Renting a Room in Your Home: Is It a Good Idea?
First added 5th July 2021
By Lewis Ridley
5 min read
If you have a spare room available, renting it out could be a good option to make use of the space. However, sometimes, this is easier said than done. It’s important to know the benefits and limitations when it comes to housing a lodger. If you get it wrong, you could become unhappy in your own home.
In this article, we’ll break down everything you need to know about renting out a room in your house. When you’re finished, you’ll have a clear understanding of whether renting out a room is right for you.
The Benefits of Renting a Room in Your House
There are plenty of benefits when it comes to renting out a spare room, and many believe it to be a fruitful activity. Let’s explore some of these key benefits.
The most obvious reason to rent out a room in your house is to make an extra bit of cash. If you're looking to make a bit of extra money or pay the mortgage off quicker, getting a lodger can be highly beneficial.
However, there are a few things you'll need to consider when it comes to getting paid:
- Where you live matters - The amount you can claim in rent very much depends on the location of your property. Prices fluctuate across the country. You need to analyse the rental yields in your area to see what you can get. Make sure it's worth your while before you put up some advertisements.
- What services are included? - What you offer to lodgers will impact how much you can charge. If you're offering a fully furnished room, you can charge a little more. If you're looking to offer short-term stays with breakfast included, you can charge even more than the former. What you offer impacts the price enormously. Decide on the service before setting a price.
- What does the room look like? - The size and look of the room has a big impact on price. If you have the resources available, spruce up the room and give it a modern look. The better you dress it up, the more you can charge. It's all about perception, if you want to attract the best rental yield.
- Short stays or long stays? - The length of the tenancy will impact the price as well. If you're letting the room for short stays, you can normally charge a higher price. People will be willing to spend more for a quick break. If you are planning on having a lodger in for months, you'll have to discount the rent in exchange for a longer contract.
As you can see, there are plenty of factors that impact the price you'll be able to charge. With the right planning, you'll be able to garner the best yield for your room and area.
Meet Someone New
Another benefit of having a lodger or tenant in your spare room is the extra company. Although this won’t be on everyone’s list, renting out a room gives you the opportunity to meet someone new.
By allowing your tenant to have access to other rooms, your living room, your kitchen, etc. you will be able to make a new connection. Depending on how you choose your tenant, you could make sure you get a professional who you can add to your network.
Of course, this ultimately depends on who you let into your spare room. Make sure to do your research on the tenant before bringing them into your space. This is why references and other personal records are important. The last thing you want is a bad tenant.
Believe it or not, the government incentivises people to let out their spare rooms by offering tax advantages and bonuses to landlords. If you qualify for the Rent a Room Scheme, you could earn up to £7,500 a year tax-free. The room you offer has to be furnished and the tax break automatically applies if you earn less than £7,500 a year.
The government is currently trying to battle the rising house prices and lack of affordable accommodation by offering tax breaks. If you fit the criteria, you could receive income without paying tax. Of course, HMRC schemes come and go, so be sure to get into this scheme before it gets removed.
Easy and Simple
Some people find renting a room is an easier step to becoming a landlord. By renting out a single room, you don't have to worry about handling the extra hassle of managing a whole property. Having a lodger is the simple first step into property.
When renting out a room, you'll have to do all the standard checks a normal landlord would have to. The difference here is you won't have to deal with letting agents and other third parties (solicitors, etc.). However, you'll still need a contract for the tenancy but these are readily available from sites like the NRLA.
Are There Any Downsides to Renting Out a Room?
Although there are a lot of benefits to renting out a room in your home, there are downsides as well. You need to consider the potential negative effects when taking on a tenant. Failing to do your due diligence could result in a very unpleasant experience.
One problem many new resident landlords forget to consider relates to the mortgage provider. In some cases, you could be blocked from taking on a tenant altogether before the project has even started.
In most cases, there won’t be any issues. Mortgage lenders, whether that is banks or building societies, tend to look at these in a positive light. If the rental is successful, the landlord will have another source of income to pay off the mortgage.
Where there can be problems, however, is when you are solely relying on the rental income as a wage. Mortgage lenders want security and if you’re living off the single room rental income, they might object. In either case, always check with your lender that renting a room is a feasible endeavour.
This might seem an obvious one but it’s still very important. When you bring someone into your home, make sure your personalities align. The last thing you want is to bring the wrong character into your home.
This is why doing your due diligence is key. Vetting people using references and different questions is how you’re going to find the right person. However, it could be a good idea to include a break clause in your first contract to make sure the relationship can end if it isn’t working.
Even if you’ve hired a good individual, you will still need to make sure your security is up to scratch. Put locks on doors and make sure you let your home insurance company know what your plans are. You could save yourself a lot of trouble in the process.
A Tough Project
Renting out a room is a big project, and many new landlords fail to appreciate all the moving parts. Depending on the room you’ll be offering, you’ll need to make sure it’s designed to a high standard.
This means making sure the walls are decorated and that you have all the necessary bedroom furniture ready for use. For starters, this should include a small double bed and an acceptable level of storage. If you are short on space, using a space saving bed or divan bed can be an effective ploy.
All in all, just plan ahead and make sure you appreciate the effort that is needed to complete the project. You won’t get many offers from tenants if you provide a poor living environment. Additionally, you’ll need to consider bills and how they’ll be paid. Will you pay the bills, or will there be a split between you and the tenant? In either case, your energy company will need to be contacted to see if you can get a cheaper price.
Renting out a spare room to a tenant can be a profitable project. Not only do you get an extra wage, but you also get a tax break on that money up to £7,500. Clearly, there are a lot of benefits to renting a room. However, make sure to do your research before you undergo any progression.
If you want to learn more about how we can help get your room set up with the right bed so your tenant sleeps easy, get in touch today!
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