Adding a Roommate

If done correctly, adding another tenant to a lease can be highly beneficial to your bottom line. Before you do so, however, be sure you take the following into consideration:

• Occupancy limits. Does the extra tenant put the number of residents in the unit over the legal limit? Generally, occupancy laws allow two people per bedroom; however, some cities (such as New York City) allow more.



• Prescreening. Treat new tenants as you would any other prospective tenants; have them fill out an application and complete your standard prescreening process.



• A new lease. Drawing up a new lease ensures the new tenant is legally liable for rent and damages as well as adhering to all property rules.



• Rent increase. Raise the rent when a new tenant is added to a lease to compensate for the additional wear and tear on a property. The standard 30-day warning for rent increases is not necessary if you are drawing up a new lease.



• Security deposit. Along with increasing the rent, you should also increase the security deposit. This is common practice when adding a tenant. If you were previously charging the security deposit limit for your state, raising your rent also raises that limit, leaving you free to increase the deposit.

Allowing your tenants to invite another occupant to share their unit can be an effective way to increase your cash flow with little effort or investment on your part, but remember to treat them as you would any prospective tenant.