Guide to renting rooms
So you have made the decision or are thinking about room rental. I will start off by giving you an overview of why thousands of people are turning to this every day, then give you a step by step guide of what you need to know.
The room rental market has grown massively over the last 10 years, people have reverted from advertising in papers to advertising online and that’s made it bigger than ever. As house prices have risen more and more people turned to room rental and realised the great returns room rental could bring. Now 1000s of people advertise their rooms every day, with tenants quickly snapping these up. A lot of people who were considering flats with rent and bills over £900/month turned to room rental instead, which was a win win situation for both the landlord and tenant. Most landlords and tenants save 100s monthly with the added benefit of making friends along the way.
Do you need permission?
In most cases it’s perfectly OK to take in a lodger. It may be good to check up on any of the points below that might affect you.
- If you own a leasehold property, check the lease to see if you need the freeholder’s permission.
- If you have a mortgage, you may need your mortgage lender’s permission.
- If you are renting a property, give the estate agent, landlord, local council or housing association a quick call to check.
Does my home insurance need changing?
Your insurance company will need to adjust your policy. Not telling them about a lodger or tenant may invalidate your policy. It’s also a good idea to get a quick online quote from our landlord insurance partners. You might save some money.
Ensure your home meets safety regulations. You may need to fit smoke alarms, carbon monoxide detectors and fire extinguishing equipment.
Do I need to pay tax?
The great news is, if you are an owner-occupier of the property where furnished rooms are being rented, then you can earn £4250 of rental income per annum tax free. That’s £354 a month and you automatically join the rent a room scheme and you don’t even have to tell the inland revenue about the rent, unless you receive a tax return over this amount or the rent is over £4250.
If you don’t live in the property and you are letting the rooms, it would be considered as a business and you would pay tax as normal by contacting your local tax office and completing a tax return and you would not join the rent a room scheme.
Decide when and how long you want a lodger for
When considering taking on a lodger: is it going to be a short arrangement, say 6 months until you get on top of things or a more permanent long term arrangement? Once you have decided this, decide if you would like the lodger to be there all week or not. You may think that’s a strange question but Monday to Friday lets and weekend lets are growing more and more popular especially in Manchester and London. A lot of travelling business people take up these options saving on hotel and travelling fees benefiting both the tenant and the landlord. The other option some people choose is to let their rooms out over special events like Wimbledon or Cheltenham.
Take a deposit
Always take a security deposit from your tenants, which is normally the equivalent of one month’s rent, this can be used in case there is any damage or unpaid rent or bills. See the topic on deposits & legislation as this has more information on what to do with the deposit if you’re not an owner occupier.
Remember that when choosing a lodger always be aware as you don’t fully know them yet so keep any valuables such as handbags, wallets, personal information out of sight. Setup a password protected accounts on your home computer.
Get a tenancy agreement
When renting its advisable to always have a tenancy agreement in place between you and the lodger, this will include details of the rental terms of the property and protect you in the future. Print yourself a tenancy agreement right for you.
Provide your tenants with a safe property. Make sure all your fire alarms are working, and check if you’re up to scratch with fire, electrical and gas safety, furniture and furnishings regulations and general safety of the building.
What kind of person do you want as a tenant
Get an idea of the kind of tenant you are after i.e. male, female or no preference, young/old, smoker/non smoker etc.