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Setting Up a Successful Rental in 2024

Last Updated: February 19, 2024

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Key Takeaways:

  • Before renting out a room in your house, consider space and personalities. Then, create a Roommate Agreement to establish clear house rules.
  • Ensure your property complies with local laws and building codes, including safety features like smoke detectors and fire extinguishers.
  • When preparing to lease a room, research property codes, understand landlord and tenant rights, obtain landlord insurance, vet tenants, and keep accurate records.

Want to generate extra income by renting out a room in your house?
It’s hard to pass on an opportunity to subsidize the costs of living. But becoming a landlord isn’t a responsibility to take lightly.
Learn the legal requirements, your responsibilities as a landlord, and tips to prepare your property for rent.

Should I rent out a room in my house?

First, ask yourself a few key questions to decide if living with a tenant is a good option:
  • Do you have enough room for another person?
  • Which spaces will you share or keep private?
  • Is there another occupant you should consult first?
Space is the number one issue when it comes to living with roommates. To encourage sharing and respectful use, create a Roommate Agreement to cover house rules that aren’t in the Residential Lease.
At a minimum, each person living in the house should have a designated room to call their own. You can also schedule for common areas such as the kitchen, living room, and bathroom.
Consider the personalities of the people who’ll be living under one roof. Does it make sense to put these people together? If not, perhaps a separate apartment in the basement or above your garage would work better. Separate suites give tenants more privacy and autonomy, while still providing landlords with that extra income.
Whether you’re leasing a room or developing a basement apartment, check these things off your list before a tenant moves in.
You’ll need to keep your house in good, livable condition. Check your local laws for rules regarding property rentals (such as occupancy limits and structural requirements).

States, counties, and cities often implement the International Property Maintenance Code (IPMC) when setting out regulations for housing. The IPMC sets minimum standards for housing, and your jurisdiction may adapt this code to align with local laws and practices. For example, in Austin, Texas, a violation of the property code is a misdemeanor punishable by fines up to $2000.

Consider getting a professional home inspection done to identify any problems that may cause you to fail a safety inspection. Some municipalities may require you to pass a safety inspection to operate a legal rental suite. Although changes to your home’s foundation, plumbing, or electricity can be expensive, it’s important that your home meets all structural standards before a tenant moves in.

Not only should your house comply with building codes, but you must also comply with federal and state landlord-tenant laws. All landlords in the United States must follow the obligations in the Uniform Residential Landlord and Tenant Act (URLTA) of 1972, which requires landlords to maintain a habitable dwelling and make all necessary repairs. Many jurisdictions also have specific requirements for landlords to take care of their property and communicate issues with their tenants.

Though you may be friends with your housemate, you must still act professionally. Tenants have property rights and can take legal action against landlords that violate them. For example, it might seem okay to open your friend’s door and check on them. But tenants have a right to privacy and reasonable notice from a landlord that intends to enter their suite.

What are basement apartment code requirements?

Local laws often dictate which buildings qualify for a legal basement suite. Be sure to refer to your local and state laws for specific details. However, typical requirements are as follows:
  • The house must be a single or semi-detached house.
  • The location must be appropriate according to zoning by-laws.
  • The city must issue you a building permit before you begin any construction.
  • The home cannot alter its outside appearance (to have little impact on neighborhood aesthetic).
  • The basement apartment must be smaller than the primary unit.
  • The basement apartment should have a separate exit accessible for emergencies.
  • Windows must be large enough for emergency escape.
  • Basement ceilings must be a certain height (usually, at least 6.5 feet).
  • Doors and walls may need to be fire-rated to prevent fires from quickly spreading.
  • You must provide an appropriate amount of parking to all tenants.

Building Safety

In addition to general structural requirements, there are a few things you can do to ensure your tenants’ safety in your rental property (again, check your local laws to see what is required):
  1. Install smoke/carbon monoxide detectors
  2. Include a fire extinguisher
  3. Update old wiring/electricity sockets
These three steps are essential to fire prevention and safety.
By ensuring building safety, you can mitigate the need for disruptive repairs when a tenant resides in the building. Plus, as a landlord, you are liable for any injuries that might occur on the property. Get landlord insurance if you want to protect yourself from certain liabilities and insure the house and its contents properly.
Once your home meets general building codes, you can start adding the needed appliances, furniture, and final details.

What should I upgrade or renovate in my basement apartment?

Many secondary suites benefit from space-saving designs and furniture. If you have the budget, consider renovating high-use areas such as the kitchen, bathroom, and laundry room.

Kitchen renovations

It is not illegal to have a kitchen in your basement as long as you follow all the proper building codes and have the proper permits. If your basement doesn’t have the capacity for a full kitchen, install a kitchenette instead. A kitchenette includes just the essentials: a sink, fridge, and stovetop. Include a wheeled island counter where tenants can prep meals and store smaller appliances, such as a toaster, pressure cooker, or kettle. Hanging shelves add extra storage space where a full cabinet might not fit.

Bathroom upgrades

If your home isn’t roughed in for a bathroom, hire a professional to help install the necessary plumbing and ventilation. Add recessed or pot lights to brighten the bathroom without taking up space.

In-suite laundry

Use a stackable washer and dryer to take advantage of vertical space. If possible, put the laundry machines in a closet next to some simple storage. The machines will need space for power, water, and ventilation connections. But, if you have a closet deep enough, this is a great way to save room in a small suite.

How do I prepare to lease a room in my house?

Check these legal requirements and landlord responsibilities off your list to set yourself up for success.

1. Ensure your house is up to code.

Research the property codes that apply in your area. Get a professional home inspection to help identify the renovations your home may need before you can turn it into a rental property. Consider making any upgrades that would appeal to tenants.

2. Know the rights of both a landlord and tenant.

Review your obligations as a landlord. Create a positive relationship with your tenant and act within the law.

3. Obtain landlord insurance.

Housing authorities may require you to purchase landlord insurance. In some cases, you may be able to upgrade your home insurance policy to account for tenants.

4. Create a Rental Application and vet tenants.

Use a Residential Rental Application to collect information such as landlord references, credit checks, and criminal background.

5. Sign a Rental Agreement with the tenant.

Whether you’re renting a full basement suite or just a room in your house, having a valid contract protects both you and your tenant in the event of a dispute. Create a Residential Lease Agreement to document the terms and conditions of the living arrangement.

If you’ll be living with the tenant and wish to address details on shared spaces and house rules, create a Roommate Agreement as well. This contract covers things like chores, quiet times, and rules for parties or gatherings.

6. Keep accurate records.

Use a Rental Inspection Report to document the condition of the rental property before a tenant moves in (and after they move out). An inspection helps determine who is responsible for any needed repairs.

Use a Rental Receipt to keep a record of your tenant’s payment history, and remember to claim your expenses and income when filing your taxes each year.