffee every day, you can cut back to one every other day? Or renting movies instead of watching them at the theater every weekend?
But even if you can make these adjustments, renting out a room is a great way to add money to your bottom line every month. Like I said earlier, many people who aren't in financial straights still rent their rooms out because of the amazing income it offers.