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What You Need to Know About Renting Out a Room

by Desi Sowers

With college football season upon us, there will be an influx of people trying to find accommodations in the New River Valley area.  Homeowners may be tempted to rent out rooms to earn a little extra income.  Why not?  It sounds easy enough.  Clean up that spare room or basement and you can rake in the big bucks from people desperate to find lodging.  But there are things you should know before taking this on.  It may not be as simple as it seems.

  • There are several online peer-to-peer marketplaces for renting out your house or a room in your house. Airbnb is one of the largest and most popular. Some others include HomeAway and FlipKey. Your first step should be to investigate the various options and decide which one will work best for you.
  • Educate yourself about the laws involved with renting out a room in your home. When listing your home on a website, they might not indicate whether you’re complying with local laws.  You are responsible for knowing the regulations and following the rule of the law.  Don’t get yourself in a situation like the hosts in New York City who were fined thousands of dollars for renting their apartments through peer-to-peer services.  This type of rental activity is allowed in the Town of Blacksburg, but it is subject to standards adopted by Town Council.  Make sure you know the rules and regulations before placing your room for rent.
  • There may be taxes involved.  Depending on how much you earn by renting out all or part of your home, you may receive a tax form from the marketplaces that list your property.  Regardless, you must report the earnings when filing your taxes.  This is something to consider when deciding if it is worth the cost to start renting out space in your home.
  • Something else to think about when deciding if your profits will outweigh your costs is the expense of having guests in your home.  You will be providing consumables such as soap, toilet paper, shampoo and cleaning supplies. In addition, your utility bills may increase.  You may also want to hire a cleaning service if you don’t have time to clean between guests.
  • To increase your chances of being booked, consider listing on multiple sites.  The more people that see your listing, the better the chance it will be rented.  But remember, each site has its own rules, fee structures and insurance requirements, so you need to know this information for every site you use.

Should you decide to rent out a room in your home, the rental site that you choose will help you get started.  You can also check out College Weekends; a site specific to Blacksburg for renting out spaces for football weekends.  Go Hokies!

http://www.desisowers.com/Blog/Bedand-Breakfast

http://www.desisowers.com/Blog/Welcome-to-the-New-River-Valley

http://www.desisowers.com/Blog/Real-Estate-Myths-Dont-Let-Them-Fool-You

Selling Your House or Renting It Out - Pros and Cons

by Desi Sowers

Whether moving for a job or just relocating for personal reasons, you still must decide what to do with your current home.  Should you rent it out?  Or sell it?  There are many circumstances to consider before making that decision.  How long do you have before you move?  What is the housing market doing in your area?  And do you have someone you can trust to manage your property?

Of course, the biggest motivator in your decision is which option will be most financially profitable.   If you have a lot of equity in your house and can sell it, you’ll walk away with some cash to put toward your new home.  If the house is paid off, you’ll walk away with A LOT of cash.  However, if your equity is built up and you have low mortgage payments (or no mortgage payment), you could bring in a substantial monthly income by renting the house for more than your monthly payments.  You do have to consider the costs involved with renting the house out.  If you’re relocating to another town, you will likely have to hire a property manager to collect rent and take care of issues that come up.  You might also have to pay to advertise the home.

There are going to be risks involved either way.  If you put the house up for sale, you run the risk of not selling it quickly and possibly ending up with two mortgage payments or a house payment and rent payment on a new place.  But renting out your house might be a bigger risk. There’s a chance you will rent it to people who you think will be good tenants, but wind up paying the rent late or not at all.  There is also the risk that renters will not take care of the house and lower its value.

Another issue to consider is that housing markets can greatly fluctuate from year to year. You must question whether your neighborhood is in the kind of shape to support a quick sale.  If other homes haven’t been selling, for example, you might not get as much for your house as you might if you could wait a year or two and rent it out in the meantime.  On the other hand, if the housing market is hot in your neighborhood, it might just be the best time to take advantage of it and sell to get the best price possible.

Finally, you have to think about whether you can afford a new mortgage while you still own the first house.  Per Kiplinger, lenders count about 75 percent of the income you receive from renters when figuring out if they’ll give you a new loan, but that’s only if you have a signed lease and your salary is sufficient to cover the rest of the mortgage requirement.  Selling your house will make it much easier for you to qualify for a new loan.

The bottom line is that, after doing your research, you can decide whether selling or renting is the best and most financially sound choice for you.

 

http://www.desisowers.com/Blog/Paint-Colors-that-Sell

http://www.desisowers.com/Blog/Moving-Day-Survival-Kit

http://www.desisowers.com/Blog/To-Renovate-or-Not-to-Renovate-Should-You-Fix-Up-Your-Home-or-Sell-it-As-Is

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