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Owning a property is probably one of the most significant purchases you’ll make, one that you have worked incredibly hard to attain. If you have space in your home, renting out a room to a lodger can be a lucrative way to earn some extra cash or help pay off your mortgage quicker.
You could be sitting on a goldmine and not even realise the potential under your own roof. With Perth’s hot market and the cost of living rising at an alarming rate, why not make your biggest asset work for you by renting out a room to a lodger? By making a few modifications to your home and lifestyle, the rewards are there for the taking.
There are many things to consider, from choosing a suitable lodger to tackling the legalities. Here are a few tips when renting out a room to a lodger.
Before choosing a lodger, decide on your criteria first. You might need to do a bit of soul-searching to determine the kind of person you would be willing to share your home with. Perhaps you travel a lot, or you’re a FIFO worker planning to find a lodger working FIFO on your alternate roster. Maybe you’re a homebody, or you work from home? An international student could be a great option if you live near public transport or a university.
Depending on your needs, there are many things to consider when renting out a room out to a lodger.
You might feel more comfortable renting out a room to a lodger you already know and get along with. This eliminates the need to advertise the room; however, there is the risk that the relationship might suffer.
Several reputable websites cater to finding a lodger, requiring you to post photos, a description, available amenities, the amount of space and weekly rent. This will also allow you to browse the profiles of potential lodgers and conduct your online research. It’s advisable to meet them in person to conduct a casual interview and ask for their references from former landlords or employers.
The neater, better maintained and more organised your home is, the more likely you will attract a high-quality lodger and generate a better rental income.
Generally, the room needs to be furnished to yield a higher return. You can keep it as basic or well-equipped as you want and include a bed, wardrobe, laundry access and bathroom and kitchen storage. You might also supply bed linens, towels, toiletries and bathroom supplies, and in some instances appliances such as a microwave, fridge and washing machine.
Some lodgers might prefer an empty room and organise their own furniture and furnishings; however, you will have little control over what they might move in with.
Prepare a condition report with lots of photos prior to them moving in to eliminate any confusion about the state of the property when they move out.
Apart from earning a steady income stream, the companionship of a lodger can be incredibly rewarding, particularly if you live alone. If you’re renting the room out short-term, you could meet like-minded people, especially if you enjoy travelling too. Either way, forming life-long connections is part of the package.
You could end up with someone you don’t get along with or feel awkward around. Maybe they’re messy, noisy or have an incompatible lifestyle. You might end up cleaning more and drastically altering your lifestyle to cater to someone else living in your home. They mightn’t be trustworthy and steal your food, or worse. Communicating your clear expectations will help eliminate some of the potential risks.
Firstly, consider your current living arrangements when determining who would make a suitable lodger. Are you living alone, as a couple or as a family? How will having someone else in your space impact the current dynamic, especially if you’re renting out more than one room to multiple people or families?
Will you rent out the room on a short-term platform like Airbnb or Stayz? Or do you prefer the stability of a long-term lodger? Perth Realty Group has many property managers who can help find short and long-term lodgers.
Before determining the rental rate, take into account what you will include. Some rent out the primary bedroom with an ensuite, a living room and plenty of storage. The suburb, room size, and whether they have their own bathroom, living space and outdoor area can determine the rate. Research what other lodgers in your area with similar properties charge and consult with local property managers to gauge a fair price.
Homeowners are free to rent out a room anytime, but if you’re renting a property, you must confirm that your lease arrangement allows for sub-letting, as some contracts specify how many occupants are allowed to live in the property. It will be challenging to get around this, especially during rent inspections, and a breach of contract could lead to eviction.
When renting out a room to a lodger, ensure you have a watertight tenancy agreement stating the lease agreement’s rate, conditions, terms, and start and end dates.
Rent earned from a lodger is considered income, so consult with your accountant beforehand to determine if it is financially viable and the tax implications as the rules vary between states. You may need to amend your home insurance policy to account for additional people living in your property. Depending on your policy, you might need to take out landlord insurance, and some short-stay platforms offer host liability insurance covering damage or loss of property.
The responsibilities and legalities of landlords are complex. Enlisting the help of a property manager when renting out a room to a lodger is a hassle-free option and, in many instances, saves time and money. Perth Realty Group can handle the entire process, from screening potential lodgers to listing your property, handling disputes, legal documents, property maintenance and rental collection. Please get in touch with our team here for a free consultation.
