According to the August issue of CHANGING TIMES magazine, taking in a boarder is a good way to generate some extra income if you have some extra space in your house. But there can be problems. Some people do this on a handshake and get stuck with a bad tenant and have no grounds for eviction.

To avoid the problems, the magazine suggestions the following:-Ask for references. Get them from banks, employers and former landlords. Careful screening is essential when you're going to share living quarters. You need to make sure the potential tenant is capable of paying his rent. You also want to agree on pets, smoking and noise.

You can check a prospective tenant's credit history by joining a local credit bureau, which may cost you $20 to $50.

-Put everything in writing. Buy a boilerplate lease agreement that covers the essentials, such as how much rent is due and when. The lease should spell out rules on the use of kitchen, laundry and storage facilities, chores to be done in exchange for rent, and any other verbal agreements.

There are about 200 nonprofit rental-matching services across the country that provide preliminary screening and help with drawing up a lease agreement. Some are free, other charge - up to $125. Contact the Shared Housing Resource Center, 6344 Greene St., Philadelphia, PA 19144, (215) 848-1220 for information.

-Know the laws. If you're renting only a room and not an attached duplex or apartment, you may be exempt from fair-housing laws. But you may have to adhere to security-deposit and eviction laws that tell you how much notice you must give a tenant before evicting him.

As far as insurance is concerned, you probaly won't have to make changes in your home owners policy if you have adequate liability coverage.