By renting out a portion of your home, you legally become a landlord. As a landlord, you're now legally responsible to keep your tenants safe, and to keep your neighborhood safe from your tenants. Because you may be held liable for any criminal acts committed by your tenants, it's important that you obtain criminal background checks on applicants before you allow them to move in. Landlord's should also obtain credit checks on their applicants. Credit checks will show you any prior evictions and give you an idea of the likelihood of your new tenant paying you on time.
The idea of renting part of your house is appealing to many homeowners, especially those who could use the extra cash. However, before deciding if renting your home is a good idea or not, first consider any negative effects such as the additional liability associated with being a landlord. If you do decide to go ahead with your rental, do it the smart way by taking precautions.
Obtain Background Checks on Potential Applicants
Sign a Written Lease
One of the most important aspects of renting is to sign a written lease. The lease should detail terms such as the rent amounts, due dates, deposits, duration, late fees, grace periods, eviction procedures, terms of breaking the lease and the names of each person included in the lease. In addition, the lease should also detail how utilities will be split, how the food situation will be handled, tenant responsibilities, rules on guests, which rooms are accessible to the tenants, and any rooms where the tenants aren't allowed.
Establish House Rules
Living with another person can have its difficulties. Therefore, it's important to have house rules established right from the start. For example, if your lease requires your tenant to share in the yard and housework duties, you should establish a plan on how this will work. One way of accomplishing this is to establish a rotating schedule where you vacuum and dust one week, and the tenant the next. House rules should also be established on how the guest situation will be handled. For example, some landlords restrict or limit their tenant's ability to have late-night or overnight guests.
Obtain Liability Insurance
Insurance is an area often overlooked by landlords renting out a portion of their home. Many automatically assume that their homeowners insurance would cover any issues. However, this is usually not the case, as homeowners insurance doesn't cover tenant liabilities. For example, if your tenant breaks his foot by accidentally tripping in a hole while walking through the yard, you're liable for his injuries. For this reason, many landlords choose to obtain renter's liability insurance, and even umbrella policies, to cover themselves in case such an event occurs.