‘Can I rent half my house out in NSW?‘
If the question that’s been on your mind sounds a little like this, this article will be the perfect read for you.
To address the elephant in the room, the clear-cut answer is yes, you definitely can!
Here’s everything you need to know about renting half your house out and how you can make it a reality.
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- A Guide To Renting To Family And Friends
- Tips on Renting Out Your Home Privately Without an Agent
- Things You Need to Know Before Renting Out Your Home
Homeowners renting out half their houses to tenants is common across Australia. So you have nothing to fret about and it’s 100% legal! There are a few laws set around that, which we will get into later.
Let’s start with the basics.
What is your purpose for renting out your space?
As homeowners, you have a potential passive income stream at your disposal – the space in your house.
If you have the capacity to rent part of your house out, doing so might be a really good decision for you to generate some income on the side.
However, it is a big decision to make as you will be sharing your personal space with a potential stranger. Living with someone that you do not know means sacrificing parts of your privacy to live with them.
So, privacy is definitely an aspect that you have to factor into your decision.
With that being said, it is more important than ever that you identify your purpose as to why you want to rent out your house.
Whether it be for extra income, to meet more people or simply to give more life (literally) to your home, make sure you consider this thoroughly before actioning it.
Getting a flatmate that is cooperative will certainly be a good trade-off. But if they aren’t? Will you be okay with that? You will have to prepare yourself for these kinds of situations.
Which parts of your home do you want to rent out?
One other key step is deciding which part of your house you want to rent out.
It could be a room in your home or your garage to a retailer. Each of these scenarios has its own considerations you need to take note of.
If you are deciding to rent out a room to someone, you have to set your boundaries and determine which part of your home is shared and which areas you would prefer to be kept private. Are you sharing bathrooms? Kitchen?
If you are planning on starting a share accommodation type of business, will you provide meals? How much would your tenants need to pay you?
Renting out part of your home as a storage unit or to house a small business would mean finding out if your insurance covers the renter’s policy. Laws differ from state to state so it is important that you read up on that.
In NSW, unless your strata scheme (if you are under strata) has any by-laws against renting out your garage, you are free to do whatever you want to your space.
Do I sign a lease agreement with the tenant?
Yes, you do.
If you are renting out part of your home to someone else, you have to have a lease agreement signed with your future tenant.
Oral agreements are legal, but a written lease provides you and the tenant with more security and a clearer picture of each person’s responsibilities.
Lease agreements hold both parties accountable for their actions and also document any specific rules you have pertaining to the property.
If your tenant wants to discuss certain terms of the agreement, as a landlord, you should listen. If the changes they suggest are acceptable, then ask them to initial the areas on the rental agreement where changes were made.
You can find an example of a lease agreement online or here, from the Tenants’ Union of New South Wales if you want a more legitimate example.
You have full autonomy as a landlord if you want to make the lease agreement more specific.
Learn about the taxes and laws involved with renting
Renting out part of your property works similarly to renting out an entire house.
Taxes
There are taxes involved so you need to be aware of any tax ramifications or laws related to renting your property.
If you rent out part of your home, the rent money you receive is generally regarded as assessable income. This means that you must declare your rental income in your income tax return, and you can claim deductions for the associated expenses.
If you do use a section of your home strictly as a rental, you can deduct a proportionate section of your mortgage payment interest, insurance, utilities, repairs and depreciation.
If you require more information, speaking to a professional or your local tax accountant will give you a clearer idea of what you can or cannot claim.
Laws
In NSW, renters in share housing are generally covered by the Residential Tenancies Act 2010 and Residential Tenancies Regulation 2019.
If you plan on doing share accommodation, you and your tenants will have your own rooms but you will also have shared premises.
Your rights and obligations depend on your legal status. In this scenario, the legal statuses involved will be lodger, tenant and landlord.
As a lodger, this means that you either:
- rent part of the premises from a tenant who also lives there, or
- the owner of the premises, who also lives there
The second point applies to you as you own the property. This also implies that you keep control over the whole premises (including the part you rent), making you the landlord.
Lodger vs. Tenant
Whether you have a lodger or a tenant will depend on how much control you have over the premises.
You are likely to be dealing with a tenant rather than a lodger, if you:
- have exclusive access to your own room (no-one else uses your room and you can lock it)
- do not get meals, linen, or cleaning as part of your agreement
- have your own cooking facilities
- do not have house rules enforced
With this, you may want to decide if what you are looking for is a tenant or a lodger as they are two separate things.
Lodger’s bond
As a landlord, you have to collect bond money from your lodger also known as a lodger’s bond.
You are not required to deposit your lodger’s bond money with NSW Fair Trading but you are recommended to issue a receipt for any bond money that your boarder pays.
This applies to a tenant situation as well.
In the event your lodger or tenant wants to leave…
They should give you ‘reasonable’ notice. If they pay rent to you weekly, the minimum notice is 7 days. Ensure that the notice is put in writing and that both of you print a copy.
When it comes to the tenant, reasonable notice is defined by the agreement that you signed with the tenant.
Paying bills
If you have a contract with a phone, power, TV or internet service or supplier, you must ensure the bills are paid.
If your lodger/tenant does not pay their share of the bills – except for electricity bills – you can take action in a Local Court to get the money back.
See the chamber registrar at a Local Court, or contact a Community Legal Centre for advice.
How do I search for tenants?
Your tenants will ultimately be your flatmates so it is crucial for you to find someone who you think is the right fit for you.
An easy way for you to search for tenants is to advertise for it online or through word-of-mouth.
You can use the Internet or online forums, newspapers and bulletin boards in areas that attract the type of renters you are looking for.
Ideally, finding a flatmate that you or your friends can vouch for would be the best option. But in the event that you do not, that is also fine!
Regardless if you know them through a friend or if they are a stranger, you should run a credit check on them or ask them to provide references for you. This is just for you to be safe.
Do I need to make any conversions to my property?
For this question, it is dependent on the situation.
If the room you are renting out in your current home is missing a closet space or a separate entry, you might need to do that.
Essentially, figure out the necessary conversions you need to do and action them before your tenants move in.
It is up to you to decide what the rented room or space would look like. If you are having problems thinking of a layout, you can search for inspiration on Pinterest or any home design blogs there are online.
Remember to clean the room thoroughly and consider giving the walls a fresh coat of paint. You won’t want your tenants to be moving into a space that isn’t sanitary or safe to live in.
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