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You can make up to £7,500 a year in tax free cash if you rent out a spare room. But apart from the tax-free cash incentive, how else could it benefit you?
Let’s examine it in depth:
So who to rent your room out to? Your first port of call of course should be your friends and family. Renting to them may be more ideal than a stranger, providing you can live with them. But at least you don’t need to worry about not knowing someone.
But if you must rent to someone you don’t know, the location you live should give you a good idea who may be interested in renting your room. Such as:
Depending on what your room is currently, or was previously used for, you may want to think about furnishing it for ‘rent a room’ use and perhaps re-decorating.
Which means you don’t have to go overboard, but if the room is neutral in decor and contains the necessary amenities then it is likely to appeal to a greater amount of potential lodgers.
If your spare room is currently unsuitable for lodgers to move into, furnishing it can be easy and cheap. You may even be able to get things for free, but make sure they are in good condition before you buy them.
All these offer free stuff, you just need to be able to pick the items up and take them home.
You’re unlikely to be able to furnish the whole room from such sites, and even if you do, it won’t match. But even if you manage to get a bed, some drawers or a desk, at least this will help towards the cost.
For items that you don’t want or can’t get secondhand, you can pick up simple, co-ordinating furniture relatively cheaply from places like Ikea,
Don’t forget that any expense you have when it comes to furnishing the room will eventually get covered by the rent paid by tenants. You can also put some of it against your income reduce your tax too.
If you are providing a ready furnished room, you will want the contents protected under the house insurance should anything happen to them through theft or fire, for example.
The second thing you need to do, is to make sure your insurers are aware of your lodger. Having someone live in your house that you didn’t previously know, and your insurers are not aware of, can invalidate your cover.
This is because should you make a claim for theft, your insurers could challenge it with the fact that you have a stranger living with you.
When screening potential lodgers, you may want to find out if they have any previous criminal convictions. This is a touchy subject, especially with strangers, but should you invite someone with a conviction into your home as a lodger, your home insurance may well become invalidated or skyrocket. Its something you need to know.
This is fairly simple to do:
To advertise for free.
Unless you manage to rent your room out to a friend or acquaintance, you are ultimately inviting a stranger into your home to live with you. You may want to think about asking potential tenants for some references before you give them the keys. Ask for at least two.
These will ideally be previous landlords and workplace references.
Take the time to call them up by phone instead of sending them an email. You’ll be able to get an idea of their authenticity a lot easier if you actually hear their voice.
For previous landlords, you may want to ask some of the following questions:
For workplace references, you may want to ask some of the below questions:
This will ensure that the lodger is telling you the truth and ensure that their rent will be paid.
It’s important to have a contract in place so that there is a written agreement between the two of you. And you can refer to this in the event that anything goes wrong.
There’s more info on the rights of both sides when you are renting a room to a lodger on the Gov.uk website here.
You can create your own lodger agreement, or there are a few on the Net that you can use. Here is one, for example, that is useful to copy.
Under the Government’s Rent-a-Room scheme, you can charge up to £7,500 a year or £3,750 each per year if you’re doing it jointly, without paying tax. Making renting a room a decent earner.
Anything over that, and you’ll have to pay tax. But, if you’re living in London or somewhere else expensive, it’s likely that you will make more than that.
The amount you can make each year will vary a lot depending on what sort of room you have and your location.
Living within close proximity to large cities, educational institutes and places of work will allow to charge a little more than other places.
You need to think about whether to ask for rent on a weekly or monthly basis. If you ask for the rent on monthly basis, you will end up gaining slightly less in the long run than if you receive it on a weekly basis.
But there are a few things you’ll need to bear in mind when deciding how much to charge:
You’ll also need to make sure that the amount you charge in rent covers the additional cost of electricity and gas bills and any other utilities, unless you will be charging for those on top.
Generally it’s easier to include them in the overall cost. Just work out how much you use on your own and estimate how much more the other person could use. This way you can charge a bit more and justify it, as well as keeping it simpler.
Renting out one of your rooms is not for everyone. There are pros and cons and it depends on you, your lifestyle, your property and how much you need the money, frankly
Most obviously, this is an easy way of making money without actually doing much work. The money you make can ultimately help towards mortgage costs or any other expenditures.
If you screen potential lodgers properly, you’re likely to end up with someone who will fit into your lifestyle and who you will get along with easily. If you live on your own, a lodger may be excellent company and open up a whole new social life and circle of friends.
It is much easier to remove unsuitable lodgers from your property than it is to remove full tenants, as they do not have the security of tenure. Therefore, should it not work out, and you have outlined details in the contract, it is easy to get them to leave.
If you like your privacy and can’t bear the idea of sharing your bathroom and kitchen with a stranger, then renting out a room is probably not for you.
Lodgers do have a right to occupy the other rooms in the house and also to invite guests over, at least not without your approval. So if you’re not a people person this might be difficult.
But bear in mind that you could gain a lodger who simply likes to keep themselves to themselves and spends most of their time in their room. Screen potential lodgers properly and everything should be ok.
Have you rented out a room?
Let us know your stories in the comments below.