A mother-in-law suite is a functional feature of any home that offers a host of benefits for homeowners. It's where older family members or college-aged kids can have their own space if they live with you or where house guests can stay when they visit. But if you're not using your mother-in-law suite, maybe you've thought of renting it out.

Renting out this extra space is a way to bring in some extra cash — and who wouldn't want that? But there are some expenses that you'll have to pay out of pocket and tasks you'll have to handle to manage your tenant. Here's an overview of what a mother-in-law suite is and the pros and cons of renting it out.

What is a mother-in-law suite?

Also known as a mother-in-law apartment or secondary unit, a mother-in-law suite is a private living area, either inside a home or on the same property. It ranges in size but usually features a bedroom, bathroom, living room, small kitchen and a separate entrance.

Traditionally, a mother-in-law suite supported multi-generational living when an elderly relative needed to live with family members. While that's still the case in many instances today, in others, people often rent them out when they don't need the space.

Purchasing a home with a mother-in-law suite is an excellent investment. The space may come in handy someday if you need to support a friend or family member or renting it out can add to your household income. If you have the space around your home, you may consider adding a mother-in-law suite to tap into the benefits.

Pros of renting out a mother-in-law suite

Renting out a mother-in-law suite offers many benefits for homeowners. Here are some of the pros.

You'll earn extra money

When you rent out your mother-in-law suite, it allows you to generate some extra income each month. You can use the money to pay part of your mortgage or you can save it for retirement or something else. Even with the expenses of running the rental, you're still likely to come out ahead each year.

You can see a return on investment for the home

Homes with mother-in-law suites are increasingly in demand, as multi-generational living is becoming more common. Having a secondary unit on your property could increase your home's value and you'll likely be able to get a good price when you sell.

You have the flexibility to use the space how you want

Renting out your mother-in-law suite gives you a lot of flexibility. You can find tenants and collect rent for a specific time period and then, if someone decides not to renew their lease, you can do something else with the unit. Turn it into a short-term or vacation rental or allow a family member to move in.

You can keep an eye on your property

Because the rental unit is on your property, you can easily keep an eye on things, such as how a tenant maintains the home. You're also able to get in quick contact with the renter in case an issue arises, like an emergency or late rent payment. Often, rental property owners can't keep such a close watch on their homes when the units are across town.

You still have privacy

Most mother-in-law apartments have their own entrance, so you and the tenant can maintain your privacy even though you're living in close quarters. If the unit doesn't have its own entrance, check with your local landlord-tenant laws because you may have to add one.

Cons of renting out a mother-in-law suite

While the extra money, flexibility and ability to see a high return on investment are great, there are some downsides to renting out your mother-in-law suite. Here are some of the cons of turning the space into a rental.

You'll have some extra expenses

Renting out the mother-in-law suite might bring in extra money each month, but it also comes with expenses. You'll be responsible for regular maintenance, repairs, tax, insurance and other like utilities if you choose to pay them yourself.

Your insurance and taxes might go up

When you rent your mother-in-law suite, it might affect your homeowners' insurance. You'll likely have to get landlord insurance to cover the dwelling, personal property and liability. These policies tend to cost about 25 percent more than typical homeowners' policies. Depending on where the home is located, your property taxes could go up, too.

You might need a license

In some areas, local laws may require that you get a permit or license to run the rental property. It's recommended that you familiarize yourself with local rental laws to know what's required. Or, consult with an attorney who can help.

You might need to remodel

Depending on the layout and setup of the secondary unit, you may need to remodel the space before you can rent it out. Local landlord-tenant laws, which vary from place to place, likely require the rental to have its own bathroom and kitchen and some may require a separate entrance.

Check what's required in your area to make sure you're in compliance before making the decision to become a rental property owner. These renovations are costly.

You have to find and screen tenants

As a rental property owner, you're responsible for finding the best tenants to live in your home. This involves advertising and showing the rental, accepting applications, verifying renters' income and screening tenants, including credit and background checks. The process is time-consuming, especially if you're new to owning rental property. Hiring a property manager who will do all of this for you, along with collecting rent, is often a good investment.

You'll live in close quarters

Even if you have your own entrances, you'll still be living very close to your renters. That could be awkward, depending on the situation! You might feel like you're in their personal space and they're in yours or feel obligated to make small talk when you see them.

Renting a mother-in-law suite

If you have extra space in your home in the form of a mother-in-law suite, renting it out has a number of benefits — from generating extra income to increasing the home's value. There are some negatives, too, however, like additional expenses and day-to-day management. Use this list of pros and cons to decide if renting out a mother-in-law apartment is the best move for you.