Extra rooms are an untapped real estate opportunity.
It’s not unusual to have an extra bedroom in your house. Kids grow up and move out, guest bedrooms are reserved for when visitors pass through or perhaps you just live in a house with rooms that exceed its occupants.
A finder.com analysis of US Census data suggests that there are 33.6 million of them across the nation. If you assume that each of these rooms could be rented out for $100 a week (which is considered cheap in many areas of the US), that adds up to a whopping $174 billion in missed opportunities for extra cash each year.
According to the US Census, there are 357,032,421 bedrooms in America and only 323,391,100 people, leaving a surplus of 33,641,321 rooms. The total number of spare rooms is likely even higher, because many couples share a bedroom. That means overall, there are 9.42% more bedrooms than people.
How much could you score?
The door to your spare bedroom has the potential to open up many financial and social benefits. If you’re not using a spare room, you can easily score $5,000 a year in extra rental income. With $400 more a month, you could pay off your mortgage faster, save for renovations or simply enjoy earning spare cash on the side.
After the wave of foreclosures that followed the global financial crisis in 2007, renting became increasingly common across the US. Today 35.6% of properties are rented, up from 33.8% in 2000.
That means rental prices are rising, creating a potential opportunity to rent rooms to people who can’t afford to rent an entire property themselves. Before you take that step, though, consider these issues:
- Consult your accountant for the tax implications of extra income.
- If own your home, check on relevant county or state laws about renting spare rooms. If you’re renting, read your lease to see if it allows for subleasing rooms.
- Make sure that your home insurance policy covers tenants.
- Conduct careful background checks on potential tenants. Interview candidates in person, and ask for financial records that demonstrate their income.
- Request a security deposit and two weeks’ rent in advance for protection if your tenant proves unreliable.
If you’re still haunted by your first shared house experience, avoid future pitfalls by setting ground rules on Day One. Consider putting together a folder that outlines household expectations and rules on visitors and curfew or quiet times. Include Wi-Fi details, local restaurants menus and public transportation information to welcome your new tenant.
How do you get started?
It’s likely that potential tenants will want to see your living space before committing to a lease. Take some good shots of your spare room to upload later.
There are a plethora of sites available for you to advertise your spare room, depending on whether you’ll rent it for a long time or short stint. Keep your location in mind. If you live close to a popular vacation destination, for example, consider increasing your rent. And remember: An uncomfortable tenant can be easily replaced.
It might feel daunting to get started. But come your second tenant, you’ll be a seasoned pro.
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Co-Founder of Spark Rental
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Thinking about earning some extra cash with your spare bedroom?
Step 1: Choose short-term or long-term
Would you prefer a long-term housemate, or to rent the bedroom for a few days at a time to travelers?
Before deciding, you compare the numbers, including average vacancy rate and cleaning costs, in both money and time.
Step 2: Furnishing
Decided to go the Airbnb route? Make sure the room is furnished with a comfortable bed, a basic dresser, a bedside table with an alarm clock, and at least some closet space. Be sure to also keep clean linens on hand.
Step 3: Photograph the room
First and foremost, make sure the room is impeccably clean. Photograph it during daylight hours, with plenty of light.
Take shots from every corner of the room, and try out some low and high angles in addition to eye-level.
Step 4: Advertise!
For short-term rentals, post your listing on all short-term rental sites, including Airbnb, VRBO, and HomeAway.
For long-term rentals, use a syndicator like HotPads (which also posts to Zillow and Trulia), plus classic Craigslist. Include a link where prospects can download an emailable rental application, directly in the rental listing.
Step 5: Screen Prospects
Websites like Airbnb make renter screening easy with guest ratings and reviews.
For long-term housemates, make sure that the prospect doesn’t keep drastically different hours from yours, or has different cleanliness standards. Collect a rental application and run tenant screening reports. Also verify their employment, income, and housing history!
Step 6: Sign the lease agreement
If you’re bringing in a long-term housemate, you’ll need to prepare your own rental agreement. Make sure your rental agreement includes details like who’s responsible for which chores, which spaces are communal versus private, how utilities are split, etc.
Spare bedrooms by state
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Note: According to the data, California, DC, Hawaii, Texas and Wyoming did not report surplus bedrooms.
Top 10 states with extra bedrooms
Photo courtesy of Kaiscapes; licensed under Creative Commons Attribution-Noncommercial-ShareAlike 2.0 Generic (image cropped).
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