Beware the pitfalls of renting rooms to head off foreclosure
byFeb 10th 2010 4:30PM
It reportedly is a growing trend: people desperately trying to increase income to stave off foreclosure by renting out one or more rooms in their own homes.
In a telephone interview with WalletPop, Sharleen Kilgore, of California-based Project Sentinel, a non-profit agency that offers free housing counseling services, says the agency is seeing a lot more people renting out rooms.
In fact, Kilgore says, those looking for a mortgage loan modification may actually be encouraged to go this route because such modifications usually require the homeowner to demonstrate some type of increased income in order to qualify for the modification. Renting out rooms is a quick way to do this.
But, she points out, anyone thinking of becoming a landlord in their own homes needs to go into such a venture with eyes wide open. There are many potential pitfalls.
For example, Kilgore says a leaky roof may be a mere inconvenience for you and your family, remedied with a bucket or two strategically placed. But if it happens to be leaking over the heads of your new tenants, local laws may mandate that you repair the roof, which can be costly.
Kilgore says that before renting out any room in your house to a stranger, make sure to run a full credit check. The last thing you need if you, yourself, are facing foreclosure, is renting to a deadbeat.
A criminal background check is also a good idea, she points out. There are many places on the Web where you can get basic things checked for a nominal feey.
You also can't underestimate the value of personal references. But references from people you do not know are pretty useless unless you make sure to verify they are the real McCoy.
Be sure to familiarize yourself with local laws about landlord-tenant responsibilities. Taking in a tenant is a serious matter and needs to be treated as such.
Kilgore highly recommends a series of legal self-help books published by Nolo Press.
Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace Of Media Speed and the 24-hour News Cycle." He has written about real estate related issues for several years.