Renting Out A Room In Your Home

Thursday, October 23, 2014

So, you want to rent out a room in your house?

It seems an easy enough and convenient proposition: you’ve got a mortgage and a spare room or two and there are plenty of tenants out there looking for somewhere nice to rent, that doesn’t cost the Earth.

It seems like a dream scenario. You get to offset the costs of your property and someone else gets to live comfortably for a reasonable price. You might even find a new friend!

However, while there are plenty of positives, there is also an inherent risk involved in sharing your home with a stranger, and some obligations, so be sure to consider the following before hitching up that For Rent sign.


How will you find your tenant?

Many people would likely housemate hunt via friends, or friends of friends.This is probably safer as you are likely to know the person who will share your home or someone in your personal network will know them.

If you are going to be searching online or via existing network, for example, a group that organises placements for foreign exchange students, you’ll want to ensure you know exactly who will have access to your home, your goods and your family, so only deal with reputable networks.

There are several websites, too, that act as portals for people renting out rooms and the big real estate sites like, too, offer this service .

Of course, you could always place an ad in the local newspaper or on Gumtree but see our entry on Stranger Danger below, before choosing the method you’ll use to find a tenant.


Be clear about expectations

Be sure to explain clearly exactly what is on offer.

If the room is on the smallish side, say so. If there’s excellent cupboard space, say so. If they will be expected to share a bathroom, say so. If there’s no off street parking, say so.

If you’re funny about having pets in your home, smoking or constant visitors, be sure to state that straight up.

It’s better to let your potential tenants know the rules and it will cut down on the number of people who are interested, and thus on your vetting time.


Be vague if you are advertising the vacancy online

Never provide your full address or full name online.

A suburb and first name is fine, along with a mobile phone number or generic (not work) email address.

Along these lines, also let people know that if they want to inspect, they will be expected to provide photographic ID for you to copy.

Explain it’s nothing personal, it’s just that you need a record of who has been through your property.


Avoid stranger danger

Whether you end up with one or 10 interested parties, ask anyone who wants to move in to fill out an application form that will be detailed enough to let you vet them thoroughly.

This doesn’t mean they have to give you their full life story, but queries about their job situation, ability to pay rent and rental history are more than acceptable, as is a request for rental references.

Then, actually do a background check, as dodgy tenants often count on people not bothering. Also, listen to your gut. If someone looks good on paper but your instincts scream, do not go ahead.

If it makes you feel better, insist on a National Police Check. It costs about $30 and will give you a little peace of mind.


Double check your insurance

Check out your current policy to see if it covers a tenant.

If not, you definitely want to speak with your insurance provider to check what amendments need to be made as you’ll likely need to look at adding landlord’s insurance to your portfolio.


Get it in writing

Whether your new housemate is a friend or not, make sure you set out the guidelines right from the start – in writing. Check with your local Real Estate body to find out whether you’ll need a Tenancy Agreement, as is necessary in some states.  

Whatever documentation you do end up using, it should cover things such as the amount of rent, how often it should be paid, how utilities are to be shared, whether there’s a household kitty for food etc.

Be sure it is signed and don’t forget to collect a security bond, so you’re covered for damage they might cause – accidental or otherwise.


Make room for them

It’s not enough to simply give a new housemate a room.  You must to give them space for their belongings – and fair access to the property.

For example, even if they are welcome to use all your kitchen appliances, give them somewhere to keep all their crockery, pots and pans and foodstuffs.

Also make sure they have space in the bathroom, a bookshelf and any other common use areas.


Remember that their rent is taxable

Whether you get paid cash in hand or via more official channels, rental money is income.

So, remember this when you’re budgeting. You don’t want to come to the end of the financial year and realise you have a massive tax bill because you didn’t include details of income stream.

That said, the situation also means you are entitled to various tax deductions, so be sure to consult the Australian Tax Office guidelines, and as always, consult your accountant or lawyer before finalising this agreement.

With the basic practicalities sorted, there are still other things you may want to consider when deciding if renting out space in your home is right route for you including:



  • Extra money to help pay the bills
  • Company and the potential to make new friends
  • Someone to share the chores with
  • Chance your broaden your horizons, especially if you take in people from other cultures and countries
  • Tax deductions
  • Extra safety and someone to look after the property when you’re away



  • If the wrong person moves in, it can be hard to get them out
  • You never really have a moment alone in your own home
  • If a single housemate finds a partner, you could find yourself a third wheel
  • There can be encroachment over the dividing line between yours and theirs
  • Untaxed income must be reconciled in your return
  • There could be a loss of privacy


Renting out spare space in your home can be mutually beneficial, but if you don’t lay the groundwork from the beginning, it can also turn into a nightmare.

Be sure to consider every one of the points above carefully before deciding either way and, remember, if you’re crystal clear about the details and rules from the beginning, you’re already on the right track and, who knows where your new friendship may lead?