I received the following question this week:
Hi I’m Dan, I’m 27 and just bought a house. It is just me at this house and looking to rent out rooms. I live in a professional, upscale neighborhood and have gotten a few responses, and am still looking. Some questions I got from people were, “What if me and my friend stay together”? My rate is $600/month and I told them $800/month for 2 people. Just wondering what your thoughts are. Thanks for any advice!
It’s an open-ended question that’s entirely up to you. I can present my thoughts and you can best decide what’s best for you.
Clearly, the biggest advantage of having friends rent a room from you is that you know who they are and you can trust them. You don’t need to determine their credibility on paying rent on-time and in-full. You know where they work and you probably know some of their family members. It eliminates a lot of the unknown variables making an easy option for “live-in landlords” to gravitate towards.
Also look at the flip-side. There are countless number of issues that could cause arguments. When things go bad, you can loose friends and have mutual friends pick sides causing even more drama. Is this worth loosing friends over arguments caused by living arrangements? One could argue against my point by stating that you’ve lived together and know what to expect, which is a valid point. Having a friend rent from you may work out in this case.
FROM THE BUSINESS PERSPECTIVE
What’s your reason for renting out a room? Just simply saying that you have all this extra space is not a good reason. Obviously, you can afford the house without your current roommates so all that money from renting out rooms is just extra cash.
I believe every “live-in landlord” should have a personal financial goal in place before they start renting out rooms because you can easily squander the extra money and you’ll feel even more broke when your roommate(s) move out.
The reduced rent you want to charge you friends, can you still reach you financial goal in a reasonable amount of time? This is something you need to ask yourself and think about it.
Additionally, if you have one friend move out and another roommate who you found via craigslist move in, would you still charge that person a reduced rate because your current friend is still getting a discount?
In other words, you can’t charge a friend a discount and expect another person who is not your friend to pay full price unless there’s a sizeable difference in your offer.
I would just stick to a fixed price that you would be comfortable charging a person regardless if they were your friend or not. This way you’re not selling yourself short and reduce the likelihood of any arguments of rent price regardless of who moves in.
If you currently have friends renting from you or will be renting from you, it won’t last forever. Change is the only thing guaranteed in life and people will move on. If you can’t find other friends to rent your room and you still want to accomplish your financial goal, you’ll have to start posting advertisement looking for roommates.
Eventually, you’ll have to resort to finding roommates through other means if you want to attain your financial goal from the supplemental income from the rooms, in which case, you’re delaying the inevitable of the roommate search process.
There are a lot of things to think about with having a friend rent from you. Is it going to be short duration or a long term plan to pay off debt or some financial goal you have in mind. You’ll also have to think about whether you want your friends since it is a business arrangement where each party mutually benefits, but ultimately, you’re profiting.