Everyone loves a good statistic, don’t they? Here at Boxman, we’re as much a sucker for a stat as the next person. So here are a few that have caught our attention in recent days.
Firstly, according to Matt Hutchinson over at Spareroom.co.uk, there are currently around 19 million potential bedrooms unoccupied across the UK. Secondly, new UK flatmates are brought together every three minutes on that same website alone. Thirdly – based on our own research – the average British home puts to waste around £30,000-worth of useable space each year. In short, there’s a lot of unearned income sitting amidst a lot of clutter across a lot of the country!
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One of our big interests on this blog is in helping people to live better in small spaces, and what better way to live better than to nurture a potential new friendship while making a bit of extra cash at the same time? And ‘a bit’ doesn’t have to mean ‘a little extra’, either. Chatting with the aforementioned Mr Hutchinson, we discovered that Londoners who declutter their spare room and rent it out could stand to make upwards of £7,000 extra per year, and quite a considerable amount of that could be tax-free.
‘For a lot of people, a spare room is the biggest untapped asset they own’
While we know a lot about how to declutter your space (remember, we do self-storage with a difference – all you need to do is pack!), we concede that we’re not too hot on the ins and outs of renting out spare rooms. So we went to the expert himself, grabbing Matt Hutchinson for a quick chinwag on how to get started.
For those not in the know, can you tell us a bit about Spareroom.co.uk and what it does?
Sure. We launched in 2004 as a UK-wide flat-share site, and launched in New York in 2011. With around 4.8 million registered users, we’re the leading flat-share site in the UK by quite some margin. We’ve been running SpeedFlatmating events since 2007, which are designed to help people looking for rooms meet people who have rooms, and that’s a big part of Spareroom – it’s not a traditional property site; in some ways it’s more like a dating site, set up around matching a person with someone who is going to give them a positive experience for a year, or however long they’re going to live together.
From a purely financial perspective, renting out an empty room seems like a no-brainer. In terms of London-based renters, how much do people tend to make out of renting their spare rooms?
The average room rate in London now is probably in the high seven thousands per year. For a lot of people who have a spare room, it’s the biggest untapped asset they own. If you think about the amount of hours they have to put in at their second job to earn anywhere near that… it’s a way of generating a sizeable income. And it can be really flexible – you can get somebody in for three months and then have a break, or you can get somebody in for a year, if that works for you.
It seems as though the biggest barrier to entry into this market is the potential hassle involved. What do people need to know, legally and logistically, when they’re thinking about setting up a room?
If you’re living in the house, then you need to make sure that you’ve told your mortgage provider and your contents insurance people. Those are the key things. You also need to make sure that the council tax people know that you’re claiming a single person’s discount. After that, a lot of it is common sense – the planning aspects, the relationships side, and making sure that your expectations are clear. Because – as with most things – when you’re living together and sharing space, the more you communicate in advance, the more problems you get out of the way before they appear. It’s about having a realistic understanding of your own expectations, and then choosing somebody who matches those.
So what would be your top five tips for renting your room out?
After alerting your mortgage provider and contents insurance people – tips one and two – the third tip would be to check out the Rent-a-Room Scheme, which is a government incentive that allows you to earn £4,250 per year tax-free by renting out a room. It’s something that we’re campaigning on now. We feel that the tax threshold should be increased to encourage more people to rent out rooms, because there’s only something like 30% of postcodes across the UK where an annual rent is covered by that threshold. There are something like 19 million empty bedrooms in under-occupied properties in England alone, so a tiny fraction of those would make a big difference.
‘You want to get to know what it’d be like to live with somebody – not just whether they can afford to rent your room’
The fourth tip would probably be around picking the right person – so taking your time. It’s not a financial transaction, like selling your car, where if someone turns up with the right money they can have it. It’s your room in your house, so it’s about meeting a few people – not being afraid to meet several people and then asking to meet a couple of them again. It’s like an interview process in a way. You want to get to know somebody and know what it’d be like to live with them – not just whether they can afford to rent your room or not.
The fifth point would be about being really clear on expectations in advance. So you know what they’re expecting, and they know what you’re expecting. That can come down to really specific things like whether they’re expecting bills to be included or not, because if you don’t set that out up-front, it can have a big effect on finances for one or the other of you. And then it goes right down to the type of person you are. Realistically, if you’re a really clean person, you’re going to want to live with someone else who is clean. And if tidiness doesn’t bother you too much, then living with a neat freak could really annoy you. It’s just about values and basic approaches to life, rather than specifics.
Looking to rent out your spare room? Check out Spareroom.co.uk for more information, and see Boxman.co.uk if you’re looking for ways to clear out any potential space and keep your stuff safe while you’re experimenting with becoming a landlord.