I feel odd linking to a NASDAQ page about shared real estate, but there was a nice article on one of the NASDAQ blogs recently about renting out rooms of a house or apartment that you own – that is, being a landlord in your own home. Apparently, the 2011 US Census has concluded that over 30% of households in the US now have unrelated adults living together, which comes to 69M roommates (and a 10.7% increase over the 2007 figure). This means the potential market for property owners to share their residence with renters is increasing rather quickly.
Renting part of a place you own is an appealing option for people who are living in a house that is now too big for them to afford. For instance, parents who have an empty-nest can rent out their kids old bedroom to get some retirement income. Or a young professional who wants to go back to graduate school can get some positive cash flow if they own some property.
If you’re able to get a mortgage, renting out the other rooms of a residence can also be a good way to live affordably while slowly buying the place you’re sharing. With interest rates low, and the sale-price-to rental-price-ratio declining in many major US cities, it’s getting easier and easier to pull-off paying off a mortgage with rental income.
The main trick to doing this well yourself is to find and keep good tenants / roommates, which can be a tough proposition. Finding roommates means ensuring your personal security and doing appropriate tenant screening. There are also a couple of things to watch out for: have some legal protection, pay taxes, and follow Fair Housing rules when advertising for tenants. (the NASDAQ article does not mention this, but the exact rules of fair housing legislation seem more subtle now in light of a recent court case).