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Some earn extra cash by renting a room in their home

by Annie Flanzraich

Associated Press

Saturday August 29, 2009

Renting out a room in his home was both a financial necessity for Christopher Paulsen and a hedge against loneliness.

"It was like empty-nest syndrome, and I thought I could use a few bucks to offset costs," said Paulsen, 48, of Incline Village, Nev., whose youngest son left home last year.

Paulsen placed an ad on Craigslist and got many responses. He chose an AmeriCorps volunteer to take over the room for a year in his two-bedroom townhome in this small town at Lake Tahoe.

He is one of many homeowners in a down economy who are making extra income by renting out rooms in their homes.

"Right now people are trying to stay in their home for the long term and may need a roommate to make that happen," said Eva Rosenberg, founder of the tax-advice Web site TaxMama.com .

But being both roommate and landlord can be tricky.

You need to find someone you can live with, of course, as well as someone dependable and financially responsible. You also need to be aware of fair housing and tax rules, expert say.

Some guidelines:

  • Checking a potential housemate's credentials and credit history is crucial, said Leigh Robinson, author of "Landlording" (ExPress Publishing, $29.95). Double-check the person's credit, employment and former housing situation, he said.

  • Robinson recommends meeting in person, and even seeing where the prospective housemate lives.

  • While the lease can be succinct, house rules should be specific and signed by the roommate, Robinson said. For examples of leases and forms, Robinson suggested checking www.mrlandlord.com/

    Homeowners also should check local laws and any community rules regarding renters before drawing up a lease, said Stephen Fainsbert, a Los Angeles real estate lawyer.

  • While homeowners may believe they can rent rooms to whomever they want, they must comply with local, state and federal fair housing laws, which are meant to prevent discrimination, said John Trasvina, assistant secretary for the U.S. Department of Housing and Urban Development's Fair Housing and Equal Opportunity office.

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