THERE is nothing new in using a spare room for a bit of extra cash.bigstock--Room-for-Rent-sign-45888079

However, in these days of legal over-complication, it is important you know your rights and obligations.It can be tempting to be very casual about renting out a room: you meet someone, somehow, and you all agree to terms, they move in, pay cash and everything is beautiful.  Now while this may have been the norm back in the 1970s, this is 2013 and you need to get serious.

Back then, tenants were more conditioned to do the right thing and your extra income could be, let's say, ``discreetly'' earned. It is nothing like this today.  Sourcing tenants today is actually much easier than ever before, contact nearby universities or large employment bases such as hospitals.  Consider putting a print ad in the right section of the paper, or go online.

The major difference with tenant selection compared to when leasing a whole property is you will have this person in your home, this means you will share some facilities, will you cope with bumping into them in the morning? You will need to interview them thoroughly and I suggest building a trial period into your agreement.  You can access a standard tenancy agreement or lease, depending on your state, online.  As much as there may be a temptation to avoid the formal tenancy agreements, I strongly advise you treat this very seriously, get advice, get the right agreement and ensure all is executed correctly, and consider adding conditions to your agreement, these may state how the bills for things such as electricity, internet or pay TV are divided and when the tenant needs to pay.  Define access and the use of other areas of your home - even where they may park their car, not smoking, or playing loud music late at night, are reasonable conditions, for example, but you need to accept they will have a right to live there; asking them to stay in their room at all times and only using the shower on alternate nights after 11pm is not really reasonable.  This is effectively a sharing scenario so, unless the rental space is totally independent, you must give this a great deal of thought.

Successful tenancies tend to be the ones with clear boundaries from the start,  insurance must not be ignored, accidents do happen, contact your insurer before the tenant moves in to make sure your policy conditions cover you, and if the rental allows sole access to a bathroom or more ``self-contained'' space such as a kitchenette or living area, or individual access, expect more rent, but be aware that if all goes well and you want to start renting out other rooms in the house, check with the relevant authorities because different rules can apply the more rooms you let out.

Now the bad news: you are about to generate extra income for yourself, so your accountant and the taxman will want to know how much you made, worse still if you don't tell them and they find out subsequently, ouch! However, letting them know in advance will allow you to discover what, if any, additional expenses can be claimed to reduce your tax liability, if you have the tenancy agreement in place, the right conditions, interview thoroughly and secure the right tenant, plus sort out insurance and the taxman, you are on your way!

(source: Perthnow - by Andrew Winter - host of Selling Houses Australia)