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I’ll share my thoughts on how renting out a room in my townhouse for the first time provided me with some extra cash and how the extra person, ie roommate affected my expenses.  My expenses may not fit everyone’s current scenario, but it this should get your thought process going on renting a room will make you money.

If I were living by myself in my townhouse, I would have the following expenses:

  • Mortgage
  • Home Insurance
  • Association fees
  • Cable/Internet
  • Electric Bill (Heat/AC)
  • Public Utilities (sewer/water)

When my first roommate moved in, I had him pay me a fixed amount for rent for the bedroom he was renting. Cha-Ching!

This provided me with extra income to help pay  the aforementioned expenses.  I know some of you may be wondering why I charged a flat monthly rate versus splitting the utility usage.  I’ll touch on that later.  Let me explain the net effect on my living expenses by renting out my spare room.

FIXED EXPENSES

With fixed expenses such as mortgage, cable, insurance, and association fees, it doesn’t matter if I am living by myself or living with a roommate.  I will always have these expenses as long as I am living in my townhouse.  I know, I don’t have to have cable or Internet, but it’s just convenient to have these things.

VARIABLE EXPENSES

I want to note that my townhouse is about 1,500-square-feet including the basement, so it’s not that big.  When my first roommate moved in, there was a small increase in utility costs.  The small increase was due to the fact that my place is not that big and we were sharing common areas such as the kitchen and living room. Thus, the increase on the utility bill was caused by the bedroom that my roommate was occupying, the additional use of hot water, cooking, and laundry.  So in my case, the increase in the utility was small enough that the fixed amount I was receiving could absorb the increase in utilities costs.  This is one reason why I chose to charge a fixed amount for rent.  In addition, the utility rate drops significantly during the spring and fall seasons because the heat/AC is rarely turned on, nearly offsetting any increases during summer and winter season.

If you have a bigger house than I do, this situation probably wouldn’t hold true and you would probably incur a higher utility bill.  In this case, I would highly recommend splitting the utilities. By doing this, the roommate would be mindful of their utility usage and not be wasteful.  If you do live in a smaller place and then the heat/AC bill may see a slight increase, I would collect a fixed rate rather than worrying about the headaches of splitting the utilities.

Since I have been renting out my spare room for some time now, I have had different people living in it.  Not everyone is the same when it comes to utility usage.  Sometimes I get that roommate that is perpetually cold or vice versa, thus increasing my utility usage to be marginally higher.  This is something I cannot control and I am 100% fine with that as long as they are not wasting resources. I kindly remind them to turn off the heat/AC off when they go out and often use the analogy “would you leave your car running in the parking lot when you’re not using it.”

My water and sewer bills are other variable costs and these are billed on a quarterly basis.  When my first roommate moved in, these bills went up by a total of $10 per month at most.  This increase was easily absorbed by the rent.

A small portion of the monthly rent covers the increased variable cost of renting out my room, but a good chunk of the rent is extra income that can assist in paying other bills such as student loans, and so on.  Of course, you have to set aside some of that profit to pay taxes.  Despite the taxes on the rental income, renting out a room is a great way to make some extra cash for those that are in dire financial need.  For those that are unsure whether if the income from renting a room out is worth it, sit down and write down your expenses and see how that extra income can help your financial situation out.

RELATED READINGS:

Pacific NW | In tough times, the rented room is resurgent | Seattle Times Newspaper

Homeowners Rent Out Rooms to Stave off Foreclosure | RISMedia

{ 14 comments }
  • Jules March 15, 2010, 11:53 pm

    The fixed rent is a great idea and not one I have thought of before. Thanks for your insight!

    Reply
  • Crystal January 14, 2012, 4:01 pm

    Hi there, How much do you set aside to pay taxes? I just started renting out my room and I’m wondering what percentage of the rent I’m collecting I should set aside for taxes.

