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Thinking about renting your spare room? Here’s how

It’s no secret that rents across the UK are skyrocketing as the number of houses being built are outstripped by lots of house hunters looking for a place to settle down. It’s leading to record house prices– between 2012 and 2013, fewer houses were built than at any point in peacetime since the 1920s.

Because of this, across the country, lots of people are either putting off buying a home or are being priced out entirely, leading to record numbers of renters. Many home owners have chosen to renovate their current homes which can lead to storage issues when moving home. A 2015 PwC report found that 5.4 million people were privately renting, compared to just 2.3 million 15 years earlier – and forecast this number to rise to 7.2 million by 2025.

If you own your own home, this represents an opportunity. Taking in a tenant can be a useful source of cash, helping you pay off your mortgage, boost your pension or afford that extra something you’ve been after. Here’s everything you need to know about boosting your income by renting a room.

How much could I make?

Before we go in to how to rent a room out, it’s worth knowing why it’s a good idea. To get a clear idea of how much you could make from the booming private rental market, Space Station recently undertook research into the top 20 universities in the UK, seeing how much, on average, private accommodation
close to the universities cost per week:

  • London universities had the highest rents, with rents at Imperial College London being around £270 per week, University College London students paying
    around £237 per week, and London School of Economics students paying £228 per week.
  • Outside of the capital, in provincial cities where property prices aren’t as high as in London, rents are still high: in York, the average is £114
    a week, at Warwick rents are £207 a week, Oxford rents are £153 a week, and students at the University of East Anglia pay around £103 a week.
  • The lowest rents were found in Nottingham (£95), Leeds (£90) and Lancaster (£81) – less money, though according to International Student Calculator,
    the average yearly contract period for private student rentals is 44 weeks, or £3,564 for homeowners in Lancaster.

There’s money to be made, and the government’s Rent a Room Scheme means that you can earn up to £7,500 per year, tax-free, for renting out furnished accommodation in your home (or £3,500 if you share the income with another person such as your partner). That’s a huge boost to your usual tax-free allowances.

So, how do you go about renting out your spare room?

How do I become a resident landlord?

The process of becoming a resident landlord – letting out room(s) in a home you live in for most of the time – is very much down to you. Regulations regarding becoming a resident landlord aren’t particularly stringent, but there are some rules you have to follow to protect your tenants, and some important ways you can protect your home too.

Your responsibilities

Before you can rent a part of your home, you first need to get a private landlord or letting agent to check your immigration status, as well as anyone living with you.

You also need to get an Energy Performance Certificate for the home, a gas safety certificate if your home or appliances run on gas, and make sure to read the government’s guidance for resident landlords.
It goes into everything you legally must do before you let out part of your home.

You should also download a copy of the government’s How to Rent guide. Whenever you get a new tenant, you must give them copies of this guide and all of the certificates listed above.

Every 12 months you should get a gas safety check done, and both electricals and furniture provided to the tenant should meet safety standards – get an electrician in and make sure furnishings (fabric furnishings in particular) are labelled and meet fire resistance requirements.

Your tenants need access to a kitchen, washing and toilet facilities – these can be communal – and you must keep the property safe and in good repair. When dealing with deposits, legally you must put the deposit in a deposit protection scheme, or you can be taken to court by your tenant.

Lastly, you must remember to pay any income tax, capital gains tax and so forth on any money you make.

The contract

Protecting your tenant, yourself and your home, the contract is incredibly important. It should include things like:

  • whether or not it’s a tenancy or a licence to occupy (the latter would grant you entry into their room and them into your space)
  • the start date and length of the tenancy – this can be indefinite
  • the deposit amount and rent you charge
  • responsibilities for maintenance
  • the terms for ending the tenancy.

You only legally need a contract if the rent has been agreed for at least a three-year period, but they provide consistency and avoid confusion, settling disputes without the need for messy and expensive court visits.

Renting out your home can be an easy way to generate some cash, and self-storing with Space Station can help you free up space to start earning. Click here to get a quote!