Jul 18

5 Steps Before Renting Rooms In Primary Residences

a houseThe following post is a guest post from Tali Wee at Zillow.

Many homeowners at one point or another consider renting out rooms in their houses to help pay for their mortgages. In theory, earning money for unused space is an advantageous opportunity. However, renting out a room in a primary residence involves taking legal precautions, increasing insurance premiums and preparing for potential personality or lifestyle conflicts between roommates. Although, when homeowners are tight on cash, renting rooms can be the perfect solution.

Homeowners considering renting rooms or units in their primary residences should check off these five steps before inviting strangers into their homes.

1. Legality

Homeowners should research their local municipal websites to gather information about current renting regulations. Depending on the location of properties, different zoning applies allowing or prohibiting homeowners from renting. Some areas allow room rentals, but not divided rentals with separate kitchens and bathrooms. Relatives may be legal, but other tenants forbidden. Plus, laws might require rental inspections and registration before tenancy. Rental stipulations are also written into mortgage terms, specifying whether homeowners can live on site.

Further, if all regulations are cleared, homeowners should contact their homeowners insurance representatives. Some owners may need to acquire landlord insurance to protect properties from damages caused by tenants. Additionally, homeowners may need to notify future tenants that they’ll need to purchase renter’s insurance to protect their own possessions.

Lastly, homeowners running rental businesses should contact their accountants to file taxes accordingly.

2. Preparations

Once homeowners know the legal regulations for rental spaces in their communities, they may need to make improvements to meet requirements. Ensure all upgrades are built to code and properly permitted.

Before remodeling, homeowners should carefully consider the most comfortable layouts for shared living. Many owners prefer to split space where tenants reside on one floor and owners on the other. Consider potential for basement rentals, second-level units, backyard cottages or mother-in-law suites.

3. Tenants

Most importantly, owners should lease space to tenants they feel comfortable welcoming into their homes. Traditionally, first-time landlords reach out to family to see if a natural-fitting relative is looking for rentals. However, renting property is a business transaction and friends and family are more likely to take advantage of the opportunity because agreements are looser and consequences are light. As long as owners can find tenants they’d feel comfortable living with, it’s best to avoid friends and family.

Run credit and background checks before approving tenants. Contact their references to confirm rents were paid on time and property rules were respected. Landlords should familiarize themselves with Fair Housing Laws before marketing units. It’s important to avoid discrimination language throughout the screening process, as every applicant deserves equal opportunity to view and apply for tenancy. Owners can reject applicants who smoke, have pets or don’t meet the background check requirements.

4. Terms

Homeowners should absolutely draw up lease agreements, signed by both themselves and their tenants with copies for each. Some owners prefer to hire attorneys to create legal documents, where others are satisfied with generic leases found online. Regardless of trustworthy verbal agreements, all homeowners should confirm everything in writing to protect themselves from disrespectful tenants who skip payments, disregard household courtesies, damage property or overstay their welcome.

Leases should detail the total costs due upon move-in, such as first and last month’s rent and a refundable damage deposit. Documents should cover rent costs, due dates and penalties for late payments. Additionally, owners should set house rules such as quiet hours, number of allowable guests, maintenance requirements and non-smoking preferences. Leases should designate rules for tenants with pets or who acquire pets during tenancy; indicate the costs of pet rent, due dates and prices of penalties, plus refundable/non-refundable pet damage deposits and breed or size regulations. Lastly, the lease should clarify the length of tenancy, including the date and time of move-out and required notice and consequences for lease termination.

5. Disclosures

If homeowners know of any mold, asbestos or lead paint on their properties they are required to disclose this in writing to tenants. Tenants must report any signs of mold during tenancy and sign disclosure documents.

6. Calculations

Owners should review the total costs of updating their residences to rental code, drawing up leases and then calculating the total insurance and taxes of acquiring renters. Next, compare the rental unit to other rentals in the area to settle on fair rent. If the time and money necessary to facilitate renting rooms is favorable to the total profit, then owners should get started.

Buying a home is typically the most expensive purchase in a person’s lifetime. Besides maintenance, monthly mortgage payments cost between 25 and 28 percent of homeowners’ income on average. If homeowners can earn some cash by renting an empty room, they can apply rents to cover some of their mortgage payments or prepay their principals. The faster homeowners pay down their principals, the less mortgage interest they’ll owe over the life of their loans. As long as homeowners take the necessary steps to safeguard themselves legally and carefully detail the guidelines of tenants’ leases, renting rooms can be agreeable and highly profitable.

Note from KK: When Eric and I bought our condo we talked a lot about having a second bedroom so that we’d have a space to rent out to a roommate if we ever fell on hard financial times. Thankfully we haven’t had to, since our space is pretty compact. But if we ever needed to, we know we could which is really comforting.

