How Much Should I Charge To Rent A Room In My House?
January 15, 2022
Whether you plan to rent a room in your house yourself or through Airbnb and Vrbo, renting out a room can be a great way to boost your income while at the same time reducing some of your expenses that come with owning a home. However, it’s not as easy as just taking a picture and telling potential tenants that the room is move-in ready.
There are many things homeowners have to consider before actually renting out a room in their house like creating a rental agreement, the legal implications, and how much rent to charge for a single room.
In this blog post, we answer the question every homeowner renting out a room has to ask, how much should I charge to rent a room in my house?
Why Is The Rent Price Important?
Renting out a room in your house can be a great way to add an extra stream of income. However, to make the most profit off of it, there are a few things you need to consider before setting the rental price.
1. You Want To Attract Renters
If the rental price is too low, then you may not be able to draw in reliable renters. On the other hand, if the rental price is too high, there may not be a lot of renters interested in the room. Consider what other owners are charging for the room living in the same area.
2. To Cover a Good Portion of the Mortgage and Other Costs
A house is a major investment that you’ll be paying off for decades. Renting out a spare room is a great way to raise funds to cover a proportion of the costs of being a homeowner.
3. To Add an Extra Stream of Income
Whether you are renting out a room to cover debts or to boost your income overall, renting out spare rooms will benefit your bank account immensely.
How To Figure Out What To Charge For The Monthly Rent
Now that we’ve gone through why finding the right rental price is important for homeowners looking to rent out a room, we can go through how you can figure out what to charge for one room.
Ideally, the rent you charge for the spare room should cover a good portion of your homeowner expenses, along with any other costs that come up while owning a home. The best place to start is to calculate all of your expenses and figure out how much of those expenses you want the room rental to cover.
1. Calculate Your Monthly Housing Costs
There are a few different types of expenses that come with homeownership. There are consistent costs that have to be paid monthly, infrequent costs that are inconsistent one-off costs, and any other additional fees that could come up. Monthly costs for homeownership include:
- Mortgage payments
- Property taxes
- Utility costs like electricity, gas, internet, etc.
- Homeowners insurance
- HOA (Homeowners Association) fee
Since these costs are consistent, they are easy to predict and add up to calculate the total annual costs. Once you add all of the costs together and divide by twelve, you can figure out the proportion of the costs you want the spare room rental to cover.
Read more: All of the Costs Associated With Buying a Home
2. Calculate The Potential Infrequent Costs
Infrequent costs are the one-off fees that come up unexpectedly as you own a house. Costs like:
- Any furniture or accessories such as light fixtures, bathroom cabinets, sofas, refrigerators, etc.
- Repairs and maintenance that come up like A/C, heat, roofing, etc.
- Renovations or redecorations to make the spare room more appealing to renters.
The rent price for the room shouldn’t be set to cover all of your expenses. That would be unfair to the potential tenants and would deter most of them, but the rent price should cover a good portion of your expenses as a homeowner.
These calculations are a great place to start but there are still other factors to consider when pricing a spare bedroom rental.
Other Factors That Influence The Rental Price
Supply and demand are largely what drive real estate pricing. If the supply exceeds the demand, then rent prices could drop significantly and vice versa if the demand exceeds the supply.
The four seasons can affect supply and demand. During the winter season, the demand to move into a new place usually drops while in the summer, the demand usually rises.
2. Look At Similar Rentals
Before deciding the rental amount, knowing what others are charging in your area is essential.
To know the local market rates, take a look at similar room rentals in your immediate area and use them as a general guide.
While trying to find comparable rooms, make sure to look for similar features like the neighborhood, size, condition of the property, location, etc.
You should also make a note of the rental properties that have shifted their price in the past few weeks – you might have to do the same thing to stay competitive in the market.
Extra Tips To Find Comparable Rooms
You should do your due diligence while researching. Here are a few tips to help you research the rental rates in the market:
- Browse through local rental property websites to get an idea of the competition in your area.
- Take note of the ad copy that is used to promote popular rentals so that you can mimic the style and get the attention of prospective tenants.
- Take advantage of online forums and social media to discuss with potential renters about their wants and needs.
- If a lot of renters aren’t showing an interest in your rental, then you may need to reconsider your price, the marketing, or the amenities offered with the room.
3. The Size of the Room and What’s Included
When setting the rental price, the amenities, and perks that are included with the room can change the price drastically.
Rooms with different square footage, attached bathrooms, or other features should have different charges for rent to reflect those differences. For example…
- Rooms with a private bathroom should be charged more than rooms without one
- A room with an appealing view, balcony, or large square footage could be charged a little more than the ones without.
- Tenants would be willing to pay more rent for a room located near businesses, stores, restaurants, and other entertainment venues.
- If you’re offering perks like home-cooked meals, access to the garden, pool, etc., then tenants would be willing to pay a little bit more than the average price.
Pricing The Room Correctly Is Only The Beginning
Setting your rental at the right price is only a part of how to successfully manage renting out a room as a homeowner. Just like any other rental property, you need to also properly market the room, set the right price, and make the room desirable for renters to draw in many candidates.
All the best!
Recommended Articles To Read:
How To Make Money on Airbnb Without Owning Property
What is Airbnb Rental Arbitrage?
Published on January 15th, 2022. Updated on July 31st, 2022