photo credit: raneko

I found this thread about a homeowner looking for some advice about being a “live-in landlord” because they’re thinking about taking in a friend of a friend who’s taking classes at a nearby school.  In nearly all the responses to the original poster, issues of privacy were the number one concern not to take in this friend of a friend.  I don’t know how much experience these people had or how much of it attributes to the group think mentality.  Here’s my take on the privacy issue when you rent out a room.

Yes, you will loose privacy.  How much depends on how you’re home is setup.  A person renting out a room in their apartment like condo will loose more privacy than say a mansion owner renting out their rooms.  In the latter case, since you’re in more confined quarters, you’ll most likely notice the other person more while the former case a mansion with more space for people, you’ll probably have infrequent encounters on a daily basis and be unlikely notice the other person.  These are two extreme cases of how the setup of home can affect a homeowner’s privacy.  I would imagine most of the live-in landlords fit in between the two extremes with some privacy compromised as result of a roommate.  So, it really depends on how big your home is how you’re home is setup with regards to which room the roommate will occupy.

SIDE NOTE:, if you’re wondering, “why in the world are mansion owners renting out rooms?”  There’s an article here to prove that mansion owners are in a bit of bind themselves.

AWKWARDNESS

A few of the responses mentioned the feeling of awkwardness with a roommate, meaning you’re home won’t feel like your anymore with a roommate.  I can attest that this is true, but only for the first several weeks.  I clearly remember when I had my first roommate move in, I was contemplating whether this was the right move because I was going to be sharing a space with a person I found on the internet.  I don’t know what made me push myself to get over this awkward feeling, but after the first few weeks, I fell back into my routine and the awkward feeling subsided.  The way you feel, will be the somewhat the way you’re roommate will feel, if you take the initiative to reach and break the ice, the awkwardness will subside faster.

In short, yes, the commenters are correct in that there is an awkward feeling.  One way to avoid this is to have friends or friends of friends rent your spare room.  I highly don’t recommend having a business arrangement as when things turn sour, it can lead to arguments and lost friends.  In the case of renting out to friends of friends and an argument does arise, your mutual friends will be stuck in the middle – not a pretty situation.

DEALING WITH ISSUES

Some of the commenters have suggested a trial period ranging from several weeks to a month.  This is good idea.  I never tried this myself nor have I ever asked someone to move out.  On paper, a trial period is a good idea, but here’s some things to keep in mind.

1. Transaction costs of time – Finding a roommate and arranging meet up times to show your place is a hassle.  Throw in a few annoying e-mails from scammers and you’re adding extra aggravation to the entire process.
2. The perfect roommate is hard to find – My definition of the perfect roommate is someone that pays rent in full, on-time, and lives somewhere else.  This roommate will provide no loss of privacy and ensures a secondary income for you.  However, the living somewhere else is probably not going to happen.  So, you’re going to have to live with compromise.

I feel the privacy isn’t the issue that most newbie “live-in landlords” should be worried about.  With the anticipation of having a roommate move in, the loss of privacy won’t come as shocker.  The awkward feeling of living with a roommate in your house is the bigger hurdle to climb.  I know this tied into the privacy issue, but if you can get over the awkward feeling and developing a routine that works with your new found roommate, you’ve paved the way to living with future roommates.  So that’s my take on the privacy issue.

 photo credit: Portland Afoot

The New York Times ran an interesting piece a few days ago pertaining to the liability of homeowners insurance for folks who rent out their homes part-time through popular sites like AirBnB.  Though, the AirBnB site is catered to people unlike those of a “live-in landlord”, the article did briefly mention renting out individual rooms to roommates.

Liability of homeowners is a big concern for us folks that rent out the individual rooms as I receive several e-mails per week on the issue.  What I find quite surprising and relieved reading about in the article is:

In the four years since Airbnb opened for business, it says it has not heard about a single liability claim or judgment over $10,000, or even an attempt at one. In that time, the company says that it has booked over five million nights of lodging.

Now of course, airBnB is a site where your entire residence is rented out to tenants as opposed to the individual rooms.  I strongly feel that folks like me who are “live-in landlords” are less susceptible to claims and horrific incidences because we can better monitor our roommate’s activities, i.e. control them if they get out of hand.

I don’t know how this fits in with the five million nights of losing without an incident, the article linked to a homeowner’s epic ordeal when she rented her residences through AirBnB and found out she was completely ransacked.  To alleviate situations like this in the future, AirBnB offers a guarantee to protect your personal items up to $50k.

