Homeowner informational pack – How to rent a spare room in your home

Welcome-Home

You want to rent out a spare room. 

Would you like to rent a spare room in your home but don’t know where to start? The usual process is to advertise your home on a property website. With the shortage of accommodation, you could be overwhelmed with applications. Another challenge is you don’t know much about the applicants, so how do you know who to trust?  Maybe you don’t feel comfortable inviting strangers to view your home.

 

HomeHak’s Tenant Selector allows homeowners to filter, sort, select and contact organised home seekers who could be happy in their home. Make an informed selection about who your property would suit best. If you do decide to advertise your spare room, ask for applicants to submit their HomeHak Tenant CVs so that you can filter, sort and select applicants in a consistent format in one place.

 

Once you have selected someone to view your home, there are many factors to consider and discuss with your potential new resident. This article prompts you to enquire about typical topics and what you may want to agree on at the beginning of any arrangement.

Important

This post focuses on an arrangement where an owner-occupier invites a home seeker to rent a room in their home. This is not considered the same as a landlord-tenant arrangement. Landlord and tenant legislation do not cover you, so the rights and obligations under that legislation do not apply to you. For example, you are not obliged to register as a landlord with the RTB. This also means that residents living in your home live under a licensee agreement, not a tenancy agreement, and are only entitled to reasonable notice if you terminate the arrangement.

 

In this article, we use the terms “homeowner” instead of “landlord” and “resident”, “lodger” or “home seeker” instead of “tenant”.

 

Welcome-Home
Photo by Andrew Neel on Unsplash

Selecting your resident – some considerations and discussion points

Once you have selected the home seekers and invited them to view your home, there are topics we recommend you discuss with your potential resident before selecting who will move in.

Furthermore, you can also establish a formal agreement between yourself as a homeowner and your future resident. There is an example template linked at the end of this article.

Duration and Nature of the Stay

Discuss the intended length of the accommodation period and whether or not that period could be extended. Enquire about their plans and how long they need accommodation.  You may have future commitments and need the room back after 6 or 12 months or at a certain date. It is fair to manage expectations so your resident can plan accordingly. Communicate openly about the availability of the room, as flexibility is often attractive to residents.

Damage Deposit

If you are operating a damage deposit system, be clear about the conditions relating to the deposit and provide the resident with a receipt. Make it clear that the damage deposit is not rent and will be returned at the end of the accommodation period if all goes well. If any damage does ever occur, discuss the situation immediately. This will be less awkward than introducing it as surprise news at the end of the accommodation period. Return the deposit if no damage has been caused on the resident’s departure.

Utilities

Give the resident sufficient information about the approximate cost of utility bills. Make special considerations for individual situations. If the resident will be working from home, they could maybe contribute a certain percentage of the electricity or gas bill to reflect the extra consumption.

 

Working-from-home
Photo by Annie Spratt on Unsplash

Rent Payment

Agree on the amount of rent, the day and frequency of payments, the method of payment, and to who it should be paid. Make it clear what is included in the “rent” and if utilities are included, for example. If there are situations when the rent can be increased or decreased in future, make these clear in advance.

Extra services

You may want to offer the resident extra services with the room, such as a secure parking space, cooked meals, laundry services, bed linen changes, etc. If you propose such and agree on additional services with your resident, make sure you factor in the cost of the services into the final agreed rent price for the room. Remember, if services are included in the rent, they must be delivered.

Common Areas

Outline which areas of the home may be considered common areas and which are off-limits to residents. . Generally, a resident would have access to the kitchen, living room, bathroom, back kitchen/utility room, and their bedroom. Still, every household varies, and if you prefer a resident to use a specific toilet, for example, that should be communicated.

 

Person in the living room with computer
Photo Thought Catalog on Unsplash

Time and consumption limits

Inform the resident of any time limits which may apply to the use of amenities such as the shower, the heating, the tumble dryer, etc. Most people can appreciate the rising cost of living, especially concerning utility bills. If you want to set consumption limits, make the residents aware before they move in to avoid potential disputes later.

Other Limitations

To rent a spare room in your home without incidents, you may want to discuss other limitations. For instance,  consider if there will be limitations on visitors, noise, hours of entering and leaving home, use of common areas, etc.

Expectations and Preferences

Discuss any personal expectations, pet peeves or preferences you have regarding your home. It could be related to anything from noise levels to security to cleanliness and so on. Every home and every person is different. If you are accustomed to doing things a certain way, it’s important to remember that people cannot read your mind! Open communication and setting reasonable boundaries early on will help to avoid any frustrations in the future.

Smoking

Many homeowners don’t allow smoking. However, if you permit smoking, discuss the rules for smoking at your home. Outline if there are designated areas, where to dispose of cigarette butts, where to empty ashtrays, etc.

Sharing of Household items

There may be some everyday products that you are comfortable with your resident using. If you are willing to share, we recommend creating a checklist of items to agree on, for example, milk, sugar, tea and coffee, toilet paper, kitchen towels, cleaning products, dish soap or dishwashing tablets, shower gel, shampoo, laundry detergent, etc. Discuss with the resident which common products they have permission to use and how such items will be bought. If certain products should not be shared, discuss these in  advance.

