We would all appreciate a little extra cash in our pockets. This is especially true when we don’t have to work so hard, or the income is passive anyway — meaning that you need little to no effort to maintain it. One way of doing this is to rent out a room in your home.

While some effort is required to maintain the property, this deal can be mutually beneficial and help the property owner capitalize on an asset they already have. For example, do you have a spare room, basement apartment or a guesthouse on your property that usually sits empty? If so, it may be a good idea for you to look into renting it out for the long or short-term. Read on to learn the process of renting out a spare unit in your home, which can help you generate income and pay off your mortgage faster.

Research and Prepare

Once you’ve decided that you’d like to rent out a room — or two — in your home and other members of your family agree with the decision, you will need to start doing some research on housing laws in your area. You’ll want to ensure that you are not doing anything against the rules or regulations in your town before you proceed. Prepare any paperwork if necessary and do some research on comparable prices of rent in the area so you’ll know what to charge future tenants.

Next, you’ll want to consider your home layout and decide which rooms you’ll rent out and what bathroom/kitchen area the tenants will use. Choose a design that will make your tenant and yourself most comfortable while still maintaining privacy.

If you have a guesthouse on your premises, an in-law suite or a basement apartment, this would be ideal for renting out. If you happen to know the person you are renting your room out to, you may have more leeway when it comes to shared spaces such as kitchens, bathrooms and living rooms.

Either way, prepare and organize your house to be renter-friendly and appealing to potential tenants. That could mean doing some upgrades to make some spaces liveable, putting locks on doors, securing valuables and childproofing, if you are planning on renting to a family with young kids or babies. Remember that while you will have to claim rental income on your taxes, you can also save money by deducting any expenses incurred for improvements from your taxes.

Set a Price and Advertise

So, you’ve done your research and found some comparable rooms in your area to make a fair judgement for your rental pricing. Essentially, you want to avoid pricing your room either too high or too low. Remember also to consider how utilities will be paid. Do you want to split it with tenants, or will they be included in the rental rate?

While it may be easier to make your rate all-inclusive, you may have to foot a larger bill yourself if your tenant or roommate isn’t considerate of how much water, electricity and gas they are using. Specify what each party will be paying for and lay it out from the beginning to avoid confusion later on.

Once you have established the rate and price stipulations, it’s time for you to get on the market and start advertising. Take pictures of the space to post online and write an accurate description of what you are offering and additional features and amenities.

Use sites such as Craigslist, Kijiji, social media and advertising websites. It may also be worth asking your friends and family members if someone they know is interested. You can also choose to use a real estate agent — who will charge additional fees or commission.

Screen Tenants and Use References

With your ads posted and the word out, you should soon be well on your way to screening and interviewing potential tenants. Think about what questions you’d like to ask during your screenings, and don’t be afraid to ask for references or proof of employment and identity. Avoid any actions that could be deemed discriminatory and be upfront on your requirements to save yourself time and effort in the long run.

Establish Rules and Have a Written Agreement

Once you’ve found a trusted roommate and done your background checks, it’s time to fill out your formal written agreement and establish some ground rules for living. That can include rules around visitors, communal areas, noise, parking, pets and more. Create your lease agreement and get your tenant to sign it before they move.

Before your tenant officially moves in, you will want to collect a security deposit from them in case of incidentals or damage to the property. Define the details in your lease agreement and do some research once again to ensure you are charging fairly.

So, if you are fortunate enough to have some extra living space, why not put it to fair use? Not only would you be helping someone else find a home, but you can also make some extra cash to put towards your bills and mortgage. A win-win situation! Just remember to check the laws in your region to ensure you comply with all the requirements.

For more information about investing in your Mississauga home to make money, call sMp Mortgages at 1-855-915-5139 or contact us here.