Are you a household head feeling the economic pinch in which many of us now find ourselves? Have you been awake nights not only thinking up ways to reduce spending, but also considering how to increase your household income? Is one of those recurring thoughts about opening up your living space, apartment, condo, home or estate, for the first time, to paying boarders? Judging from the number of ads on craigslist.com2, you are one of many people considering that approach in these harsh economic times.
On the surface, taking in paying boarders is a win/win situation for both you and your future tenant, right? You can generate more household income simply by giving up a bit of space and the renter has a nice affordable place to live. The right arrangement could lead to a lifetime of completely satisfying personal interactions with what was once a total stranger. Consider Evan’s situation for example; five years ago, he was in the military, being deployed from Japan to So. CA, when he found a “Roommate Wanted” ad on his church’s bulletin board. “It was exactly what I needed at the time,” Evan said, “so, I applied and was accepted. The two other men that I met – one, the landlord and two, another tenant, attended the same church and over time, we became friends. They showed me around the area and eventually, I ended up owning the condo where we had all once lived!”
On the flipside, tenant/landlord situations can also end up as the “Roommate from Hell” story that we tell whenever and wherever we are given a chance to speak.
How do we get the former and avoid the latter? One way to creating a desired outcome before accepting and depositing that much-needed rent check, is to start out by taking a business-like approach to the tenant/landlord arrangement. There are probably as many ways to create a business-like approach as there are “Roommate Wanted” ads, but the essence of taking a business person’s attitude can be found in the following suggestions:
1. Desk and Internet research; do the math
Browse local web sites such as craigslist.com or roommates.com, to get an idea of what others are offering and see what the going rate is. Compare it to the space that you are thinking of offering – be sure and compare “apples to apples” – and set the price point appropriately.
Also, check with the local office of the government’s Fair Employment and Housing Department for landlord rights and responsibilities.
2. Check out the “legality” of adding to your household with your homeowner’s association or property manager or landlord
Are there any restrictions to adding another member to the household? If so, is there anything that can be done to add him/her to the agreement?
The last thing that you or your tenant want to have happen is to go through the “handshake” process and then find out that there is a previously agreed to regulation or guideline that prevents closing the deal.
Also, check with the carrier of your homeowner’s insurance, if applicable; are you and your tenant covered in case of accident, theft, fire or “Act of Nature”? Should your tenant be required to carry renter’s insurance on his/her custom-made water-cooled surround sound speaker system that would cost $10K to replace?
It is best to find out sooner rather later that the policy you have in place does - or more importantly, does not - provide the assumed coverage.
3. Prepare the space as if expecting a guest
It could mean the difference between attracting the perfect tenant and renting to the world’s worst roommate. For example, I met earlier this year with Lori, nearly 50 years old, who had a room and bath for rent in her 4 bedroom/2 bath house. Lori told me that she was, “…looking to replace my last roommate to help pay the mortgage. It increased when my ex-husband and I divorced a few years ago and I agreed to buy him out.” While the house was nice and located in a good neighborhood, I declined to rent because it was not tenant-ready; Lori’s teen-aged daughter was still occupying the rental area and the kitchen had no space prepared for tenant belongings.
4. Run a complete and honest classified ad; conduct business-like showings
List the exact offering in detail and forego providing too much personal information, which may detract from a business-like introduction. Basics include:
Contact information
Date available
Move-in expense amount
Preferences
Privileges
Rental terms
Room(s) available
- Process an application
Browse the internet for a boilerplate version, amend it as needed, go over it with the applicant, initial changes and provide them with a copy for their file.
Who will pay the credit check fee? What will you do if/when your perspective “roommate” has a rating lower than your car’s tire pressure?
Remember, you are in the business of renting, so move on to the next top candidate or prepare for future drama - the choice is yours.
6. Do a background check
It is a must in my book and especially so where minors are present; consult a local agency.
7. Put a rental agreement in place; require a cashier’s check or money order for the deposit and first month’s rent, set a grace period or “late” date for paying the rent.
Browse the internet for a boilerplate version, amend it as needed, go over it with the tenant, initial changes and provide him/her with a copy for their file. Review the agreement from time to time or when the circumstances change; for example, when the tenant’s “visiting” cousin is still in the house a month after arriving for their “vacation”.
8. Set some basic house rules; you can always relax them later
What is appropriate for college roommates may not be so for a young family, so take time to consider your situation and set the ground rules that make sense for your household; major categories are:
Cleanliness – Communicate your comfort level as well as the limit
Dispute resolution – Pre-arrange a way to work out differences, e.g., bulletin board, notes, regular meetings, etc.
Energy – Turn off lights when not in use, agree upon air conditioner/heater thermostat settings, manage water and hot water usage, etc.
Quiet hours – Generally, quiet time is from 11pm to 7am, but tailor to your situation.
Safety – Lock doors and windows when leaving, close garage door, etc.
Visitors – Ranging from picking up and dropping off to overnight or extended stays; make known what is expected and acceptable. For example, when I met with Rita, a senior citizen on a fixed income, last month to discuss sharing her 3 bedroom/2 bath condo, she said, “I frequently have overnight guests and allow overnight guests, too. My only request is that you let me know when someone else is in the house so that I don’t freak-out when I see them.”
9. React appropriately and in a timely way to “red flags”
Depending on your style, a flag can be anything from being late to the first meeting or three months in arrears on the rent to general incompatibility; whatever it may be, prepare to deal with red flags as the business conversations and learning opportunities that they really are.
Will following the suggestions above ensure the perfect roommate situation? No, but regardless of the outcome, you can rest easily knowing that like any first-time business venture, you were diligent about creating a setting where landlord/tenant success was entirely possible.
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