Renting out a Spare Room: Everything You Need To Know

24th September 2019

If you have a spare room, renting it out often seems like an easy way to get some extra money for the space that you wouldn’t otherwise be using. There are a couple of things that you need to do before you can welcome the person into your home, or even before you start looking for people.

1. Tell your insurance company

Taking in another person, particularly a lodger, could affect your insurance cover. Check your policy and confirm that you can take on a lodger with your provider. They may stipulate conditions like not taking anyone on with a criminal conviction (often not including motor vehicle convictions).

You don’t want to find out that you’ve invalidated your policy when something breaks and you can no longer cover it. This isn’t a legal requirement but is a necessity.

2. Tell your mortgage company

This one is a legal requirement. You could end up in breach of your mortgage terms if you don’t confirm with them beforehand. Some of them do have restrictions on taking on a lodger.

3. Tax Break

Currently, the government is running a Rent a Room scheme, where you can earn up to £7,500 tax-free earnings for renting out a furnished spare room. There is also a £1,000 digital tax break if you’re using Airbnb or an equivalent, though the two breaks do not stack.

Check your council tax bill before you start, as you may not have to pay anymore ‘bedroom tax’ but may have to lose other council tax discounts.

4. What do you have to provide?

If you’re offering a single room in your house, there are some conditions you may have to follow. Your tenant must have access to a bathroom and a kitchen, but they don’t have to access other rooms.

You are also responsible for general maintenance, such as the smoke & carbon monoxide alarms, safety standards for electrical devices, and you may have to furnish the room if you want to qualify for a tax break.

5. How much to charge

You should do some research to see how much other nearby hosts are charging. Account for the size of the room, the bed, any additions (such as an en-suite), location of your house (near to transport links), etc. The average cost, including bills, for a week is £90 for a double room. Feel free to go cheaper to beat out competitors, or higher for more peace of mind.

6. Advertise

Post notices on work noticeboards, among friends or online. Post on spareroom, Airbnb, MondaytoFriday or other local websites – find if there are any organisations that lease to a particular market, whether that be other female full-time workers or students.

Make sure that your advertisements are personalised, with good images and a complete profile. Doing this will make sure that you are seen as a trustworthy and desirable landlord.

7. Check and meet

Whilst an interrogation room isn’t necessary, you should check that they are who they say they are. Some housing websites may do those checks on both yourself and the tenant, but ask for a reference from a previous landlord or employer if you want.

However, this meeting goes beyond their identity – it may also indicate whether or not you’ll get along, or if they like to sleep early or will spend most of the day out of the house, when you’re after the opposite.

8. Tenancy Agreement

This agreement is essential to protect both yourself and your lodgers. You can find templates online without too much effort, but this will protect obligations and is an essential contract. It will pin down the rent and the length of stay (though clauses can be put in to allow future amendments), so determine whether your want a fixed or a non-fixed term contract.

This can also be the time to set some more casual ground rules, just so that you can live under the same roof in harmony. Figure out what the shower schedule should be, or how sound-proof the walls and floors are. This one should allow more compromise, but putting it into writing is an act of good faith.

9. Deposit

A deposit is usually one month’s rent handed before the rent period starts. This will provide financial security in the event that they suddenly disappear or damage anything.

By law, you must put that money into a government-backed deposit protection scheme within 30 days. You must also give all that money back, unless they break part of the tenancy agreement. That money is not yours, and remains the lodger’s, until you can prove your claim to keep part of the deposit.

10. Inventory List

This is also a legal requirement for the deposit scheme, and involves an inventory of everything in the room and all existing damage. This can be done by an independent third party or by yourself, but if you do it, you should go through it with your tenant and get them to sign an agreement that it covers all current damage and items.

In the event of a deposit dispute, this inventory is then used as evidence to resolve it. Without one, you will probably lose your entire claim.

Once you’ve agreed on everything and signed all the contracts, enjoy the bit of extra income and not having such an empty home!