With sites like AirBNB becoming increasingly popular, many people are looking at the possibility of renting out a room in their home, whether that’s for hosting students, taking on a lodger or as with AirBNB letting out a room on a temporary basis to world travellers.
You don’t have to own your home to take on a lodger either. If you rent your home, you might be able to take on a lodger if you have the permission from your landlord. If you are still paying the mortgage on your property, however, you will need to contact your provider to make sure they have no objections.
On the surface, letting a room is a great way to bring in extra money if you have a spare room or two that are not used. Letting out a room is simple to arrange, though there are some factors that you will need to consider before you go ahead.
Things to Consider Before Letting a Room
The Advantages of Renting Out a Room
The first, and perhaps most appealing advantage, is that letting a room in this way comes with some serious tax advantages. Under the Government’s rent a room relief, you can earn up to £7,500 before you start paying out to HMRC. The only caveat is that you can’t deduct the expenses that normally come with being classed as a normal landlord. Above £7,500 you get charged 20% tax on your rental income.
If you live in a reasonably large property and there’s plenty of space, renting out to a lodger is certainly a way of making better use of your assets. For some it can not only provide valuable extra income but also companionship.
Make the right decisions and there aren’t too many disadvantages in renting out a room in your home. You will need to contact your insurance company and tell them that you are becoming a landlord and this may add a small amount to your premiums.
Finding your lodger is going to be the biggest challenge. If it’s already someone you know, then all well and good. If you are taking in a stranger, then it makes sense to do some checks and ask for references before you let someone through the front door. You’ll also need to decide how your rent is going to be paid, what deposit you want, and what other bills such as gas and electricity and council tax are going to be shared.
The Disadvantages of Letting a Room
As a landlord, you’ll be responsible for providing a safe and secure environment for your lodger which means you will need to carry out safety activities like regular gas safety checks.
Letting a room to a lodger means that you will be sharing the house rather than having someone who lives in a self-contained flat. That can cause problems if you don’t get on as co-habitants which is why vetting and interviewing potential lodgers in the first place is vital as well as having the right agreement in place.
Overall, there are few disadvantages of letting a room in your home to a lodger as long as you don’t mind sharing your space with someone. It’s a great way to earn some extra income and comes with some useful tax advantages.