This post is from a reader, Josh who wanted to share his experience into becoming a “live-in landlord.” His journey to join the ranks didn’t come easy. He had some difficulty finding a roommate and admits some mistakes he made along the way.
I think this is a great story that other to-be “live-in landlords” would find inspirational and educational. I added my commentary in brackets based on my own experience.
So without me rambling, here’s Josh:
My initial decision to take in a roommate came mainly from a desire to create a second source of income. Long story short, my wife and I bought a home about three years ago, and after a divorce, I was left with the home and mortgage.
While my regular income is sufficient to cover my obligations, I began to view all the extra room in my home as a resource I could utilize to create a second income source.
I have a three bedroom, two bath house, so I decided to start with one roommate to see how that would go. I did some research, mainly online, and set a rental price of $425 per month, all utilities included.
SETTING THE PRICE
I mainly derived my rental price from other ad listings I saw in our area. I live in a pretty small town, so rental comps were somewhat few and far between.
I really did not use any formulas to determine the price, but in hindsight I wish I had, because if I had based the rent on a percentage of the utilities and total monthly housing costs, I probably could have justified a higher rent payment.[Mike: don’t base rent price solely on your mortgage payment. The rental income should only help you pay your mortgage rather than covering it]
Basically, the rent is half my mortgage payment, and I handle all utilities. I do have to admit, I was afraid of asking too much, because I did not want to scare interested applicants off, and I wanted to be able to choose from a wide pool of responders to my advertisement.
The $425 is a number I can accept every month, however I will not go any lower. And if/when the current roommate moves out, I will most likely set rent based on a certain percentage of total housing costs. [Mike: This is the most appropriate time to raise the rent price NOT springing up a new rent price on the same roommate.]
I put the word out through my network and talked with a few friends about moving in, however could not find someone who would commit, as most of my friends are either well established or married with families. Finding no success this way, I posted an advertisement on roomster.com, and signed up for a month long subscription.
I was not impressed at all with roomster, most of the responses to my advertisements were from people way out of my area, and I’m sure they were scams as the questions they
asked made little sense. I cancelled my subscription before the month was over.[Mike: I tried roomster and was not thrilled about it. They make cancelling your subscription obscure, thus charging your CC more than you’d like]
After roomster, I turned to Craigslist. I created a very brief ad in the rooms shared section, however one thing I did not do was add pictures. I notated that I would send them on request to anyone who was seriously interested. In hindsight, I view this as a mistake, as I probably cost myself a lot of views. It took about a week for responses up begin coming in.[Mike: I wrote a post why adding photographs improves responses]
One thing I found with Craigslist is you have to wade through a LOT of scams. This was the worst part.[Mike, read my post about scams on craigslist and how they work]
I did get some good responses from real people however, and after about three weeks I found someone who seemed to be a very good fit. I have had my roommate for a few weeks now, and so far so good. There have been a few adjustments on both our parts, however I have found the experience to be very positive and mutually beneficial.
I have a few trains of thought in regards to my third bedroom. At this time, I would not like to take in another renter, as my current roommate and I get along well, and I would not want to upset the balance in the house. I also use this room as an office/storage, and for me to rent it I would have to move a lot of things around.
In the back of my mind, however, I have entertained thoughts of cleaning out the room and renting it. Again, if I choose to do this, it will be if for whatever reason I lose my current roommate, as the understanding he and I had was that he would be the only renter. Lots to think about, but I hope I will not have to enter the roommate search again for a while.[Mike: The roommate search process sucks, I’ve lost out of months of rental income because my spare room went vacant. I think this is the most frustrating part]
Be sure to sign up for my mailing list on the side bar. You’ll receive a free copy of my “Quick Start Guide” and much more.
As you probably already know Google Reader will shut down on July 1st. If you read this blog through an RSS feed, add rentingoutrooms.com/feed to another reader. I prefer feedly.