Rentin’ Rooms in your House

Why U No Use Rent Calculator?
Most Splitwise Man In The World

If you are going to rent out a room in your house, especially to a friend, you need to pick a fair price that also reflects the market. One reader asks:

Dear Splitwise,

How would you charge if you rent out a room with a private bathroom in the home that is your primary residence, which you own?

Sincerely,
Landlord in Training

Hi Landlord in Training,

Great question. As it happens, I just had to help my parents do this. Here’s what you need to know:

  1. Find out the approximate value of your home. You can look up this value from Zillow.
  2. You can use this amount to calculate the rental value for your whole house. One good way is to take the sale price and divide by the “buy-to-rent ratio” for your neighborhood. You can look up the buy to rent ratio for your metro area or specific neighborhood on Trulia. A range of 7-15 is relatively normal.
  3. After finding out what your whole house would rent for, you can figure out the price of a single room using our trusty rent splitting calculator.

Let me give you an example. Using my psychic powers¹:

  • I can tell that your house is in Isle Of Palms, SC
  • The total size of your house is 2700 sq feet.
  • You have 3 rooms in total:
    • 1 is the master, which you currently reside in.
    • 1  room with a private bathroom and normal sized closet.
    • 1 room without a private bathroom and a normal sized closet.

Bottom line: my best guess from the information given is $1385 a month, assuming it’s a year-long habitation.

To break it down in detail:

  1. Zillow thinks your house is worth $867,000.
  2. The buy-to-rent ratio on Zillow for Isle of Palms, SC is 6 – which is insanely low because Isle of Palms is a vacation town. This would mean that your monthly rental price for your whole house would be $11,600. Despite what I said above, this seems nuts to me if this is a year-long renter.Let’s just assume a non-vacation ratio in a nice town, like 15 (as it is in Boston, Chicago, San Diego, or Denver). This gives a more sane $4,817, which I used for the rest of the calculation. I’m also guessing that you are living alone in the master, and that the other bedroom is unoccupied. This makes a modest difference in the calculation.
  3. I’m assuming that your master bedroom is twice as large as his bedroom and has a nice closet, along with a private bathroom as well. Using the rent calculator, here’s what I get: $1384 per month for a non-master bedroom with a private bath. Round-off as you feel is appropriate.

I hope this helps you graduate to being a landlord!
Splitwise

¹ or possibly the follow-up email we had

If you have a fairness or money etiquette question you’d like Splitwise to address anonymously for you, email Dear Splitwise at ask@splitwise.com.

Published by

Jon Bittner

Splitwise helps you and your friends keep track of shared expenses, so that bills (and friends) get paid on time.

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