Although, I’ve used AirBnB to rent properties while on vacation, I’ve never used AirBnB myself to list my house so I’m unfamiliar with the terms and conditions from a homeowners perspective.  The article goes to state, “AirBnB makes it clear that it’s not liable for any any and all listings and accommodation.”  This probably isn’t all too important for a renter, but as a homeowner renting out their property, it raises concern who’s liable in damages.

With that in mind it’s a no brainer that the article mentions that you shouldn’t be avoiding the home insurance issue.  Back when I first started this venture, I contacted my insurance company and informed them that I was going to take on a roommate.  The roommates situation didn’t deter my insurance company one bit.  You can read about that interaction between my insurance company and myself here.

Again, the case in the article is geared more towards homeowner renting out their entire house for several months of the year versus renting out a single room while you’re still living there.  I think insurance companies are a bit more relaxed in the latter case.  Partly because while you’re still living in your residences and utilizing your current house as a place to live first then a commercial business.  Secondly, as I mentioned before, you can monitor your roommates behavior to ensure nothing is going to adversely affect your home.

For homeowner starting out on the renting out rooms venture, it’s definitely a wise choice to inform your homeowners insurance.

 photo credit: Neil T

Sorry for the lack of posts. I’ve been away on vacation and thought I would have the time to post something upon my return, but as evident from the lack of post that didn’t happen.

So, what’s new in the world of renting out rooms?  Two things occurred in my house.  One of which happened while I was away on vacation and the other happened the week I returned.

1. While I was away, my wireless route (Apple Time Capsule) stopped working.  Rightly so, this unit was 2 plus years old and there’s been a number of reported incidences of these units failing.  Without the Time Capsule device, there’s no wireless internet, which is a devastating loss for my roommates as we don’t have cable TV.  One of my roommates took the liberty to go buy one with his own resources, albeit a high end one because, well, that’s the way he is with his computer stuff.  He wants the best performing device to obviate any obstacles that may interfere with his gaming.
2. My first week back from vacation, my hot water heater quit working while I was at work.  To any homeowner, when a hot water heater fails, it’s never good news because it often equates to water damage  and no hot water

I’m fortunate my two roommates were home while this happened and that they were competent enough to shut off the supply to the water heater.  In addition, they took time to clean up the water in the laundry room before any more water seeped into my bedroom area of the basement.  The vast majority of other roommates would have panicked and would have been clueless on the proper action.  I can’t be anymore grateful for the water damage they mitigated.

Since the hot water heater failed because of normal wear and tear, it’s my sole responsibility to fix it in a timely manner.  There’s no justification for me to split the cost of the repair with my roommates.  I’m the homeowner and my roommates are my almost like my paying customers.  I’m the business owner providing a service to my two roommates.  I’m responsible for ensuring everything is in proper order because it’s the reason why I’m in business.

 photo credit: scott1723

During the times I’ve posted an advertisement looking for a roommate, I’ve never fallen victim to a scammer(knock on wood).  A reader, Nise from Georgia recently contacted me about rental agreements because her roommate was moving in rather soon.  I began to ask the reader questions and it resembled the likings of a scammer.  I immediately told her to stop all communications with her and not to wire or deposit any more.  Thanks to my intervention, I was able to prevent Nise from being a victim of a scam.  She has agreed to share her story as a learning experience for pointers to picking out scam during e-mail exchanges.

Enter Nise:

There is a person who calls herself Dawn Ellis. Her email address is dddolls96@yahoo.com, who is pretending to be interested in renting your room.  She seems really nice and very professional at first, and then the signs of scamming begin to emerge.  I will start by saying look for signs and discrepancies in your emails exchanges.  This person misspelled a lot of words.  She contradicted herself a couple times in her email exchanges.   She stated that she was a woman of integrity and of great dignity and would never get involved in any dubious acts.

Well the only problem I had with that is I did not know her, so how would I know that she was what she was claiming to be?

Okay, anyway let me share with you briefly about this scam I came close to becoming a victim to.

This Dawn Ellis person asked for room details and asked me to text a picture of my house.  Now, I don’t text people pictures of my house, my intent was to send her a picture of the room.  Anyway I stated to her that I would send pictures of my spare room only if she gave me her phone number, so that I could text the pictures to her. Well I did not receive a phone number (This is where the scam began to brew) and did not send her any pictures.

