Tenant Pitfalls: Flat Rate Rent, Utility Costs, & Other Tips

Tenant Horror Stories?

Do you have any boarder/tenant horror stories? Sometimes a great strategy for earning extra money can be to rent out the spare room or an entire area of your house to a tenant. In the previous sentence I chose the word “earning” carefully because I won’t lie to you, it’s never a completely pleasant experience sharing your home with someone; it can pay well, and it’s a good learning experience, but I believe there are downsides that must be considered.

After buying my house I briefly lived alone and I enjoyed the solitude and privacy it gave me. Despite my enjoyment of the solitude, I could not see the empty room across the hall without feeling wasteful and there were dollar signs dancing in my eyes, so I posted a “room for rent” announcement on Craigslist and found myself a “tenant.”

My first tenant turned out to be a nightmare – she:

  • told me she had a job but did not, so she very rarely left the house
  • often took showers so long that the hot water would run out completely, and water would run down the walls of the bathroom due to steam
  • was a slob in the kitchen
  • had her boyfriend move in without consulting me
  • badly installed a window air conditioner in her window without consulting me
  • regularly cranked the baseboard heat in her room to 100 degrees F, and then opened the window all the way because she enjoys the “fresh air”
  • nearly ruined the carpet in her room
  • had capacity for seemingly endless personal drama

I can say confidently that I learned many, many lessons during the year she lived at my house – things that you don’t run into when you’re sharing a rental with other students or friends, but that you run into when you’re the home owner, and you’ve taken on a live-in tenant. The most obvious mistake that I made was charging her a flat rental rate. Given her tendency to completely disregard the cost of heating the outdoors, I would have been better off at least splitting the utility bills evenly. The other obvious oversight on my part was not screening and interviewing more thoroughly; she represented herself in a way that was completely opposite of how she actually acted and lived. Usually how someone else lives doesn’t affect your life, until they live in the same house with you, so finding the right person and screening should not be overlooked.

Tips for Home Owners Considering a Tenant/Boarder

Thankfully, it seems I got the “problem” tenant out of the way the first time, but I thought I’d share some of my tips in case you’re hoping to bring on a tenant yourself to help pay the mortgage:

  • Rent month to month if you can, so that if things don’t work out with someone, it’s easier to ask them to leave
  • Structure utility costs in a way so that they are encouraged to conserve rather than waste
  • Sign a rental agreement that clearly defines terms, including what areas and belongings the tenant has access to
  • Sign a household rules agreement that clearly defines a set of common sense rules & responsibilities that you and your tenant will follow, cultivating mutual respect and reducing surprises & grievances
  • Make sure to define in your rental agreement a policy on house guests, and how to define when someone stops being a guest and starts being an additional tenant
  • Prepare yourself for the need to have some tough conversations when the agreements aren’t followed, or if things are not working out for you and you’d like them to move out
  • Always collect a security deposit, even though you’re only renting a room – some people are just prone to damaging the space around them
  • Define a few cupboards and an area of the fridge that they can use, encouraging the clear separation of food, as well as hopefully limiting the “pack rat” tendency that some people have when grocery shopping
  • Make sure to have a working fire extinguisher, and to go over basic “emergency” situation procedures with the tenant, including how to shut off the main water valve if there is a plumbing emergency
  • Try and find a like minded person with a complimentary schedule (it generally is legal to be discerning about your tenants when taking on a “boarder”)

If you’ve ever had a tenant/boarder/roommate, what tips would you add to my list? Have you had good experiences renting out space in your house? If you take the plunge, let me know how it goes, and how much money you’re able to save because of your sacrifice!

[featured image: ismael villafranco]

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