Living with tenants - Landlord Forum thread 322065

Living with tenants by Ko1990 (West Virginia) on July 30, 2014 @10:36

Hello,
I currently own a home and rent out to one of my best friends of 15 years. I live in one bedroom, and he lives in another. He pays me $600/mo in cash, and we have no lease. He's paid on the 1st of every month in full for a year now, not 1 issue.

I am remodeling my home to add a master bathroom for myself. Upon completion, I will be looking for an additional tenant, so I will be renting out bedrooms to 2 people (3 people total including myself). When I do this, I plan on having both tenants sign a lease (6mo or 12mo).

Could someone please describe the difference in landlord/tenant rights when the landlord is also living in the residence? Am I even considered a landlord? Are there special tips, things to watch out for, specifics that I should include in the lease for my type of arrangement? Can I and should I require that my tenants have renters insurance? Does my standard homeowners policy cover my tenants since I am living there as well? What type of taxes do I have to pay on the rent money I am receiving? So far I have not reported any taxes as I have no lease and have only received cash which I usually just use as spending money for the month.

Thank you.

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Re: Living with tenants by Been There, Done That on July 30, 2014 @15:20	[ Reply ]

In some jurisdictions, renting out a room in your own home is treated differently from renting to a tenant who will occupy a separate dwelling. Your questions are difficult to answer as the answers will vary depending on at least four things (1) the law in your geographic area--not just your state law but possibly also your local city or county laws, (2) the number of rooms you are renting out--for example, if you rent out more than one room in California a different set of laws apply (3) the physical set up of the house and whether the person you are renting to will have access to the entire house or be in a separate area with their own entrance. (4) whether the individual is a tenant or a boarder. So to answer your questions: "Could someone please describe the difference in landlord/tenant rights when the landlord is also living in the residence?" I answered that above by telling you it depends. We'd need to know more about the situation and more specifics on your location other than your state in order to answer this. Even with that information, I doubt anyone here could tell you what you need to know since they won't likely be familiar with the law in your local area. "Am I even considered a landlord?" Possibly, but it depends. See the above answer. Are there special tips, things to watch out for, specifics that I should include in the lease for my type of arrangement?" OMG, yes! Read my remarks at the end. Can I and should I require that my tenants have renters insurance?" Yes, you can and you should. Does my standard homeowners policy cover my tenants since I am living there as well?" Possibly, but probably not. Only your insurance agent knows for sure. Ask him or her. "What type of taxes do I have to pay on the rent money I am receiving?" Unknown. Federal and state income taxes at the very least, probably, and possibly more depending on your local jurisdiction. The best advice I can offer you is to consult a local attorney who is experienced in landlord/tenant law. Also, read, read, read. Google "renting out a room in my home" and you can get quite an education in the pitfalls you should guard against. I've rented out rooms in a home I owned in California, and a townhouse I rented in WV (back in my student days). I had some good experiences and some HORRIBLE ones. I found out one roommate--who I had known since I went to High School with him--was dealing illegal drugs out of the house when I came home unexpectedly one day when I was supposed to be working. I had one roommate in California who was a single Mom who had only visitation--not custody--of her child. On the weekends she had visitation, she would sometimes run off without telling me where she was going and leave the pre-school age child alone with me, without asking me if it was OK thus making me an unpaid, de facto babysitter. The worst part of this is I'd have no idea where she was or when she would return and no idea I was even on the hook for babysitting until the kid came to me asking for something. People will do the damnedest things, and you can't even anticipate or imagine some of the things they will do. If I were you, I wouldn't rent out another room in my home unless I was in desperate need of the money, and I would think hard about doing it even then and explore all other means of making the money first (second job maybe?). I would have a written agreement that spelled out absolutely EVERYTHING in great detail. I would screen like crazy. I would make sure to provide some service (at the very least, linen service where you change the sheets for them weekly or maybe cleaning service of their room) so the roommate would have fewer rights (would be considered a boarder instead of a tenant) and you would be able to see what's happening in their room behind the closed door (like signs of meth production or drug dealing or use). You have been VERY LUCKY so far. The headaches you can get into with this are too many to recount and the problems you can get into can be beyond recounting and incredibly bad. Worst case scenario? How about losing your house and going to jail? Or getting killed? Best case scenario? What you have right now with your current roommate. Just how bad do you need that extra money?

Re: Living with tenants

Re: Living with tenants by Been There, Done That on July 31, 2014 @22:57	[ Reply ]

Anonymous makes some very good points. Over the years, I had six roommates I can recall (may have been more, but I can remember six of them). Three of the six were friends before they moved in. One of the three friends was the drug dealer. We were friends in High School. I went off the the military after high school and he went to college. Five years later, I got out of the military and went to college. Placed a listing with the campus housing office and, lo and behold, he applied (and didn't know it was me because my last name had changed). I thought I was lucky to be renting to an old friend! Little did I know that in the five years since High School, he had changed. I came home from work unexpectedly one Saturday and found my kitchen table heaped more than six inches deep in cannabis. He and his girlfriend were dealing. I freaked since (1) I could have lost my top secret government security clearance and (2) I could have lost custody of my son. I gave them verbal notice to clear themselves and their drugs out immediately or I would call the sheriff's office. They believed I would do it and they cleared out in less than an hour. They stuck me with a $400 long distance phone bill (this was in the pre-cell phone days) and I had to pay it or lose phone service because it was in my name. We had house rules and they stated NO DRUG USE. But house rules are only as good as the character of the individual who agrees to them. The other two friends I rented to--one was absolutely never a problem and a delight to live with. The other one was mostly OK except for having a habit of bringing home men to spend the night unannounced a couple of times a month. It's never a comfortable thing to find a strange man you have never seen before running around in your home in a bathrobe on a Saturday or Sunday morning. She eventually found a guy to be steady with and it got a little easier because the rest of us got to know him and got comfortable with him hanging around. Of the three strangers: one was mostly OK; one was a disrespectful PITA young guy that liked to argue with me for the sake of arguing and stole one of my favorite books when he moved out; and the other one was the young woman who would run off unannounced and leave her child for me to watch. So my score was 3/3. Three decent roommates; three problem roommates...one the worst problem roommates was one I had known the longest. Get those house rules in writing, but more important, try to be sure before they move in that the person is one who will abide by the house rules. The state laws of WV are silent about whether or not you'd be considered a landlord in the circumstances but if you are in an urban area like Charleston, Huntington, Morgantown, Parkersburg, Clarksburg, Martinsburg, Wheeling, etc., you might want to check your local housing laws. In the college towns like Morgantown and Huntington you may find there are additional rules governing renting out rooms in your home. For sure you should be paying income tax on the rental income. You don't want to mess with the IRS. A disgruntled roommate (or just a person who knows you aren't claiming the income) can turn you in and collect a bonus. This is a quote straight off the IRS website: "The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects." Makes it tempting for someone who has something against you to retaliate and enrich themselves at the same time. Best of luck if you decide to go forward with renting out another room. I hope it works out for you. It's great when it does but it can be hell when it doesn't. One tends to think of one's home as a sanctuary. When roommate problems arise it can be extremely stressful and you can be left with no escape from the problem.