Should you rent out a room in your home?

There may be a housing shortage in the UK, but that doesn't necessarily mean a shortage of accommodation. A three bedroom home where only two of the bedrooms are being used may not be available on the property market, but for those who simply require four walls and a bed, that spare room provides all the housing they need.

These days, home owners with a room to spare stand to benefit from a new kind of investment opportunity: the Rent-a-Room scheme.

Benefits of Rent-a-Room

For lodgers, renting a room in someone else's home is not that far removed from your typical flatshare, but it requires less financial commitment and a lot less admin. No hefty deposit here and, depending on the nature of the arrangement, you may even get some laundry and housekeeping services thrown into the bargain.

For home owners, a lodger can be a valuable source of income. They contribute towards your own rent or mortgage, serve as an extra set of eyes and ears around the house, and may even be willing to provide babysitting services. While you may be required to obtain permission from your landlord or mortgage lender, you are spared much of the paperwork that accompanies an official landlord-tenant relationship.

Add to all this, landlords who participate in the Rent-a-Room scheme are given a tax threshold of £4250 per year. That means you could potentially earn up to £350 per month tax-free; and since Rent-a-Room plays an important role in alleviating the housing shortage, the government is being pressured to increase their support for the programme. This may lead to the introduction of additional tax incentives in the future.

So, it's no wonder that Rent-a-Room is proving so popular with both landlords and lodgers across the UK. According to the Guardian, 2.7% of UK homeowners now have a lodger, an increase from 1.4% in 2009, and estimates that there has been a 70% increase in the number of live-in landlords looking for lodgers since 2011.

The cash-strapped student may have once represented the typical lodger, but now it's single professionals who are leaping at the opportunity to secure affordable accommodation close to city centers. Websites like cater specifically to this demographic, enabling them to find landlords willing to rent out rooms on week nights only.

Important things to bear in mind

If you're looking to rent out a room in your home, you'll want to verify potential lodgers using the same procedures applied by landlords to their prospective tenants; credit checks, references from past landlords and so on. You'll want to be as thorough, if not more so; since you will essentially be inviting this person into your own home for awhile.

According to The Landlord, Rent-a-Room does not allow you to claim any expenses related to the letting, such as insurance and repairs. You'll want to take that into account before deciding whether or not to participate in the scheme.

You can use websites such as Gumtree, EasyRoomate, and Rightmove to advertise rooms for rent. If you're still not certain whether letting is right for you, Tepilo has some advice that might help you.

Get Started with Sarah Beeny's Tepilo now.