07 November 2016 Renting out a spare room Renting out a spare room could be a way to help pay off your mortgage faster. Transcript: If you're looking to purchase your first home and you're thinking of being there for a while, is it a good idea to maybe purchase something bigger and rent out a spare room? Well there are pros and cons and today we meet with Jade and one of our property managers to discuss it further. So Jade, I hear you're looking to purchase your first home. What type of thing are you're looking for? I'm looking for a two bedroom or townhouse. Room to grow eventually, but just for the moment I think I might rent out the second room. I'm just not a hundred percent sure how to go about that. OK, well what type of questions do you have in relation to that? What are the legal requirements of renting out a room? You can either do it privately or through an agent. We obviously recommend through an agent in case of any issues down the track. In terms of what we would have as an agent. We have a lease agreement, a bond, a condition report, so there's no issues. How do I decide what percent of rent is paid? There's no real accurate answer, however, it's sort of a mutually agreeable thing. Where the bedroom might be a bit bigger in the master bedroom and have an ensuite, so therefore they may pay sixty percent of the rent and the other person may pay 40. I'm renting to someone I know - a friend or family member. Do I still need the rental agreement? We would advise yes. Just in case there's any implications down the track. Definitely advisable to have that. But again, if it's a private agreement, it's up to you. What are the tax implications of renting out a room? Well you obviously need to declare any rental income. You'd have to speak with your accountant about what the implications are directly to you. So after all that do you recommend buying a two-bedroom and renting it out or just a one-bedroom apartment? It's really up to personal opinion. Obviously if you don't mind sharing, the benefit of having that financial freedom is definitely there. However if you do like your own space and privacy then maybe a one bedroom place is better for you. So there you have it. Renting out a space in your home can be beneficial, but if you don't lay out the ground work from the beginning it can be a nightmare. I hope you've learnt some helpful tips. We'll see you next time.