Roommates

Ok, so you have a place of your own whether it is renting or owning and have decided that it is a good idea to bring in a roommate or two to help with expenses.  Well, I thought the same thing.  But you need to be careful.  Renting out a room can be a great way to go.  One thing to consider is that it helps to think of it as a business.  Because there is no such thing as collecting rent for someone with no work involved.  And that is true whether you are renting out a room, house or apartment.

 

I had gone 15 years without owning property.  I still think that renting is the only way to go but we will save that discussion for another post.  The roommate engagement has changed somewhat over those years.  When I rented out rooms 15 years ago, the norm was to use classified ads in the newspaper.  By the time you posted an ad and had a candidate actually move in, it would take 2 to 4 weeks.

 

Now, with the Internet, you will find that people are calling about your ad and wanting to meet and move in that day.  To me, that is way too risky so I still employ a several step process.  First I place the ad on Craigs list.  And yes, you have to be careful in that there are plenty of scams.  The first scam is from the companies that have roommate search websites.  They tell you are interested in your room and then they ask you to go to the website and look up their profile.  The real intent is to get you to sign up to their website.

 

Next is the scam takes many forms and is not unique to roommates.  A person will call asking about your room.  They will claim to be working overseas and need to know the total cost of moving into your place.  They will then ask you to also handle the reception of their goods and paying for those as well.  So if your room is $400 per month with a $100 deposit, they will then send you a check for $1000 or so.  $500 will be targeted for the room rent and deposit and the rest of the money for their goods to be delivered.  Then they will send you a check (maybe personal or cashiers) for $1500.  Then they will call you back stating they made a mistake in the amount they sent you.  They will then ask for the overage or just a portion of the overage back.  They are counting on your greed to retain a portion of the overage.

 

It can take several days or weeks for personal and cashier’s checks to fully clear your account.  So in the meantime, you have sent the crook a check from your account for the overage which they immediate deposit.  Then several weeks or days later the bank withdraws the funds from the original check from your account stating that the check is fraudulent.   You may have even verified with the bank that the check cleared but later on hear back from the bank that the check is fraudulent.

 

 

So how do you protect yourself?

 

First, if you receive an email or text pointing to you to another website then ignore it.  It will waste your time and perhaps cost you money to sign up for the site.  Anyone claiming to be overseas or out of town should be ignored as well.  It is never a good idea to rent out your place to someone you have not met.

 

What should I do when renting out a room?

 

First, keep in mind that anything you do should be reviewed with a real estate expert and lawyer.  Always engage with the appropriate experts.  Never read something on the Internet and implement as is without the appropriate professionals consultation.

 

Here are the steps that I recommend.

1. Create or obtain an application and review it with a lawyer with expertise in real estate
2. Create or obtain a lease and review it with a lawyer with expertise in real estate.
3. Always do background searches. Let the potential tenant know that you will be performing a background search which at a minimum includes:
   1. Criminal
   2. Child Molester
   3. Credit Search
   4. Verification of employment.

 

As an example, I use www.screenthetenant.com which has a reasonable cost.  You can find other companies that perform these services as well.

1. I always meet prospective tenants in person. This usually takes 30 to 60 minutes.  Get to know them.  Let them know you run the background checks. Ask them questions that you can later verify with their background checks.
2. Always ask for references and make sure you call them.
3. Ensure that everything you do is legal and fair. Consult with your real estate and legal professionals.
4. Review your roommate selection criteria with trained professionals to ensure you are not breaking any laws.

 

Conclusion:

 

It can take time to find roommates.  It can be even more time consuming selecting bad roommates.  Managing bad roommates and evicting them can be time consuming and stressful.     Keep in mind that having roommates is a business and it should be treated as such.  Taking the necessary precautions can save you time and money in the long run.  Also review your documents and approaches with qualified professionals.