If we lived in a bigger home I’d definitely consider renting out a room or two to the right roommate. We’ve also talked extensively about buying a multi-family home in the future so that we have some rental income coming in to help with our insanely high taxes.

Do you rent a room in your home? Would you consider it?

Image: Stephen Harris

Jul 16

Weathering a Financial Storm

storm With all of the weather events that have been happening across the country and across the world, this topic came to mind. Wherever you are, I hope everything is OK in your neck of the woods!

Have you ever heard that saying, “the calm before the storm?” Sometimes we use it at work to refer to a period of downtime (they don’t happen very often-trust me!). Basically, when things get quiet, we worry that that “storm” is right around the corner. Maybe we’re pessimists, or maybe we’re realistic (or maybe both). But none of that really matters. What does matter is our ability to plan for and weather the “storm”.

Here’s my plan for weathering financial storms:

  • Save for emergencies before they happen. It’s not a matter of, if an emergency will happen to you, it’s a matter of when. Examine at the state of your finances, taking into consideration the size of your emergency fund and the types of emergencies that realistically could happen. You don’t have channel Ms. Cleo to predict that your 15 year old car might die, or your 40 year old roof might leak. If there are big expenses coming your way, try to save for them. Barring disasters, illness etc. I can pretty realistically estimate how much money I need in my emergency fund.
  • Plan for the worst and hope for the best. I always assume that emergencies will cost me far more than they actually do. When I’m budgeting for an emergency car repair I guess high. For example, if I take my car in to the shop, I assume it will cost me $1000 and when it “only” costs $500, I’m pleasantly surprised.
  • Don’t panic. Take a deep breath and relax. This one is probably the hardest for me. Although I may look calm on the surface during an emergency, I’m often screaming inside.
  • Sleep on it. When possible, I always wait overnight before making an important financial decision during an emergency. What seemed like an emergency 8 hours ago, often feels much more manageable the next day.
  • Talk it out. Talk to friends and family if they’re supportive. You’d be surprised how many people have been through a similar financial emergency. Even if friends don’t know exactly what you’re going through, most adults have experienced some sort of financial emergency at one point or another. When I’ve been in the middle of a financial melt-down I’ve found it reassuring to know that others have been through financial emergencies and survived.
  • Ask for help. It’s hard for me to ask for help, but I really need it sometimes. Don’t be stubborn and suffer in silence. If a friend offers to make you dinner or watch your kids (so you can handle a financial emergency) take them up on the offer! You don’t have to be superman or superwoman.
  • Stick to the plan. If you had a plan for how to handle an emergency before it occurred, stick to the plan. It’s easy to get flustered or frustrated and overspend. If you planned to spend $5,000 for a new car before the old one died, don’t spend $7,500 in the heat of the moment.
  • Remember, money is just money. When both of our cats got sick, I was an emotional wreck. I was so sad that our boys were ill and totally freaked out by the insanely large vet bills. One night a few nights into the madness, Eric told me something that really stuck with me, “money is just money, we’ll make more.” At the end of the day he was right. We had money set aside for an emergency, and we had an emergency. I don’t regret spending the money for one second, money is just money!
  • Think about the sunny days. In the middle of a financial crisis it’s hard to remember what the sunny days were like. Things will get better with time, even if it feels like the end of the world in that immediate moment. When our furnace burned up at Christmas, I felt completely deflated. All that money saved was quickly spent on something I wasn’t even planning on buying. Throughout that whole ordeal I had to remind myself that the emergency was only a bump in the road and things were going to get better.

How do you weather a financial storm?

Image: Diana Robinson

Jul 09

Start Your Own Business to Kill Your Student Debt

small businessSome people say that going to college is the key to a successful career, but I don’t necessarily believe that. The truth of the matter is, the transition into a professional career isn’t always a smooth one and that, “fancy” college degree doesn’t always translate into big earnings. The one thing that was, “big” when I was finished school was my student loan bill.

Instead of slaving away indefinitely in a job that made me miserable and waiting for the day I finally got that big promotion, I started working on a few side hustles/businesses. I dog walked, babysat and sold things online to make extra cash. I had big bills to pay and I wanted to pay them them off as fast as possible. The thought of still having loans when I was getting ready to send my own kids to college (I don’t even have kids) was terrifying.

So If you’re in debt, like I was, you might want to think of a few alternative ways to make more money. Starting your own business is a great way to make more money to pay down your debts (or save money!).  Here are a few things to take into consideration when you’re thinking about starting your own business.

What Are You Good At? What Do You Enjoy?

For me, it was important that my side businesses were activities that I actually enjoyed doing. Since you’re going to be effectively working two jobs (the full-time gig and your small business), you’re probably going to be pretty tired at the end of the day. If you choose something you’re passionate about, it won’t feel like work. You’ll also be less likely to quit or make excuses when you’re exhausted and overwhelmed (and you will be! I was!). When your business is something you’re passionate about, it’s much easier to stay motivated and excited about working long hours.