 

Man-cooking-kitchen-at-home
Photo by Jason Briscoe on Unsplash

Scheduling use of common areas

Schedules can be helpful where multiple people are living in the home. Everyone has different day-to-day lives. It’s considerate and useful to compare schedules with the resident. If necessary, agree on times of use for the busiest areas of the house.  For example,  you might schedule the use of the kitchen for cooking meals or the use of the main bathroom for taking showers or baths. The goal is to ensure that everybody’s daily routine can run smoothly. Understanding everybody’s schedule from the start can also avoid disruption if, for example, you or your resident must work awkward shift patterns.

Keys

Discuss the resident’s responsibilities regarding holding keys to your home. Specify any conditions, e.g. don’t make copies or that there is a fee to replace lost keys.

Security

For many homeowners, knowing there is a trusted resident in the home offers added security. Demonstrate to the resident how to properly lock doors and windows and set alarms or any other security equipment in the home. Specify your expectations about locking up when the home is unoccupied or before bed. If you have other people nominated as keyholders for your home, such as neighbours, family members, or a security company, make sure your resident is also in the loop.

Household Services/Contracts

Explain any services you may have contracted related to the home and how the resident should handle them in your absence, e.g. refuse collection, signing for post & packages, allowing access to builders, childminders, window cleaners, etc.

Household Responsibilities

Discuss the sharing of household responsibilities with the resident. This might involve, for example, taking turns each week to clean the common areas of the home, watering the plants/garden or taking out the bins to be collected, etc. Discuss and outline the expectations in advance, so there is no confusion later.

Embracing differences

Maybe your resident comes from a different cultural or ethnic background? If so, it is considerate to gen up in advance so that you can ask thoughtful questions about cultural differences that might affect the experience for both of you. Ask the resident what a typical day in their life looks like. Enquire about food and eating habits, work or study hours. You will possibly discover more similarities than differences and more conveniences than issues. For example, if your resident is from Spain, they may like to cook dinner later in the evening, allowing you full use of the kitchen during Irish dinner time!

Pets

Disclose plenty of information about your pets to the resident in advance. Make sure to introduce your pet to the resident before they move in It is important to avoid issues with allergies or where a resident has a fear of animals. Before agreeing to a property viewing, disclose details like the type of pet, size, temperament, etc. Be clear about any expectations concerning your pet, like ensuring doors, gates and windows be kept shut.

Would like your resident to feed your pets sometimes or keep an eye on them while you are away? Would you be happy to recognise such services with a discount on rent? This could be a great advantage if you have pets and would like to rent a spare room in your home. However, don’t forget to mention such expectations in advance.

If you agree with a resident that they can bring a pet to your home, obtain the same information about their pet.

 

Dog-owner-at-home
Photo by Evieanna Santiago on Unsplash

Special Requirements

Discuss with your resident if you, any other household member or the resident, have special requirements, such as a potential need for minor medical assistance. For example, if someone has a severe nut allergy, it would be a good idea to inform all household members where they can find Epi-Pen and how to administer it – just in case. Other conditions might include diabetes, epilepsy, low blood pressure etc.

Emergency numbers

In the event of an emergency, discuss with your resident what to do. Maybe you have an accessible list of phone numbers for local emergency services and family members or neighbours. For your resident, it might be a good idea to share contact details for a family member of theirs, a friend or their workplace in case of any unfortunate circumstance.

Notice period

Agree on a reasonable notice period for termination of the agreement in advance. People living in your home as residents are living under a licensee agreement, not a tenancy agreement, and are only entitled to reasonable notice if you choose to terminate the agreement. Should you require the resident to move out of your home, the process is more transparent if you can invoke a previously agreed-upon notice period.

For when your resident wants to leave, outline how your resident must communicate the notice (e.g. email or letter). State how long in advance they should advise you of the leaving date. Make it clear that you will return the damage deposit at the end of the final rent period if everything is satisfactory.  

Sample homeowner-resident agreement

Finally, if you rent a spare room in your home, consider having all the norms in writing. To make it easier, we have created this sample agreement (click here to download). Feel free to modify this sample agreement outlining living arrangements to your liking.

 

Further reading

If you would like to rent a spare room in your home, we recommend you look at this article.

For more information about the Rent-a-room relief, visit Citizensinformation.ie.

Leasing in Ireland – The True Cost of Being a Landlord

Yellow house door

Leasing in Ireland – The True Cost of Being a Landlord

 

Despite public perception and high rents, the bottom line for landlords is rarely as clear-cut as popular opinion supposes. An immense of responsibility, paperwork, and costs is plenty to deter many from participating. For those considering leasing in Ireland, we have comprised an extensive list of costs, helping you provide the best value to your tenant while ensuring your costs are suitably maintained.

 

business people making agreement with pen

 

1. Lost Rent

Keeping costs low can be a priority for many landlords, but a breakeven point must be identified to detect when an empty rental income is operating at a loss. HomeHak’s Lease Calculator is designed to help you keep track of the multiple incomings and outgoings to locate the precise point of profit.

