In Australia, live-in landlords are common. Many homeowners rent their spare rooms to tenants. This helps them in the difficult time of the Australian Rental Crisis.
If you’re a landlord, you should consider renting a room in an owner occupied home. However, you must consider several things.
As a homeowner in 2023, you must know how to rent smart. You must learn the basics about renting a room in an owner occupied home.
Tips to rent out a room in an owner-occupied home in Australia in 2023
Do you have a room at your house that you’re not using?
Good thing because you can use it to earn some extra cash. The rental income you receive will help you in many ways.
According to stats, in 2022 the rents in the regional areas increased by 4.5%.
Also, it doesn’t matter in which suburb you live. Renting out a room in the cheapest suburbs of Australia will help generate income too.
Now coming to the main point:
What is an owner-occupied home?
Of course, an owner-occupied home means renting out a room in the home that you own and live in.
This home is free from tax obligations. Whereas for investment properties you have to pay taxes.
So if you have a spare bedroom you can rent it out to a tenant.
Your rental income is taxable and should be claimed on your Tax Return. Owner-occupied homes are free from capital gains tax.
But if you rent out your whole property you’ll have to pay taxes on the profit.
Here are a few tips to find a rental:
Do a screening for the potential tenant
You should investigate more about the prospective tenant before renting them a room at your place. You must always check that your tenants can afford the rent.
Besides that you must make sure that they are trustworthy; Because renting a room is different from renting a whole property.
As we mentioned earlier, when you rent a room, you live with your tenants.
Thus, when finding a rental, checking the tenant’s credit history is a smart idea.
Inquire about the following things from the tenants:
- What is your monthly income?
- Will you have guests coming over?
- Do you have pets?
- Have you ever been convicted?
- Will you sign a 1-year lease agreement?
- What is the nature of your work?
We hope that asking these questions from the tenants will help you make smart tenant decisions.
Have a written rental agreement
You must have a written agreement that states all the obligations of the parties involved.
For instance, your agreement should talk of the tenancy duration and monthly rent.
The laws and agreements depend on the state’s rules and regulations. A Tenancy Agreement should include these things:
- The bond amount
- Amount of rent
- Type and length of agreement
- Rules and conditions
- How the amount should be paid
- Calculation of rent increases
The rent for their room will also depend on the location of the house, the size of the room, and facilities.
For instance in Melbourne, you can get a room for $200/week. While in Sydney it is around $400/week.
Be clear about the house rules and space available
To make sure there are no inconveniences in the future, you must set rules and guidelines.
Before renting, you must inform your tenant about the fridge space and house chores. You should be clear about these things when you rent a room:
- Cooking and grocery expenses
- Cleaning duties
- Noise in the house and the limitations
- Where the tenants can park their vehicles
- Besides that, you must provide a comfortable living space to your tenant.
If they are renting a room at your place, it is a good idea to clear everything in the kitchen; because they will use that.
Learn about the taxable income
You must not forget that the rental income you receive is taxable.
This is why you must double check your budget according to the tax time. Obviously you don’t want surprise tax bills, so make sure you pay your taxes on time!
Go through the Australian Tax Office Guidelines. Here you’ll learn more about the assessable income as a landlord.
Consider landlord insurance
In general, home insurance doesn’t cover the damages caused by tenants. The damages to your rented property are usually covered by landlord insurance.
However, the insurance policies vary according to the insurance provider.
People also ask
What are the cheapest suburbs to rent in Australia?
The cheapest places to live in Australia include Coober Pedy and Peterborough. Besides that, you can also rent a room for a low price in Port Pirie West and Tara.
How many days earlier does the landlord need to give notice to the tenant to move out?
The landlord must give at least 30 days’ notice to end the rental agreement. The tenant is free to leave on any day before the date given.
However, the tenant must pay rent until the agreed fixed term.
Have the rents increased in the capital cities in Australia?
Rents in the capital cities in Australia have increased by 11.7% from 2022 to 2023. Sydney is the most expensive city to rent
