Do you allow your tenants to sublet extra rooms to housemates? Most Houston landlords prohibit subletting because it can be an invitation for trouble, including property damage.
Housemates don’t always get along; sometimes, roommate situations turn sour. But there are benefits to allowing your tenants to sublet.
If you’re not sure which way to go, this article will help you decide.
Four pros to allowing tenants to sublet rooms in Houston
1. Unemployed/underemployed tenants will have rent money
When your tenants have extra income, they’re less likely to pay rent late or be short on it. Many tenants who sublet never touch the money they get from their renters but pass it directly to their landlord.
Now that more than 600,000 people are out of work in Texas, and thousands are facing eviction, it might be wise to allow your tenants to sublet. Try to determine this on a case-by-case basis, however, since not every tenant will need the extra income.
For example, if a tenant hasn’t paid rent in six months, and you don’t want to file an eviction, allowing them to sublet could be a workable solution.
2. You might be able to avoid evicting your tenant
Allowing unemployed tenants to sublet can be a great way to generate rental income when you’re trying to avoid filing an eviction lawsuit. But you need to be smart about how you amend the lease terms.
If your renter wants to sublet a spare room, require all potential housemates to go through your tenant screening process. This will give you a chance to identify obvious red flags.
Require everyone to submit a full application, run a background and credit check, and put them on the lease as someone responsible for paying rent, not just as an occupant.
You don’t have to make a housemate responsible for the entire amount of the rent, but you can and should require the individual to pay his or her portion directly to you, not to your main tenant.
This will ensure you get your rent money. If your tenants can’t agree to these terms, don’t let them sublet.
3. You’ll get more applicants
For some people, being able to sublet their home is a deal-breaker. Some people can only afford to pay when they share their rent responsibilities with other people.
In fact, many people count on rent money from housemates to pay the bills and won’t apply for a property unless subletting is allowed.
4. Your tenants won’t sneak behind your back
Sometimes tenants sublet rooms without the landlord’s permission. People sublease rooms for a variety of reasons, and if you don’t give them a legal way to do it, they could make a bad decision.
For example, your tenant might sublease a spare room to a drug dealer or a registered sex offender without knowing. It happens more often than you might think.
By allowing your tenants to sublet, you’re less likely to worry about them sneaking around and illegally subletting your property to people who spell trouble.
Four cons to allowing tenants to sublet rooms in Houston
1. Your tenant might get into tax debt and become frustrated
Most tenants who sublet a room never pay federal or state income tax on the money they receive for rent. There’s no state income tax in Texas, of course, but all rent is considered taxable income for federal income tax purposes.
At first glance, it doesn’t seem like rent from a housemate should be regarded as taxable income since the subletter’s portion of rent goes directly to the landlord. However, the IRS disagrees.
Rental income is taxable, whether you’re a property owner or a tenant who sublets a room to someone else. Although it’s not your responsibility to manage your tenants’ taxes, if they get audited, they’re likely to feel stressed.
Agitated tenants can be bad news, especially when they’re upset over financial issues. There’s only one way to avoid paying federal income tax on rent received from a housemate: the housemate needs to be on the lease and he or she needs to pay the property owner/landlord (that’s you) directly.
2. Cops might visit your property often
Though some people assume it was all staged, you’d be shocked to see those same situations in person. It’s not just family members living together who have knock-down-drag-out fights on their front lawn at 3 A.M.; fights between housemates and guests can get just as bad.
If your tenant doesn’t select a suitable housemate, and they end up fighting all the time, you could find cops getting called to your property repeatedly. You may not even be aware of it unless a neighbor knows how to contact you to let you know.
If police get summoned to your property over and over, the neighbors will feel uncomfortable and unsafe, and you don’t want that.
3. The risk of property damage increases
With each additional person who lives in your Houston property, the risk of property damage increases. Single people are less of a risk than couples or people who invite friends over frequently.
People tend to be a bit more careless in groups, especially when there’s alcohol involved. It’s too easy for someone to put a hole in the wall accidentally or start a fire in the yard during a barbecue.
Adding a person to the property increases the risk of property damage. If you’re willing to allow your tenant to sublet, it’s wise to require potential housemates to apply like any other tenant and be on the lease.
Don’t let your tenants sublet under the table. If you’re going to take a risk, exercise your right to require housemates to meet your standard tenant qualifications.
4. Evictions can become a sticky situation
Evicting a tenant is generally easy when they’re on the lease and you have all their information. If your tenant rents out a spare room to someone who isn’t on the lease, they could turn the tables on your eviction lawsuit.
It’s not always going to happen, but your tenant’s unlisted housemate may fight your eviction lawsuit. If you can’t prove that an undocumented housemate has broken the lease agreement, you might only be able to evict your primary tenant.
Houston’s landlord-tenant laws lean heavily in the tenant’s favor, and even squatters have rights. You can avoid these challenges by insisting all housemates go on the lease.
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