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Nethouseprices readers might remember a recent article where we pledged to be a lecture-free zone during January: no admonitions to eat less, drink less and spend less here! This being said, many of us are trying to do some financial housekeeping. This might simply be a resolution to reduce personal debt or lead a more frugal lifestyle. For some people, this is a temporary effort, occasioned by feeling the pinch after the traditional Christmas cash splurge. For others, though, it's a longer term problem - a situation in which households struggle on a monthly basis to pay essential bills. This issue is affecting increasing numbers of families, with real wages continuing to fall and price inflation continuing to rise. Paring down financial outgoings to the bare minimum can only go so far in easing these difficulties and, accordingly, many of us are looking to boost our incomes. If you have researched this question, you will be all too aware that there are thousands of websites and online communities offering ideas for bolstering your bank account, and the majority of these will suggest at some point that you monetise your house. This can be a lucrative and rewarding strategy, but it isn't without its pitfalls. In this article, we set out the pros and cons of the various ways of making money from your home. In Part One, we look at renting out rooms. In the next two instalments, we will analyse renting out your entire property and equity release plans respectively.

1. Renting out a room

Whether it's students from elsewhere in Britain or from overseas, workers who can't afford an apartment or who plan to spend weekends with family, or tourists who need a base to lay their heads after a day's sightseeing, there are lots of people out there who are seeking rooms in private homes. If you have a spare room in your house, it might make sense to offer this type of accommodation.

Upsides

A. Simplicity

The Internet has made it a relatively simple matter to carry out the administration associated with renting out rooms in your home. The following are just three examples of the many platforms available to market your offering:
- https://www.spareroom.co.uk.
- https://www.mondaytofriday.com/rent-rooms-monday-friday.
- https://www.airbnb.co.uk.

These sites do a great deal of the work for you.

B. Flexibility

As well as avoiding most of the legal red tape around renting out entire houses and flats, you can enjoy a certain flexibility in terms of what exactly you offer to prospective residents. Want weekends to yourself? Then it's entirely possible to rent your space from Monday to Friday? Only want to host tenants during the warmer weather? No problem, you can specify in your advertising exactly when you are able or unable to accept guests. Don't want to be committed to extra catering? Fine. Just offer the accommodation on a room only basis.

C. Profitable

Even allowing for any administrative fees, the expense of decorating and maintaining the room so it is safe and attractive, and the cost of any additional groceries and cleaning supplies, you can earn a tidy income from renting out a room. This arrangement needs careful management to avoid abuses on either side, but it's even possible to adjust your rates in return for the resident undertaking certain tasks - light housework or gardening, perhaps - that you can't or don't want to do yourself. Note: you can earn up to £7500 tax free from a lodger, which equates to just north of £144 per week!

D. Company

Another great advantage of renting out a room is the opportunity it delivers for meeting people. Much depends, of course, on your and your tenant's interests and occupations. But you will no doubt spend time getting to know each other and in everyday conversation. This can be hugely enjoyable. Having another adult in the house can also make you feel safer and more secure, especially if you usually live alone.

Downsides

A. Uncertain income

Unless you are extremely fortunate, there will be spells when - even with abundant advertising - your room is unoccupied. As such, it might be wise to regard income from your rental space as being potential rather than dependable. In other words, you probably shouldn't rely on the earnings to pay your most essential household bills. If your lodger proposes to stay with you for a reasonable length of time, it is vital that you carry out careful due diligence on them, seeking references from employers or banks and checking their credit rating. As useful as these exercises are in gauging a prospective tenant's reliability, remember that they aren't guarantees, and that even fiscally responsible people occasionally lose their jobs or run into other financial difficulties. As an aside, as thorough as you might have been in vetting your tenants, you might find that they don't show you or your property as much respect as you'd like. This is rare, but there is always the possibility that someone staying in your home might leave you with a great deal of expense, even compromising your house valuation.

B. Mortgage and insurance questions

If you don't own your home outright and are still paying a mortgage, you need to check that the terms of your loan permit you to rent out rooms to lodgers. This point was recently highlighted in the media, after research showed that most mortgage lenders do not, in fact, allow borrowers regularly to host paying guests. See, for example: https://www.which.co.uk/news/2017/07/could-listing-on-airbnb-put-you-in-trouble-with-your-mortgage-lender/. The team here at Nethouseprices would therefore recommend that you read your mortgage agreement carefully and, where appropriate, speak to the bank or building society for further guidance. Note that you will also need to revisit your insurance policies, too, since they might be affected by your taking in a tenant.

C. More work

Finally, there's little doubt that there is some graft required when you rent out a room. The obvious things are extra cooking, cleaning and shopping. But there is also the question of ongoing maintenance to keep rooms in good repair and the administrative effort of finding tenants and collecting rent. The effort is especially noticeable when you rent out rooms on a very short term basis, since you will need to repeat a lot of the initial work. Don't forget that if you have a personality clash with your tenant, it can be a job in itself to manage the relationship!

Visit us soon for Part Two: Renting out your home. Don't forget to try our free instant house valuation tool while you are here.

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