Renting out a room is a great way to make a bit of extra money alongside what you already earn. Whether your kids have just gone off to uni, or maybe flown the nest, or even if you have a spare room, you want some use out of, renting is an easy way to earn some all-important extra income.
Whilst renting out a room in your home to a total stranger can seem scary, it is an increasingly common occurrence and during the cost-of-living crisis it could be the solution to rising bills.
But how exactly do you rent a spare room? What steps do you need to take and what are the pros and cons of renting a room out?
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Renting out a room is when you rent out your spare room to either someone you know or a total stranger in exchange for money. It is a great way for people with a spare room to earn extra income relatively easily.
The Rent A Room scheme is an incentive that the government runs that allows landlords and live-in landlords to earn £7,500 of tax-free income every year, by letting out a spare room in their property.
In order to qualify you need to let out a room or part of your main property but not a self-contained flat. You don’t have to be a homeowner to qualify, as long as you have your landlord’s permission you can use the Rent A Room scheme as a tenant.
If the income is below £7,500 (around £625 a month) and if you don’t normally fill out a tax return then the exemption will be automatic. If you earn above this then it is your responsibility to inform the tax office.
You need to be aware though that the Rent A Room scheme doesn’t allow you to claim expenses for wear or tear or insurance etc.
How you want to rent out your room depends entirely on the person and your housing situation. If you only want to rent your room throughout the week, sites like mondaytofriday.com are perfect whereas if you are looking for something slightly more permanent you can advertise on spareroom.co.uk. If you only want to rent out for short periods of time to different people then you can try Airbnb as a way of earning that extra income.
If you do not want to find a lodger through the internet you can always spread the word through friends who may know someone looking for a room or you could try local noticeboards at work or in leisure centres.
The main reason that people decide to rent a spare room is for the extra income. But just how much can you charge a lodger?
The amount that you can charge depends entirely upon a variety of factors including where you live, the type of room you are letting, what services you will be provided and what kind of renting you plan to do.
Location
If you live in a major city such as London or Manchester, or somewhere that is a popular tourist destination like the Lake District, you will be able to charge slightly more for rent than homeowners in other parts of the country.
Room Type
Another factor that affects how much you can charge your lodgers is the type of room you are offering. If you have a whole floor of your house to offer then you can charge more than someone who only has a box room.
Services
If you plan on providing meals, doing laundry, cleaning the rooms, and other ‘extras’ then you will be able to charge lodgers more for these bonuses.
Type Of Rental
How often you plan on having lodgers affects the amount of money that you may make from them. If you only plan to do occasional letting then you can expect to make less than someone who has a more permanent lodger.
Like all big decisions, renting a room in your house comes with both positives and negatives. The only way to truly decide if you are on board with renting a room out is to carefully consider what it would mean for you and your household and weigh up the pros and the cons.
Pros
Cons
1. Advertise Your Spare Room
In order to find a potential lodger, you will need to first advertise your room. There are plenty of websites available online that were set up for just this purpose such as MondaytoFriday and spareroom. If you want to go down the holiday home route there is also Airbnb as a potential space to advertise your room. If you decide that the internet route is not for you, you can also advertise on work noticeboards as well as spreading the word amongst friends.
2. Vet Your Tenants
Before you let any potential lodgers move in with you, it is a good idea to vet them beforehand. You don’t have to go overboard with the questioning, but vetting is a great way to get to know any would-be renters and to see how they would fit into your day-to-day life around your house.
Performing a few background checks and asking for a couple of references is usually standard practice when it comes to vetting would-be lodgers. It is also a good idea to carry out a credit check as well.
3. Write An Inventory
Another good idea is to create an inventory of all of the furniture in your room that you are letting out along with a description of the condition that it is in. This way any existing damage, such as marks on walls or loose handles, are all logged. You and your lodger should both sign it at the start of the tenancy so that should anything get broken, you will know whether the damage occurred before or after the tenant moved in.
4. Decide How Long You Will Let The Room
One of the most important things you will need to decide is how long you are going to let the room for. You can do things on a yearly, monthly, or weekly basis depending on the type of lodger you have. You should also give some consideration to how much notice each party should give if they want the agreement to end.
5. Set Some Ground Rules
A good rule of thumb is to establish some ground rules at the very beginning of the arrangement. Let the tenant know exactly what you expect from the outgo, such as your stance on late nights and loud music.
It is a good idea to get these ground rules down in writing so that both you and the tenant know what’s expected. You should also be prepared to make compromises though.
6. What Facilities Will You Provide?
It is important to familiarise yourself with the facilities that your lodger will need. As well as your spare room, your lodger will need access to a bathroom and kitchen by law. Whether or not you are happy to share your living room is completely down to the person.
7. Inform Your Mortgage Lender
Before agreeing to rent a spare room, you should always inform your mortgage lender. It is incredibly unlikely to cause any problems but if you don’t notify your bank or building society then you could cause a breach of your mortgage terms.
If you own a leasehold then you should check with the freeholder whether it is okay for you to take in the lodger. This kind of information should be on your lease agreement.
8. Inform Your Insurer
Whilst you are informing your mortgage lender, you should also take the time to inform your insurer as it could affect your cover. It is always a good idea to check policy exclusions in your policy wording so you know where you stand. You risk invalidating your policy if you don’t tell them.
9. Request A Deposit
It is standard practice to ask for a deposit upfront when you let out a room. A deposit will provide you with security in the event of your lodger suddenly leaving owing you money or if they cause any damages.
A deposit can be any size but usually, a months’ worth of rent is a fair amount to ask for.
10. Check Council Tax
Another important element to check is council tax. If you live on your own, you’re entitled to 25% off your council bill. If you take in a lodger, you will lose this discount and will need to let your council know.
You should not lose this discount if your lodger is a full-time student, but it is always a good idea to check with your local authority.
Whether or not it is a good idea to rent a spare room is completely up to the individual. It can be a great way to earn some extra cash and if done through the government’s Rent A Room scheme will mean tax exemption as well.
However, it also means sharing your house with a stranger which can present its own unique set of challenges. Because of this, renting a room in your house is not the ideal choice for everyone.
This covers everything that you need to know about renting out a room. If you have any questions, queries, or insight into the matter, please feel free to get in touch!
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Alexandra is junior content producer who enjoys writing articles and finding out more about the property market. Read more about Alexandra here.
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