Getting Your Business Started

Don’t wait until everything is “perfect”. To keep yourself from pushing out your student loan repayment for 25 years, you should get started with your business right away. Starting a small dog walking or landscaping business when you’re in school is pretty “do-able”. If you pick a business that has inherently flexible hours (something you can do nights and weekends) you can continue working for yourself and making extra money once you graduate and start your full-time job. Some people think you need to have a huge amount of money saved or a fancy marketing plan to start a business. You don’t! I started several small businesses when I was in school and I didn’t pay more than $20 (to print business cards) to get my businesses started.

Making things to sell

If you’re not interested in starting a “service” type business like teaching piano lessons or shoveling snow, you can try selling things. If you have a passion for woodworking you can make and sell bookshelves or furniture. If you like sewing you can make and sell crafts and clothing on etsy. Or, if you know someone who’s really handy, you might want to see if they’d sell you their products and let you re-sell them. Flea markets and yard sales can be good places to sell handmade items (shipping a bookshelf would cost a fortune and you’d lose all of your profits).

Buying things to sell

Not everyone is good at making products, but that doesn’t mean you can’t be good at selling them. You might want to consider buying items in bulk and re-selling them. A guy I went to college with bought a ton of umbrellas for really cheap online. He then resold them around campus every time it rained. I don’t know how much that kid made, but I can only assume he did really well based on the volume of umbrellas I saw him sell.

If you do make your own products, or sell someone else’s, you will need a barcode printer from a company like Shopify. Simply print out the barcode, affix it to the products and you’re ready to get selling.

Selling Your Products Online

If you’re still intrigued by the idea of paying off your student loans through means other than your regular job, you can always try selling products online. Some websites will even do the marketing and shipping for you. Unfortunately they will also take a huge chunk of your profits. A better alternative is to set up your own store online. A quick Internet search yields you a bunch of options for setting up your own online store. With multiple templates and color schemes it’s not that difficult to set up a professional looking online store.

Increasing Your Revenue

No matter what your business idea is, stick with it! It takes time, patience and dedication to get a small business off the ground. It sounds counterproductive, but you might want to consider offering a few services or products to free. Word of mouth (face-to-face or virtual) is the best form of advertising. If you do a good job or offer a great product at a fair price, it won’t take long for your business to become popular. And the more popular your business becomes, the more money you’ll make to pay off those student loans!

Have you ever owned your own small business? Tell me about your side hustles/businesses

Image: Dean Meyers

Jul 07

Laughter is the best medicine

2899583679_fe44ac77e7_mI’ve you’re a regular reader you may have noticed I’ve been pretty quiet lately. I’ve had a few great guest posts from fellow bloggers, but just haven’t had the energy to put together a post of my own. Long story, short, we took our cat Liam to the vet a few weeks ago and got some bad news. Like his brother, Patty, who passed just a month ago, Liam his kidney failure.

He also has a mass on his liver that may be cancer (they can’t tell from the biopsy, and even if it was cancer, it would be too dangerous to remove). Liam spent 4 days at the cat ICU, and we thought we were going to lose him. Thankfully he’s now at home, and with the help of our primary vet and the internal medicine vet, he’s comfortable and acting like himself.

IV Stand

Eric bought this IV stand online and it sure does make things easier

Basically, the “cat room” (our spare bedroom) has been turned into a cat infirmary. Liam gets subcutaneous fluids once a day and is taking multiple medications to help him eat, lower his blood pressure and keep his stomach acid under control (all things we just learned about). He’s an incredibly tough cookie and really has taken all of this in good stride. We are incredibly thankful to have him home and even if his time is limited (we’re not even sure how limited), we want him to be at home with his family (us and the dog).

OK, on to a humorous story, because laughter is the best medicine

When I was picking up Liam’s medication at CVS, the pharmacist asked me for his date of birth. It’s not a question I get asked frequently, so I had to think about it…2014-12=2002.

Basically, the pharmacist looked at me like I had three heads because I had to think about his birthday (I can only assume he thought I was picking up blood pressure medication for my sig other and didn’t know his birthday). I felt the need to explain myself and we both had a good laugh when I told him the medication was for our cat. I wasn’t laughing when I found out how much the medication costs, but I needed that little release.

Aside from a sick kitty, here’s what’s been going on in my world:

My sister finished her PhD and I flew out to North Carolina for her graduation party. My folks and my older sister also flew to NC and we got to spend the weekend together. I swam with my nephew and played with my niece and we all went to a Durham bulls game.

durham bulls

My Nephew eating a huge hamburger at the game

Eric was supposed to come with me, but ended up staying at home to give Liam his fluids. I left for NC the night after Liam came home from the ICU, so I was pretty nervous that Eric was going to have a hard time giving Liam his meds. When I got back from NC, he was already a pro at administering the fluids and showed me step-by-step how to do everything. When he was finished giving the fluids he kissed Liam on the head. It was such a sweet moment, I almost cried.