Without any pictures of the room, she was still content with the room and insisted on the details for the payment.  I guess she felt unsafe giving her phone number to someone she met on the internet.  So, next I sent her the details concerning the room and rent amount.

SIDE NOTE: ALWAYS, ALWAYS talk on the phone with your potential roommate several times before meeting them in person so that you can hear their voice and get a feel for their personality.  And of Course the no brainer is, ” Never let anyone move into your room until you meet face-to-face.”

So, I received another email stating that her supervisor would be sending me a check in the mail.  She stated that the check would be in the form of a cashier’s check in the mail sent by USPS Courier.

Next, this Dawn Ellis person stated in her email that she found a shipper that will be moving her things, but that he (the shipper) insisted on advance payment, before proceeding with the shipment. She stated that as soon as I received the cashier’s check, to take it to my bank and deduct the fee for my room, and to send her part of the balance through the WESTERN UNION office to her shipper ASAP.

SIDE NOTE: Now wouldn’t it have made more sense to have your supervisor to cut two checks one for the room and one for the shipper. It’s really her job to pay her shipper, not mine. This is when I knew something wasn’t right. So I emailed her and told her that I would not be sending her any money and that I did not want to do any business with her because this was a scam.  I cut off all communication with her. I did not send any more emails.

SIDE NOTE: Never except money in the mail always except in person. Make a hand-to-hand transaction always. And never send any amounts of money via Western Union back to someone for any reason….It is a SCAM! They will tell you to send some money back to them via Western Union directly to their shipper or send them some money so that they can pay their shipper themselves…..Nonsense. Don’t fall for this trick.

She sent me a reply email as if like she did not believe me when I stated to her that I will not be doing any business with her anymore.  She insisted that it was fine that I did not send any money to the shipper, but that she needed me to send some amount out of the balance to her to pay her shipper, so that her things could be picked up.

When I told her that I realized that this was a scam and that I was not sending her any money.  She emailed me that she was a woman of great dignity, integrity, and that she would never get involved in any dubious act!

I hope that anyone that reads my story will feel more equipped and feel smarter when dealing with roommate scammers.  Anytime you feel that something is not right email Mike.  He’s the one that alerted me about the scam I was about to fall victim to when I contacted him about rental agreements.

When in doubt talk or tell someone what is going on before you fall victim to someone trying to scam you out of your money.  We are in a recession and people are desperate committing fraudulent acts!  Always stay on the alert and don’t be anxious for nothing.  Stay calm, pay attention talk to someone and make smart decisions.

Also, as a result of dealing with this scammer, I lost a legitimate renter and have more headaches to deal with.   Since I failed to respond to a legitimate roommate on roommates.com by the available date of my room I stated in my profile, she thought that maybe I was a fraud for failing to respond and so she reported me to fraud alert on Roommates.com.

I am presently still looking for a roommate and I am not a scammer.   I want to get that fraud alert off of my roommate account that I received dealing with this scam because I did lose  potential roommates from it.  I received several emails of people interested in renting out my room and I did not respond back to them because I thought that this Dawn Ellis person was a real potential roommate.

Boy scammers really cost you time and money. This was a crazy experience I hope I never have to go through this again. This was really more than I could bear, even though it could have been much worse.

I hope that we can all learn from Nise’s experience.  The key take away here is to always deal in person. Never ever send money to someone you have not met.  I can’t stress this last part enough.

Don from the San Francisco Bay Area was kind enough to share his recent story of renting out his spare rooms.  He initially contacted me a few months ago about some questions or hesitations about renting out his spare rooms room.  After some advice from me, he took the plunge and rented out not one, but two rooms.  It’s been a few months since he took the plunge and he’s here today to share his story.

Here’s Don:

I’m a fairly hard worker, with hours ranging from 65-80 a week I was rarely ever home, and with 2 extra rooms unoccupied some valuable space was going untouched.  Fast forward 2 years when I found myself during the Holidays with family, the normal “how have you been” and “what have you been up to” conversations sparked up and the question finally popped up, “so what’re you doing with those 2 empty rooms?” One of my cousins brought up to me that those 2 unused rooms could be bringing me some income, I was very reluctant because not only did I not like strangers being in my house, but it was hard for me to trust others around my belongings, the belongings that I’ve worked so hard for.  The fact that I can have an added source of income appealed to me so I delved into this further, and to my amazement it’s something that would benefit me in the future. I stumbled on Mike’s blog and it really opened my eyes, I found a site where I can actually relate.  I decided to email Mike on a whim , not expecting to hear a response but maybe he could give me some insight on my situation. A few emails later and I decided that I would give it a try, worse comes to worse I can have one month’s mortgage paid for and I’ll have my space back if things don’t work out.