    Reply
  • Ricks November 30, 2012, 5:47 am

    I really did not see utilities becoming a problem in my house but lately, they really have. My renter is perfect in basically every way. She is seldom ever home. She is extremely clean. She’s very quiet. Issue is that she is completely unreasonable about utilities.

    It started with running the dishwasher every other day and not waiting until it was full… and putting large items in there like pans, even after I stated that we normally wash pots and pans by hand to save on water… and then the colder months started to come in.

    The moment the temperatures started to drop, she was constantly complaining that she was cold when I wasn’t. In response to this, I bought some of that Seal n’ Peel stuff to go up around her windows to cut drafts. It made the world of difference. It is much warmer in there, now. So, jump ahead a few weeks and I wake up drenched in sweat, barely able to breathe because the air is so dry. I tell myself that it’s just because my room is hot and go to open the door. It’s pretty warm in the hallway, too. I look at the thermostat… and it says 80.

    O_o?

    I turn it back down 10 degrees, let my room air out for a while and go back to sleep.

    Jump ahead a few more weeks.

    She steps out of her room, wearing a skimpy night gown and rubbing her arms, saying “Is the heat even on?”

    See… it’s the skimpy night gown part that gets to me. Were you wearing a pair of flannel pajamas and freezing, I might actually take you seriously.

    SO… jump ahead another week to tonight… I wake up at three AM… drenched in sweat… and my thermostat is somewhere around 80, again… and though I was not home when she went to bed to see whether she bothered to dress appropriately for our climate or not, I am still extremely irritated.

    You see… our thermostat is in one of the colder rooms of the house. So when it’s set at 68, it’s probably about 70 in the bedrooms… and there is nothing unreasonable about that. Furthermore, it was not even all that cold OUTSIDE tonight. It has been much colder earlier in the month and it will GET much colder later in the winter. I shudder to think what our gas bill is going to look like if this ridiculousness continues. In this drafty house in twenty-teen weather, at a REASONABLE temperature setting, our gas bill can hike up as high as 175. Now, let’s crank it up to 80 and see if we’ll hit 300 while simultaneously sweating to death! … yeah, I don’t want to do that.

    Also, it is IN THE LEASE that she is not allowed to touch the thermostat and I REALLY am not an argumentative person and do not want to bring it up with her. I may need to if repeatedly turning it back down doesn’t get my point across… and God knows, the last thing I want to do is argue with the person who I live with. Ugh.

    Reply
    • Mike December 1, 2012, 1:28 pm

      How much are the utilities affected with the thermostat turned up? If that’s your only problem and doesn’t impact the utilities, I would let it be. I would make sure the heat stays off during the day to compensate for the increased usage during the night. If she is never home and clean, I would say it’s a good trade off.

      That’s just me.

      Reply
  • Ricks December 2, 2012, 12:54 am

    We could very easily see a bill of 300-400 in this house. Normally, it’s somewhere about $150-175.

    And the fact that she signed a lease stating that she will not touch the thermostat unless she consults me, first… and this has become a nightly thing.

    At the moment, she’s running the dishwasher for the second day in a row… cannot wait to get that water bill.

    Reply
  • Ricks December 2, 2012, 12:55 am

    Let’s not forget to factor in that I am sweating and miserable at 80 degrees because it’s more like 85 in the bedrooms if it’s 80 at the thermostat.

    Reply
    • Mike December 2, 2012, 10:09 am

      Agree that 85 is very warm. Is your house well insulated that it’s keeping most of the heat in and that the heater is not running all the time? What type of heating do you have?

      Also how much of an impact would running the dishwasher have on the water bill? I do have one, but never use it as hand washing does a better job.

      Reply
  • Ricks December 2, 2012, 11:10 pm

    Different rooms are insulated at different levels. We really need all new insulation but that is beyond expensive.

    The bedrooms are smaller, so they stay warmer but the front room that the thermostat is in is very drafty, so the heat never shuts off if it’s up past a certain level.

