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Thanks to the extraordinary success of platforms like Airbnb, there is a real buzz around renting out a room in your house. The appeal of such a venture is easy to understand - you can boost your income without leaving your own home. This being said, there are some significant drawbacks inherent in allowing a new person into your property, and indeed your life, and these require careful consideration. In this Nethouseprices feature, we set out the advantages and disadvantages of renting out a room in your home.

Advantages

1. Boost your income

Making money is, as highlighted above, a key benefit of renting out a room in your property, although the amount you will make depends on many factors, including:

- where you live: if you live in a major city like Birmingham or Manchester, or a popular tourist destination such as the Lake District, you will normally be able to charge more than householders elsewhere.

- the type of room you are offering: a box room won't be as lucrative as an entire floor in your home.

- what services are included: will you be providing meals, for example, and doing laundry? Potential guests will pay a premium for these "extras."

 - whether you plan to take in occasional overnight guests through a platform like Airbnb or a regular lodger through a service like MondaytoFriday.


The income you earn from renting out a room might be earmarked for a large purchase or to help pay your mortgage, or just to make everyday life a little more comfortable.

2) Tax benefits

The government offers a fairly generous tax incentive to people who take in paying guests and you can earn up to £7500 per annum or £144 per week in rent before being taxed. The rationale for this allowance is simple: owing to a combination of high house prices in the UK and a chronic shortage of affordable homes, central government wants to encourage people who offer housing solutions. We should add that there are suggestions that the impact of this allowance is being monitored by Her Majesty's Revenue & Customs and it might be trimmed sooner rather than later. We therefore recommend that you check the latest rules before you commit to letting out a room. Do note that if you currently live alone, you will be benefitting from the single person's council tax allowance. If you take in a regular lodger, you might lose this benefit.

3) Simplicity

If you rent out a room in your home, you are spared many of the legal obligations associated with being a traditional landlord. You don't, for instance, need to sign a tenancy agreement, although you would be well-advised to put into writing your and your lodger's rights and responsibilities, including rent, length of tenancy and any services which you undertake to provide over and beyond supplying a room. This document can be reviewed and amended from time to time.

4) Company

If you live alone, a paying guest can make you feel a little less isolated. While your lodger will usually be at work or otherwise occupied during the day, his or her presence in the evenings and during the night might provide you with valuable company and a greater sense of security. Equally, if there are some domestic jobs which are beyond your ability, you might be able to ask your guest to help with these tasks in exchange for reduced rent.

Disadvantages

1. Outlay

You will need to make sure that the space you are offering is safe, clean and decorated to a reasonably high standard. This might be an expensive project, especially if you employ tradesmen to undertake the necessary work. A lodger will also use your utilities. Unless you agree that you will both pay a fixed proportion of your gas, water, electricity and broadband costs, you will find yourself facing higher bills. You will need to talk to your insurer to check that your premium and coverage aren't affected by having another resident on the premises. It's likely that you will be required to pay a little more owing to the increased risks of, for example, accidental damage. Failing to inform your insurance company of material changes can void the policy, so it's crucial that you speak to them about your new circumstances.

As well as the financial outlay, you will find that there is extra work involved in renting out a room, especially if you are providing meals and are offering services like cleaning the room and doing a lodger's laundry.

2. Mortgage issues

You will need to check that your lender permits you to take in lodgers. Typically, there won't be a problem, although the bank or building society might have concerns if it seems that you are depending on the rental income to pay existing or new financial commitments. Similarly, if you are a first time buyer seeking a mortgage, your lender won't factor the possibility of your renting out a room into the affordability test: this sort of income is simply too unreliable.

3. Personality clashes

There are two main points here:

- even if you let your room to a close friend, you might find that living with them is different from socialising with them. By way of example, the chaotic temperament which is so endearing on a night out can be horribly disruptive to your household.
- the most careful due diligence won't guarantee that you will get along with a stranger. If you see very little of your lodger, it might well be that you won't be unduly concerned about his or her character traits just so long as they don't include dishonesty or a proclivity towards violence. We would suggest that, as well as carrying out a credit check and following up the personal references of potential lodgers, you spend time with them and meet them on multiple occasions before allowing them into your home.

4. Security

In a sense, this is an extension of the previous point. Whatever your personal circumstances, your safety and security are your central concerns. Accordingly, you should always check a prospective tenant's background. The vast majority of people are trustworthy and decent, but you can't depend on this and the consequences of failing to follow up references can be devastating. You need to repeat this exercise with every new lodger.

We hope you found this article helpful. Visit us again soon for all the news about house prices in the UK and the wider property market.

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