When renting to roommates there are bound to be many questions. For example: How to put them both on the lease agreement? How to split rent between them? and Who will be paying the security deposit? Managing roommates might be challenging for first-time landlords but it doesn’t need to be something to worry about. Co-tenancy is very common, and there are effective ways to deal with multiple renters in a property. Read on for more strategies.
Rental prices may depend on the location, condition, and size of the rental property, and vary across the states. Interestingly, rural properties are projected to increase in rent while California and New York saw a downward in rent prices in the last months of 2020.
The main reason for sharing a household is still affordability. The average American spends about 30% of their monthly income on rent. If a tenant wants to rent a place in a more desirable and better neighborhood located in closer proximity to the city centre or urban green spaces, they’re more likely to look for a roommate to reduce housing expenses and feel more financially comfortable.Â
When renting to roommates, make sure to take three steps:
Step 1. Prepare a detailed rental agreement.
A lease agreement is a document that not only highlights the terms and conditions of tenancy but also allows you to outline the rules and responsibilities of your rental property. If you’re renting to roommates, it’s essential that everyone named on the lease provides their signature. It is also important that both renters be jointly responsible for rent payments so if one of them fails to provide a timely payment, every other person whose name is on the lease is responsible for paying late fees, etc.
Many roommates may also make a separate roommate agreement to determine other rules regarding co-living. In a co-living agreement they can specify anything that might be a point of discussion later, such as who will be cleaning the rental or how bills are handled.
Step 2. Collect a security deposit.
When it comes to multiple tenants under one lease, it is better not to split a security deposit. In case of property damage or excessive wear and tear, it would be next to impossible to find out who is responsible for the damage. Also, should you need to return the deposit at the end of tenancy to roommates, it is best to return it in one payment and have the roommates divide the amount among themselves.
When dealing with roommates, to secure all tenants’ belongings, as well as your rental property, it is important to require renters insurance.
Step 3. Run a background and credit check.
In order to make sure you’re renting to reliable tenants, run background and credit checks on every tenant under the same lease. Through having access to potential tenants’ employment and credit history, you can see whether new tenants are actually able to afford the place and pay rent on time. In addition, it’s equally important to require references from their previous landlords to see if there were any issues in the past.
Either way, look out for red flags such as too many past residences, low credit scores, and prior evictions.
Do you prefer renting to roommates or individual tenants? What are the main challenges you have faced when dealing with co-tenancy?
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