Bringing in Some Extra Cash: How to Start Renting a Home Add-On on Your Property

Posted on Oct 17 2023 - 10:30am by Housecall
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By Dixie Somers 

It's not uncommon to have a home add-on on your property that's not currently in use. Perhaps you built it for guests but rarely have anyone over, or maybe an adult child has moved out and you're not sure what to do with their old space. Whatever the reason, you might consider renting out that extra space to make some extra cash. On the flip side, it can also be an opportunity for someone to have a space of their own at an affordable price. In this post, we'll go through the steps on how to start renting a home add-on on your property.

Make Sure It's Legal
The first step before deciding to rent out your home add-on is to check with your local government to ensure you're allowed to do so. Some states and municipalities require specific permits or have regulations on renting out a living space. Even if you're renting to a friend or family member, it's essential to have the proper legal documentation in case any issues arise in the future.

When looking for the legal permits required to rent out your home add-on, contact your local government office or a real estate lawyer. They can help you determine what paperwork is needed and any restrictions in place to renting a living space on your property. It's also important to be familiar with landlord-tenant laws in case there are disputes down the line.

Prepare the Space
The next step is to spruce up the space you plan on renting out. This could include painting, deep cleaning, working with a contractor for additional ADU installation, and making any necessary repairs. You'll want the space to be ready for someone to move on the day they sign the lease. Consider investing in a bed, bedding, and essential amenities like a microwave, fridge, and coffee maker. It doesn't have to be anything fancy, but it should be comfortable and welcoming for your new tenant.

Creating a functional living space out of a smaller area can be tricky, but it is possible. Start by maximizing the available space and utilization of existing furniture pieces to save money. Consider items like fold-out couches or chairs that can double as sleeping spaces and wall-mounted shelving units for storage.

Additionally, look for creative solutions such as stackable furniture or furniture on wheels that can be easily stored when not in use. Lastly, integrating smart home devices such as voice-controlled lighting and thermostats can help maximize the space while giving tenants more control over their environment. With a few strategic purchases and some creative problem-solving, creating a functional living space out of a small area is definitely within reach.

Set a Fair Price
Your home add-on rental price will depend on a few factors like the size, age, and location. Check out similar listings in your area to get an idea of what's fair for your space. Don't forget that you'll also be responsible for utilities, so make sure to factor that into the overall rent price. It's also a good idea to require a security deposit upfront, which is usually equivalent to one month's rent.

Once you've got everything ready, it's time to advertise your space. There are several online sites you can choose from to advertise on. You can also put up a sign in your yard advertising the space. Be sure to include details like the rent price, amenities, and any rules or restrictions. You'll also want to have an application process, which should include background checks and credit checks to ensure the person can pay rent on time.

A background check is an important step in ensuring that you are renting to a trustworthy tenant. It can help you uncover any potential red flags, such as a criminal history or financial issues. You can run a background check by yourself or hire a third-party service to do the work for you. When running the background check, make sure to include searching public records, verifying the applicant's identity, and employment history.

Additionally, it’s important to get written consent from the potential tenant before running the background check. This helps to protect your rights as a landlord and ensure that all parties involved are following the necessary legal steps.

Maintain the Space
Once someone moves in, it's essential to maintain the space and communicate effectively with your tenant. Make sure to address any maintenance issues promptly, and if something comes up that you can't fix, don't hesitate to call in a professional. Keep track of when rent is due and communicate with your tenant if they're late. Be respectful and empathetic—remember, they're paying for a space to call their own.

Renting out a home add-on can be a great way to make some extra cash or fill an unused space. However, it's essential to ensure you're following the proper legal steps and creating a comfortable space for your tenant. Ultimately, maintaining open communication and respecting your tenant will keep the arrangement running smoothly. With a little effort and patience, you could be on your way to generating passive income in no time.

Dixie Somers is a freelance writer who loves to write for business, health and women’s interests. She lives in Arizona with her husband and three beautiful daughters.