Gyroscopic Investing

Ad Orientem wrote: Renting a room in someone's house is great advice for people on a budget.  I have done it a few times myself when money was tight.  It can also be a good source of extra income for a home owner.  Here are a few suggestions if you are a homeowner thinking of renting out a room.

1. Be sure your room for rent add lists the qualities your looking for (and not) from any perspective house mates... i.e male or female, non smoker, pet friendly etc.  Also describe in general terms the neighborhood and what is near by.
2. Make sure that any boarder has a job or a verifiable source of income (students often have money from loans etc.).  
3. Run a credit check and criminal background check.  Depending on state laws you may need to get written consent for that.  Remember that a lot of people looking to rent rooms are doing so because they are in financial difficulty.  Bumps in the credit report should be weighed with that in mind.  But don't rent to anyone with an eviction on their credit history.  That's just asking for trouble.  Ditto anyone with a criminal record involving larceny, drugs or sex crimes.  That said one of the coolest roommates I ever had was a dude who shared the upstairs of a house with me for over a year.  He was an older guy getting his life back together after doing time for bank robbery and drug dealing.  He was totally upfront about his past and worked two jobs.  And the entire time I knew him I never so much as saw him have a beer.
4. ALWAYS use a lease.  Lay down the house rules upfront in the lease i.e. no smoking, no wild parties, no overnight guests and no drugs.  
5. Check references and be sure you get a month's rent in deposit.
6. Ask for rent in check or money order form so everyone has a record.  Be leery of renter's who pay in cash regularly.  If cash is used be sure to give a receipt.

Make sure you check to find out how hard it will be to evict someone if they turn out to be a dirtbag.  In some states like California the process can be challenging and renters have strong legal protections.  In other states once you put up the "Pay or Quit" notice and wait thirty days you can pretty much cart their stuff to the curb and change the locks with little likelihood of legal issues.  But be aware that once you let someone move in, it is extremely difficult to get them out in less than 30 days even in states that tend to favor land lord rights.