Renting out a room in your home

Who can rent out a room?

If you own a property, you are free to rent out a room to a tenant at any time you choose. However, if you yourself are a renter, you may not always be free to sublet the house. If you decide to get a flatmate, consider checking your lease agreement first to find out if this is allowed. In most cases, you’ll need written permission from the property manager or landlord before renting out a room. Each state and territory also provides information on subletting rules through their websites or fact sheets.

• QLD: Residential Tenancies Authority (RTA)
• NSW: NSW Fair Trading
• VIC: Consumer Affairs Victoria
• SA: Government of South Australia
• NT: Northern Territory Consumer Affairs
• WA: Consumer Protection
• TAS: Tasmania Legal Aid
• ACT: Legal Aid ACT

Do you need to inform your lender before renting out a room?

If you rent out a room in your home while still living there, you usually don’t need to notify your lender. However, it’s worth checking your loan agreement for any special clauses or rules around this.
If you decide to move out and rent out the entire property, you’ll most likely need to refinance to an investor loan. It’s important to inform your lender if you choose to turn your home into a rental properly. Failing to disclose this can have serious consequences, including potential legal penalties.

How do you find a housemate?

If you’ve decided to rent out a room in your house, you could rent to someone you know or to a stranger, depending on your comfort level. Renting to a known person might be easier since you don’t need to advertise and already know if you’ll get along. However, if you rent to a friend or family member and don’t get along, your relationship may suffer.

Another option is to advertise through a reputable website or community bulletin board. There are websites like flatmates.com.au and flatmatefinder.com.au that connect potential housemates with rooms for rent. These sites typically require you to post photographs of the room, a property description that includes available amenities, and the weekly rent amount.

Most websites also let you browse profiles of prospective tenants and share information about yourself.

What rules should you set for a potential housemate?

When you rent out a room to somebody in your home, it could also be a good idea to establish ‘house rules’ to ensure you can cohabit together successfully. You may like to consider factors such as:

• A bond amount, if you want one to be paid at the start of the agreement.
• The date you’d like them to pay the rent regularly, and how you’d like it paid.
• Bills for utilities and streaming services, and whether these will be included in the rent.
• Food and cooking expenses, and whether these will be shared or separate.
• Cleaning duties, and who is responsible for what tasks.
• Guests and what kind of visitors are appropriate.
• Pets, and whether or not these are allowed. However, you may need a valid reason to refuse a tenant from keeping a pet in some states and territories.
• Noise in the house and your expectations around this.
• Car/s or bike/s parking (if necessary).
• Moving out, including the terms and how much notice you would like.

If you choose to advertise your room online, it’s worth considering these house rules beforehand so that you can mention them in your listing to make prospective housemates aware. Once you’ve chosen a housemate, it may also be useful to write these things down in case any disputes arise in the future.

What are some tips for choosing a good housemate?

When seeking a housemate to rent a room in your home, things you might do to help narrow down your selection include:

• Inviting potential flatmates over for a room inspection and an informal sit-down chat.
• Asking potential flatmates about their habits, lifestyle and work situation in order to get an indication about their suitability for the home.
• Finding out whether potential flatmates have a girlfriend, boyfriend, partner or any children who will also be spending time at your home.
• Asking potential flatmates for references, either from former landlords or employers.

How do you rent a room out on a short stay website?

If you choose to rent out a room in your home on a short stay platform such as Airbnb or Stayz, you will typically need to follow these steps:

• Create an account on your preferred platform.
• Verify your identity and banking information.
• Depending on the platform, you may need to provide a formal ID or a photograph.
• Write a listing describing the space and its amenities. Try to be upfront with your description. Misleading information can lead to negative reviews.
• Upload photos to showcase the room and other areas you want to highlight. Appealing and uploading photos may help generate extra interest from prospective guests.
• Set a price for the room. Take into account the prices of similar properties nearby and the time of year. For example, in busy holiday periods, you may wish to increase the price. Also remember that you must pay either a fee or a percentage of your earnings to your platform of choice.
• Make sure your property is clean and ready for guests. The room should be appropriately furnished, with clean linens on the bed and towels for guests. All amenities should work as advertised. Stocking toiletries and bathroom supplies can also be a good idea.

Does home insurance cover your flatmates?

Standard home and contents insurance policies usually won’t cover damage caused by flatmates who are subletting a room in your home, or their visitors. For this protection, you may consider landlord insurance. If you’re renting out through a short stay website, you can also consider the alternative insurance options offered by some of these providers (in conjunction with insurers).

Certain short stay platforms, such as Airbnb, provide host liability insurance. This policy may cover your legal liability for bodily injury to guests, damage to guest property, and damage to shared spaces such as building lobbies or neighboring properties caused by guests (or others). It’s a good idea to read the Product Disclosure Statement (PDS) to understand the coverage. You can speak with an insurance provider for any questions you may have when comparing options.

Will landlord insurance protect you as a renter?

If you are a renter, your landlord’s insurance does not typically include protection for your personal belongings. If you want, you could consider renters insurance, which is designed for tenants and can cover all or part of the repair or replacement costs for your possessions if they are stolen, damaged or destroyed.

Does rental income count as part of your regular income?

According to the Australian Tax Office (ATO), if you rent out part of your home— even just one room—the rent that you receive will usually be regarded as assessable income. You’ll need to include it in your tax return and pay tax on it accordingly. If you sell your house in future, you may also have to pay some capital gains tax (CGT).On the other hand, there may be some expenses with subletting that might be tax deductible.

The ATO has further information about renting out all or part of your home. You can also find out about different side hustles if you are considering subletting to make some cash, and consider advice from the ATO about the sharing economy and tax.