 

2. Mortgage

Unless you own the property in full, one of the highest costs to overcome is a monthly mortgage repayment, with an average interest rate on new mortgages in Ireland amounting to 2.79%, noticeably higher than the European average of 1.29% (D. Cassidy, Why mortgage rates in Ireland are so high, 2021). If every room in the house is leased or not, your mortgage will remain due as standard.

 

3. Pre/Post Letting Expenses

In order to provide the highest value to your tenants, it is necessary to ensure that upkeep expenses are incurred prior to and after a tenant has stayed. Any tenant will demonstrate signs of living, be it marks on painted walls, scrapes on floorboards, or just some well-worn couch cushions.

 

A landlord has the responsibility to provide well insulated and ventilated living conditions that are free from damp, as well as equipping sound structural and electrical integrity. These turnaround times should be kept to a minimum and a timely and efficient electrician, carpenter, or painter will prove invaluable.

 

tenant-cv-rental-application-new-home

4. PRTB Registration

The vast majority of landlords will find it necessary to register with the Private Residents Tenancy Board. Costing €90 per tenancy, this registration allows you listing on the national register of tenancies and is a requirement for any landlord.

 

5. Insurance

Conventional home insurance will not cover you for rental activities and as a landlord, you are legally required to provide insurance for fire and public liability. Similarly to our Tenant’s Guide, you will find investing the time to source the best insurance a worthwhile return.

 

6. Fees

Managing a property is much more than just financially intensive; a significant amount of time is taken up dealing with issues, sourcing the correct tenant and other administrative responsibilities. In order to avoid these, as many as 87% of landlords find it worthwhile to outsource said responsibilities to estate agents…at a small fee of course (HomeLet Landlord Survey, 2015).

 

Estate agents will advertise your property, filter through the countless applications, and identify the best-suited applicants for your final approval. They will also collect rent on your behalf and act as the go-between for any queries big or small. Thus, providing you with a hassle-free experience ranging from 6.5% – 10% of rents (Estate Agents, Let.ie, 2021).

 

In addition to the direct fees mentioned above, there are legal and accounting fees. For every contract, application, and submission there will be a solicitor required to pore over and flag any potential issues, as well as bookkeeping and tax bills to meet.

 

7. Council Charges

Your tenant may directly deal with some fees depending on the agreement including rubbish, recycling, or other services such as gardening. However, if you will be managing these directly you need to consider these costs to appropriately offset them.

 

8. Maintenance & Repairs

Often the area of most debate, maintenance and repair charges can prove costly, just as they can be for any homeowner. Effective pre/post letting care will only provide you with so much cover throughout your tenant’s lease.

 

Ultimately luck plays a factor and a corrupt socket may be as likely as a leaky roof, although both substantially differ in cost. How many tenants you have under your roof will impact these costs and recent data indicates this number is on the rise at 2.8 on average (Savills Ireland., Shifting Ownership in Ireland’s Private Rented Sector., 2017).

 

A close and trusted relationship with plumbers, electricians, carpenters, and general workhorses are worthy investments. A difficult cost to anticipate without the use of hindsight and precedent, it must nonetheless be considered when setting rents.

 

9. Tax

Before profits can be redirected, taxes need to be budgeted for. As with most taxes in Ireland what you pay is dependent on your personal circumstances. Net rental income is taxed at either 20% or 40% and due every year on the 31 October. Planning and organization will prove your best tools in minimizing the amount due. Keep every receipt!

 

Here is a list of expenses that you can offset against your taxable profits:

 

a) PRTB Registration of €90

b) Wear and Tear maintenance is deductible to the point where the property is in a livable standard, including furnishings and fittings, and essential repairs and maintenance

c) Advertising and Management Fees

d) Legal and Accounting Fees

e) Insurance premiums

 

10. Trust

Trust is one of the more critical and intangible considerations. It can either prove to be an invaluable asset or an endless liability. Your tenant will directly impact the costs you will incur, either directly or indirectly. Providing your tenant with the opportunity to invest themselves into their home will make them happier and therefore more likely to remain. Data would indicate that there is a trend towards longer-term tenancies. 25% of agreements now longer than 12 months, up from 15% in 2017 (Residential Tenancies Board., Rent Index., 2018).

 

Besides the exceptional cases of moving country or county, your tenant will continue to provide you with income as long as they are content with their conditions.

 

agent giving keys to tenant

11. Profit

It may seem strange to see profit listed as a cost for landlords. However, when calculating a breakeven point, you must include a cost for the time and stress incurred. It is essential to appropriately research the target market. Guidelines indicate it is inadvisable for renters to pay more than 40% of their income on rent (EY DKM, Rent Affordability in the Irish Residential Market, 2018).

 

To summarise

Being a landlord in Ireland can be a thankless job that is sometimes vilified. However, there is a vital service provided that supports the country and those living in it. Your unseen work and risk-balanced consistently will allow you to maintain a profit. Alongside, also allowing for good people to turn your property into a home.

 

Check out our article Best Ways To Be A Great Landlord – HomeHaks Top Recommendations!