This weekend Eric has been in Michigan for his sister’s birthday. All weekend he’s been texting me photos and funny texts, and although I’ve been missing him, I’m so glad he’s visiting with his family. We spend a good deal of time with my family and I hope in the near future we’ll be able to spend more time with his family too (two of his sisters may be moving to the US very soon :-)).

What’s new for you? Did you do anything fun for the 4th?

Image: Sang Trinh

Jun 28

Frugal or Tight – Worst Ways to Save Money

Today I’m happy to share the following guest post from Glen. Glen is the owner of How to Save Money, a personal finance website dedicated to helping people save money and find financial freedom. Glen recently paid off over $300,000 in mortgage debt within 7 years, and he wants to share his money saving tips with others to help them get on their way to financial freedom.

There can sometimes be a fine line between what is considered frugal, versus what is considered tight. I personally believe that I am more of a frugal person than I am tight, but I do appreciate that some people need to save money wherever they can and this can lead to some interesting ways to save money.

The following are some of the enterprising ways I have seen people save money – let’s start with the most obscure.

The Toilet

Whilst I was studying, and when I used to work at the local shops, I met a guy called Nathan. Nathan was a stoner who wasn’t really all that interested in working, but he did love smoking pot. That love of smoking pot actually caused him to come up with a few unique ways to save money, the most unusual of these was on the throne.

tpYou see Nathan decided that he would try to avoid going to the loo while he was at home, so that he could go at the work toilets. Somehow he had it in his head that he was spending too much money on toilet paper and that by only going number 2 at work, he could avoid ever having to buy toilet paper ever again.

I’m not really too sure how much money he was saving, but he was committed to it.

Leftover food from work meetings

Another person I used to work with hates waste. He hates it so much that at the end of the work day he goes around to all the meeting rooms and doggy bags all the leftover catering that was unused throughout the day. He then takes it home so that he can eat it for dinner.

Some of this food would have been left out for quite a few hours, and was almost certainly not good for anyone to eat, but he never seemed to care at all, and to my knowledge he hasn’t ever been sick because of it.

Water theft

Another colleague (I still work with at the same company as this one) used to take a couple of big water bottles to work and fill them up so that he didn’t need to pay for water at home.

In my opinion this is theft and the money saved isn’t worth the amount of effort put in or the chance of losing your job.

Dumpster diving

My wife and I used to watch the show wife swap, and on one of the episodes a family that was living in a trailer used to go around to all of the local supermarkets and dumpster dive for food each night. They didn’t have enough money to buy food the way most people do, and they weren’t interested in working for a living, so this was the how they fed their family.

Cab Fare Dodging

Someone else that I knew when I was younger was a cab fare dodger.

We all used to go out to town on a Saturday night and when the night was drawing to a close we would all share a cab home together. This person used to always be one of the first ones to exit the cab as he lived the closest to the city.

Unfortunately he was a habitual cab fare dodger. He would get out of the cab and then conveniently never have any money for his portion of the ride, or worse, he would just get out and run into his house without even a look back. So it was always left to others to pay for his portion of the overall cab fare.

Needless to say, after a while we all stopped catching cabs with him, although I suspect he saved a few hundred dollars before we cottoned on.

Bringing food to a restaurant

Finally, one of the worst cases of being tight that I have come across was by an old school friend. He was courting a girl at his workplace and asked her to go out to dinner with him, she agreed and they setup a date and time.

They go to a restaurant and take a seat. The waiter comes over to get their orders and my old school mate just passes the menu to his date and allows her to order. Then when the waiter asks him what he wants, he just asked for water without a meal and says that he’s fine without food.

sandAfter the waiter goes away to get the water, this old mate of mine gets out a premade and leaves it on the plate in front of him to wait until the waiter returns with the girls food so they could eat together.

Now I wasn’t there, but I am told that she wasn’t even slightly impressed. Needless to say – it didn’t work out between them.

So there you have it – I know a lot of really tight people as it turns out.

I would love to hear about any stories you might have of people being tight, or doing unusual things to save money.

Notes from KK: #2 at work, not if I can avoid it. Catering from work, heck yeah! We rarely get catering, but if there is food left over my boss actually encourages us to take it home or give it to our clients so we aren’t wasting (I hate waste too!). My step-uncle’s wife used to bring her own tea bag to restaurants and ask for a glass of hot water so she didn’t have to pay for a tea. It probably wouldn’t have bothered anybody, but she had a nasty attitude which make her less than pleasant to be around (free tea or not!).

 

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