Real Estate Law
Sharing Your Property With Tenants
If you are lucky enough to own a piece of property that has an apartment, cottage, or granny flat, then you may wish to rent that structure out for additional income. The opportunity to use that structure to help pay your mortgage or provide you with additional income may be one of the reasons why you bought the property in the first place. However, if you are thinking about becoming a landlord and renting out part of your property there are some important things to consider and to decide before you begin looking for a tenant.
This page is intended to provide you with general information about renting out part of your property. For specific information in your state, contact a local real estate attorney who can answer questions about your individual situation.
Whenever you become a landlord, your landlord-tenant agreement, lease, or rental agreement, is always very important. It is especially important when you are going to be sharing the property with your tenant. In addition to the standard terms of a landlord-tenant agreement, such as the amount of the rent, when the rent is due, and describing who is responsible for maintenance, repairs, and insurance, an agreement to rent a room or basement should include information about:
- How common areas such as lawns and pools are going to be shared. Are you going to allow your tenant to access them at all or only at certain hours?
- The number of guests your tenant can have on your property at one time. Are you concerned about parties and how that will affect your ability to relax or work at home?
- How many tenants are going to occupy the rental space? You may be concerned about the safety of the tenants, the potential noise, and the wear and tear on the structure.
- The presence of pets that can damage your property and create unwanted noise.
There are always tax implications to being a landlord. If the tenant shares your property, your tax liabilities may be more complicated than if you have a separate property to rent. It is important to keep track of the expenses for the part of the property that you use and the part of the property that you rent. Your tax deductions are dependent on you keeping careful records and taking proper deductions for the part of the property that you use personally and for the part of the property that you rent to others.
A real estate attorney can discuss severing the rental property portion to its own parcel. There will be tax liabilities (capital gains) when you sell your home if the rental property is on the same tax parcel number.
Since you will be living in close proximity to your tenant, it is best to have a real estate attorney review your landlord-tenant agreement before you provide it to a tenant for their signature. A real estate attorney can also advise you concerning the tax implications of your arrangement. Then, you can be confident that the rental will provide you with income and that you are protecting your property interests.
If the rental of an apartment, house, backhouse, cottage, or flat is done in the correct manner then it can provide real benefits to the property owner/landlord. Therefore, it is important to consider your options and create an agreement that will be beneficial to you now and in the future.
Before renting out your property, you may have to check with your mortgage holder. In some cases, having a tenant on your property may trigger a default of your mortgage. Your lender may require you to sign a 1-4 Family rider, which will allow you to rent your property. This allows the lender to collect rent directly from your tenant if you default on your mortgage payments.
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified real estate lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local real estate attorney to discuss your specific legal situation.
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