Are you interested in getting into homesharing? Even with a lot of motivation and enthusiasm, it can be difficult to decide on pricing. Here are some tips to help you price your home effectively (and realistically).
Homesharing and rentals are priced differently
To begin, look at the rental market in your area. Get a sense of what apartments and full home rentals are going for. This research is just a starting point and should only act as an initial ballpark to start your calculations. That's because the market price for rentals and home shares is very different. The reality is that your homeshare should be priced below the rental market averages in your area. Here's why:
Tenants vs. Housemates
When entering into a home share agreement, you are joining together as housemates rather than the traditional landlord-tenant relationship. This gives the housemate less legal protection and fewer rights than they have as a renter under a traditional lease. Think about it this way – with a traditional rental, that legal protection and those rights as a tenant are built into the rental cost.
Homeshares also require more rule-following and shared responsibility than renting a place independently. Housemates are expected to follow the HomeShare Agreement which may restrict visitors and include other rules to abide by.
As a trade off for these concessions, housemates expect to rent space for less than they would with a traditional rental. As a homeowner, you will attract more candidates and have a greater pool of housemates to choose from when you advertise a realistic rental price that considers the compromises that your potential housemate will be making.
Calculating a Price
It's important to calculate an appropriate price that takes into consideration the dynamics of your homeshare, which will be unique. For example, the more rules you have (such as no overnight guests or asking permission before people come over), the lower the rent should be. Likewise, if amenities such as laundry and parking are not included, you should reduce the price further.
Consider how much space is private versus shared, as well. Most home sharers rent out a bedroom and bathroom and the housemate shares the other spaces in the home with the homeowner. Thus, potential housemates do not pay as much as they would if they rented a private apartment or home.
Here's an example. Let's say that the going rental rate for a detached, four-bedroom home in your neighbourhood is $2700 per month. With utilities included, that cost may rise to $3000. If you and three friends were to move into this house, each taking a bedroom, it would make sense to split the rent, paying $750 per month each.
However, you live alone in your four-bedroom home and are looking for one housemate. You're planning to take two bedrooms, and you're offering two bedrooms to the housemate (one of the bedrooms could be advertised as an office or private den). So, based on the fact that you're renting half of the bedrooms and looking at the comparison, a good starting point for rent is $1500 per month.
Now, consider that in the first scenario the group of friends are covered with a lease (co-tenancy). There's no lease for homesharing, so you'll need to consider reducing the rent.
Next, consider the rules that you're asking the housemate to follow. You'd like notice to be given before they entertain. You'd also like no guests on Sundays. You would like your washer and dryer to be available for your use only on Monday, Wednesday, and Friday evenings. Consider that these rules (all of which are reasonable) will have an impact on the price. Depending on where you live and a amenities you are offering, a reasonable range may be between $750-$1200 per month.
Keep in mind this is just an example, there is no easy formula for pricing your home share. The price depends on many different factors. The best way to know if you've priced your home share correctly is by how much interest from quality potential housemates that you get; those who would be a good fit from a lifestyle and personality perspective.
The Bottom Line
The bottom line is that as a homeowner, you cannot expect to make as large of a profit as a landlord. Homesharing is as much about relationship building and finding the right housemate to share your space as it is about making as much money as possible. The goal is to find a good balance between these two goals. You should have realistic expectations so that you attract the right candidates and ensure that they feel as though you understand the compromise they are making by agreeing to a home share situation rather than renting a place on their own.
Still not sure how to price your homeshare? The team at HomeShare Alliance would be pleased to provide our expert advice. Schedule a complimentary Discovery Call for guidance around homesharing!