How To Rent Out Your Spare Room
Recently I decided to rent out my spare room to a lodger. Let’s just say the process was a lot more involved than I was expecting! In this article I’ll outline all the steps I took, including a breakdown of cost and the time involved.
Consent – Before spending any money I wanted to be sure I was legally allowed to rent the room. I therefore contacted my mortgage and insurance provider to get their sign off. Interestingly I also discovered that, although I only owe peppercorn ground rent on my flat, I was still obliged under the terms of the lease to notify the freeholder. Time: A hour or so just find the right contact details and ping through the emails. Cost: Nil.
Budgeting – I wanted to understand exactly how much it would cost be to rent out the room and how much I’d have to charge to make it worthwhile. I took a look at SpareRoom, Zoopla, etc. to see how much similar rooms were going for. In my case £575 per month seemed a reasonable average. As this falls below £7,500 per year the amount is fully exempt from tax under the Rent-a-Room – one less thing to worry about! I then factored in the costs. I’d have to furnish the room, the electricity and gas usage would likely go up a bit and I’d lose the 25% Council Tax discount. On balance though the numbers showed it was still a worthwhile thing to do financially speaking. Time: A few hours to compare properties and budget in Excel. Cost: Nil.
Furnishing the Room – I purchased a bed, mattress, chest of draws, desk, etc. in order to kit out the room. I managed to get some good deals by looking on Gumtree rather than buying everything brand new. That said, if you plan to do this it’s important that you check to ensure the mattress and any other items comply with legislation concerning fire safety. Time: 4-5 hours finding, collecting and building furniture. Cost: £160 for the bed and mattress (Gumtree), £129 for the chest of drawers (IKEA), £100 for the desk and £45 for a mirror- Total: £429.
Lawyer – I paid a lawyer to write up a lodgers agreement and to steer me through the process. Well worth doing just to make sure everything is done properly, that you haven’t overlooked anything and that you’re protected should things go wrong. Time: 2-3 hours, including 1 hour call, 1 hour reading through the lease and asking question and about an hour doing all the client take on and paying at the end. Cost: £192.
Gas Safety Certificate – One of the legal obligations the lawyer flagged was that I required a certificate confirming my boiler, gas supply, carbon monoxide detectors, etc. were all in working order. Time: 30 mins to find and contact a suitable company plus being available when they came round to the flat. Cost: £135 (including boiler service).
Listing – Once I’d got all my ducks in a row I took some nice photos, wrote up a description and listed the property on SpareRoom. Time: 2-3 hours to tidy, take photos, write the description and get everything up on the site. Cost: £26.49 to verify my identity and promote the post.
Viewings – Over the course of a week I had 11 enquiries and arranged 6 viewings. It’s important to find the right person. Time: 6 hours contacting people, scheduling in time, meeting them and following up. Cost: Nil.
Referencing – Another legal obligation you have when taking in a lodger is to carry out right to rent checks. It’s also good practice to double check the lodger’s ability to pay. I had all these checks carried out for me by a third-party referencing agent. Time: 30 mins filling out the form to get them to do the checks. Cost: £20
Final Step – Last step was signing the contract and sending through bank details for the deposit to be paid. I checked with my lawyer whether I needed to put the deposit into the tenancy deposit scheme but, apparently in my case, this was not necessary given the type of lease drafted. I was keen to follow best practice though so moved the deposit into its own account. Time: 30 mins. Cost: Nil.
Overall then the process took around 21.5 hours end to end and cost £807.49. That said, it’s worth flagging that a lot of these costs are one offs and it would take significantly less time to re-rent the room to a new tenant.
Hopefully this has given you some idea of the steps and costs involved. For more ideas how to increase your income in a tax efficient way, guidance on budgeting, or property tax questions, please don’t hesitate to contact us by calling the office on 01326 660022 or emailing us using firstname.lastname@example.org.