I decided to put a straight forward and honest listing up on craigslist, I was specifically looking for renters, not house/roommates.  I understand that some people want relationships and friendships, but with all of my outside obligations I didn’t see it possible for me to create any other social relationships when I was at home.  The phone calls came in hard and fast, being in the Bay Area, real estate is a valuable commodity.  I based my rent on the local listings and made it competitive. Little did I know that most of the renters out there were just supplying a “room” not a home. My house is a home, I’ve remodeled it to my liking and as comfortable as can be with many of the homely amenities. I went into the process with an open mind but also having some very strict requirements ( requirements that wouldn’t interfere with my professional or personal life), I know I had to find renters who were hard working, clean, respectful of personal space/belongings AND renters who I can trust with my GF (who is also living with me). I did the normal prescreening over the phone, thankfully my human resources background came into play to help me prescreen the prospective renters.

GETTING THE ROOMMATES

I narrowed it down to the 2 renters who I thought would mesh well with me and my

lifestyle, they were far from whom I had expected. One is a new resident to our country and was given the opportunity to become a citizen, the other is a hardworking senior making his way through life, 2 very far on the spectrum, but we all coexist fine. The renters are the closest thing to exactly what I’ve wanted , they’re clean, quiet, and hard working.  They pay rent on time and very much have their own lives.

This might possibly have been one of the best chances that I’ve taken, I was the last person to be comfortable with renting out a room, but at the same time I’m also the person who will fully immerse myself before making a decision, because you know what they say about assumptions… It’s been about 3 full months now and I couldn’t be happier, the changes I’ve made in my life have been very minimal but the financial tradeoff has been highly beneficial.

###

Thanks Don for sharing your story.  I hope that someone in his position can relate to his position and are inspired to be more assertive in renting out their spare room.  I’d like to point out that if you keep worst case scenarios as a constant reason why you shouldn’t rent out a room, you’re unlikely to keep yourself from renting out a room, thus possibly preventing you from realizing the other end of the spectrum.

A lot of people have e-mailed me about how to find roommates.   When I first started years ago, I used roommates.com as my sole medium to land my first several roommates.  Since then, I’ve listed roommate advertisements on all possible sites.  This is because I’ve developed confidence in my screening process to find reliable roommates and most importantly, to weed out the scammers.

I feel that for anyone starting out, roommates.com is a good place to start because

1. You have the ability to prescreen roommates based on their profile.  If they seem like a fit, you can send them an e-mail introducing yourself and take it from there.
2. It has a relatively large network value, meaning there’s a large user base such that you’ll find a roommate.  I live in a suburban area and have had luck with the service.  So if you live in an urban area, you’re likely to have more responses than me.

Roommates.com is a pay site, but it is free to sign-up and to browse profiles.  You only have to pay for a subscription of either: 3 days, 30 days or 60 days if you want to READ messages in your inbox or to view their comments section of their profile.  I wrote a detailed post on how to get started with roommates.com here.

With roommates.com being a pay for site, it doesn’t mean it’s not susceptible to scammers.  In fact, I think there are scammers anywhere on the internet where money can exchange hands.  For information on weeding out scammers, read this post here.

MSN Real Estate had a short piece on “How to rent out a room in your house.”  Helene Prince, one of the commenters is a Director of Property at Caldwell banks and the first thing she mentions is:

..remember when you are thinking about bringing in a tenant is that it’s a business deal, not a friendship,..

This is why I advocate against having a friend renting a room from you.  Sure, you may have been good roommates in college or in an apartment and you hope this will carry over when he or she is renting a room from you.

But when you’re the homeowner, you’re profiting from the living situation in terms of building equity and extra income.  Because of the profit-gaining situation, it’s a business relationship.  When you make decisions such as raising the rent price or cutting amenities, these are business decisions that are usually decided by yourself because of necessity.  When you’re roommate friend no longer agrees with the changes or adjustments you’ve made, things can turn sour.

The agent also says to be prepared to think “carefully about whether they want to live with someone else.”