    I’m not sure about the impact of the dishwasher, but I know that it’s a very old one and that it causes lights to flicker because it draws a lot of electricity. I am also afraid that the over use will break it because it is so old. We did have a conversation about that tonight and her response was that she doesn’t have TIME to do pots and pans by hand… … …

    Hopefully, she can agree to only run it when it’s full… but I think her definition of full and mine differ A LOT… especially seeing as she never uses the top shelf. So… half full must mean full to her.

    We have gas heating.

    I think I solved my issue with a programmable thermostat… that has a lock function on it. Again, it’s in her lease that she’s not allowed to touch it, so she can’t ask me for help to adjust it and seeing as I locked the display, she won’t be able to figure out how to change the temperature. It cost me $30 (on sale), but if it saves me over $100 a month, it is 100% worth it. They have wifi ones for $90 that you can not only lock but set from a remote location, so if she figures out how to bypass the lock, I’ll buy a wifi one and just keep resetting it from my room/work/where ever I happen to be.

    I think it’s a much gentler statement than a locked box and I’ll hopefully find a time when I can actually use the program feature… which is nearly impossible because we’re always home at different times. D=

    Reply
    • Mike December 3, 2012, 7:00 pm

      The programable thermostats are a money saver. I just installed them and they shut off the heat during the day when no one is home and it saves a ton of money in heating. There’s no more worrying about whether if the roommates turned off the heat. In my opinion it’s well worth the money.

      The dishwasher, pots and pans should be hand washed because it comes out cleaner! I don’t think my roommates ever argued with that point. Plates, bowls, and other utensils can easily cleaned in the dishwasher or by hand.

      I can’t comment on the fan unless I actually see it in person, but if it’s inefficient, I agree disconnect the controls for the fan.

      Reply
  • Ricks December 2, 2012, 11:17 pm

    OH! Also, she liked to turn on the “Fan” function on the furnace that serves no purpose but to waste money, so I found out that if your thermostat has a “G” wire, all that does is run the fan function. The fan automatically turns on with the heat/air, so there’s no need to turn it on alone. This serves no purpose. I think that because it would make noise, she thought it made the heat run more, but really all it’s doing is making a lot of noise, wearing out your furnace, moving the air around without heating or cooling it and costing you HUNDREDS in electricity. The guy I talked to about the thermostat said that it’s something like 1500 amps an hour… and it serves NO purpose.

    So, I did not include the G wire when I hooked up the new thermostat. I left it hanging out and taped off the end. So, if anyone else ever has this strange but extremely annoying habit in a roomie, that is a great solution. No arguments, just pull one little wire out of your thermostat. Done.

    I am all about avoiding confrontation.

    Reply
  • Mark July 11, 2015, 4:47 pm

    What estimated percentage do you pay in taxes? ( I know it depends on your overall income)

    What about tax deductions? Do you deduct any expenses from maintaining the house for roommates as a way to offset the taxes you have to pay on rental income?

    Thanks in advance.

    Reply
  • Lala April 19, 2016, 6:08 pm

    I guess all of you are renting your spare room to someone. I am actually renting a room in Gastonia, NC where you can actually rent a 2 bedroom-house for $400 because the location is more of a country side. So I am renting a small room in a 3 bedroom house which my friend and her husband just recently bought for $150,000. I am renting the room for 300 and then plus utilities. They actually split the monthly utilities by 3. However, they start charging me of cable and Internet with different amount when I barely watch TV and the fact that I don’t have my own TV. The gas was also split into 3 but actually, I don’the like the heater because it gets really hot in my room because it’s on the second flr. So I turn it off when they are not here. I wash my clothes once a week, seldom use the stove to cook because when I’m out, I just eat out have if I have left over, I just get a to go box and eat it for the next meal. I just feel that I’may being charged more than I consume. I pay 300 for a small room and 100 plus more for the utilities. Do you think it’s a fair charge?

    Reply

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