Advantages of renting out your extra bedroom

Orange condo building

If your house has an unoccupied bedroom, you have a potential source of extra income.

Whether your budget is stretched thin or you’re looking for a way to get ahead, renting out that extra bedroom can provide a financial boost.

Add breathing room to your monthly budget. With less of your monthly income going toward mortgage payments, you can focus on other priorities like adding to your emergency savings or retirement account or paying off credit card debt.

If you’re already in great financial shape, you can put some of the money you’re saving toward home upgrades.

Get the mortgage paid off faster. A well-known way to reduce the long-term cost of home ownership is to pay off your mortgage faster.

By adding to the amount of principal you’ve paid, you gain equity, reduce the total amount of interest you’ll pay and decrease the number of years until you’re payment free.

You could also stash the rent payments initially and later do a cash-in refinance to decrease your mortgage term.

Increase your options. If you’re still in the shopping stage of buying a home, knowing that you will take in renters might expand your search parameters. If you anticipate rental income, you can stretch your budget a bit.

You might be able to afford a home in a nicer neighborhood if you’ll be picking up an additional source of income. If you’re single, you might be more willing to buy in a slightly seedy but up-and-coming neighborhood if you won’t have to live there alone.

Avoid losing the house. If you're under financial hardship and having trouble paying the mortgage, taking in a renter (or two or three) could provide the extra boost in income you need to stay afloat.

What would be worse -- losing your house to foreclosure or living with an extra person for a while?

Taking in a renter isn’t for everyone: it requires patience, flexibility and people skills.

Furthermore, becoming a landlord means taking on significant additional responsibilities, especially if your tenant is a stranger. However, the extra money might make the hassles worth your trouble.

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