I couldn’t agree with this anymore.  For this reason, I detailed a litmus test in my Quick start Guide to see if you’re ready to take the plunge to becoming a “live-in landlord.”  If you’re thinking about renting out a room and haven’t already downloaded the guide, take the time and do so.

It’s rare that I find articles helpful to “live-in landlords” because either the author either has no direct experience with renting out a room or the advice is just so broad that it just logical advice that anyone could have written.

In the State of CT, there’s a container deposit law where a consumer is required to pay a nickel deposit on a soda can or other carbonated beverages.   The idea is to incentivize recycling by ensuring the container is returned to a redemption center (grocery store) in exchange for the nickel.  To most folks, it’s not worth the effort for a measly nickel.  If anyone has experience with this, they’ll probably agree it’s a time consuming dirty job.

Despite the troublesome effort, I like to proudly say that I return soda-cans for the nickel deposit.

However, I’m smart about the process.

Several of my colleagues are complete soda addicts consuming anywhere from 1-3 cans per day.  Over the span of a month, these colleagues drink a lot of soda where it can add up to a decent chunk of change.

To avoid the time consuming and dirty can collecting task, I’ve asked these soda-drinking colleagues, if they were going to discard their soda cans anyway to put them in a cardboard box located under my desk.  Nearly all my co-workers had no problems obliging to my request.

The net result was a sizeable amount of soda-cans stacked neatly right-side up so that none of the residual soda spills out.  The only time consuming part is driving to the grocery store and depositing each can into the redemption machine.  Since I have to go to the grocery store anyway, the only real incremental opportunity cost is spent depositing each can into the machine, which doesn’t take long anyway to do.

Now, as an engineer, I’m making a perfectly good salary to obviate the need for this can collecting scheme.

By having to ask my colleagues to give me their soda cans, it could give them thoughts as to “why is this guy wasting his time” collecting soda cans for a minuscule deposit or revelations about my financial stability.

There’s a certain stigma when someone collect cans.  You normally think such an activity is relegated to the low income people or people in need of money.

To be exact, I really don’t care about what my colleagues have to say.  I don’t feel any embarrassment asking soda drinkers to drop off their cans in my little box at my desk.

In fact, several months after I started this soda-can collection effort, three other colleagues followed suit after seeing how effortless my process was and that no one really cared about the stigmas associated with collecting soda cans.

WHAT’S THE MORAL OF THE STORY? 

Newbie homeowners may sometimes be on the fence about renting out a room simply because your giving off signals about your financial stability to your neighbors.  After all, the extra cash is the number one motivation for renting out a room in your house.  The stigma associated with renting out a room amongst your neighbors may be enough of a deterrent to end all thoughts about renting out a room.

Here’s my advice to anyone that’s been in this situation:

Don’t think about what other people or neighbors will think, you’re only second guessing yourself.

Like in the case with my soda-can collecting gig, I never in my right mind would have imagined that three other colleagues would imitate my idea.  This may very well be the same scenario with your neighbors.  Once they realize how smart or acute you’re in making a little cash on the side, they might be envious and follow your lead.

I was reading an internet article from Smart Money about a new website launching in early March that may be suited for homeowners that still want to make some extra cash from their house, but don’t like dealing with roommates.  The website is called Parkatmyhouse.com.

From the name, you can already get an idea of the concept behind the site.  It’s basically a way to advertise your driveway space for commuters.  Initially, the idea doesn’t sound right, because urban downtown landscapes aren’t filled with single family homes with drive ways.  Upon further reading, the article details specific cases such as sporting events and commuter lots where the number of riders exceeds the number of available parking spots.  The article links to a Wall Street Journal Article citing one specific instance from my neck of the woods in CT.  The Metro North Rail network runs along the South Eastern corridor of CT bringing in commuter to NYC.  To ride the train, commuters must first get to the train station and most of them do so by driving their cars.  The public parking spots are in short supply with the growing number of commuters.  It’s specific cases like these where Parkatmyhouse.com will flourish.

Apparently the site is already a hit in London.

where more than 20,000 property owners earned money off their concrete.

The brainchild of the site, Anthony Eskinazi was inspired to create the site after his frustrations with parking at a San Francisco Giants game.

Parkatmyhouse.com is not active in all major areas.  So far, it’s available in Philly and D.C.   If you enter your zip code and sign-up, they’ll let you know when they’ve got enough spots to launch in your area.