With the recession taking a hold many cash strapped homeowners are finding clever ways to earn extra income. Willingness to compromise and a bit of creative thinking can turn your home from a money drainer into a money making asset. The options are dependent on your property, how much time and effort you put in and your circumstances.
There are approximately three hundred thousand people currently sharing their homes with paying guests. However, instead of the run down rooms offered by the landlord played by Leonard Rossiter in the 70s sitcom Rising Damp, accommodation is of a much better standard.
A spokesperson from the room-finding website Spareroom. says: ‘The general rise in lodgers predates the credit crunch, with people buying their homes later in life and graduates coming out of college with lots of debt.’ He also says that due to the hard times we are currently facing the trend to take in a lodger has risen sharply. An estimated twenty seven thousand households took in a lodger last year for the first time to help with the bills. Rents vary widely across the UK, with an average of 64 pounds in Dundee per week compared to 145 pounds in west London.
Mrs J R rents a room in her two bed roomed flat in Poole, Dorset and earns 425 pounds a month. She bought the flat last October and had always planned to take in a lodger. ‘I knew I could afford to survive without a lodger, but I couldn’t afford to go out or to have holidays,’ she says.
She purposely bought a flat with a large second bedroom to increase its appeal to lodgers. Her first paying guest stayed from January until the summer and her second moved in last September. She found them both by advertising on the web sites spareroom, Roomads and roombuddies, sites specialising in house and flat shares.
It is important to think carefully about how bills are to be split and what the rules will be on guests and parties when you take in a lodger. It would be best to put things down in writing so that you both know where you stand and what is expected. However, there is no legal requirement for a contract unlike when you let an unfurnished house or flat.
Rather than relying on cash or a cheque, set up a standing order to receive your rent every month. The spokesperson from Spareroom says: ‘If you depersonalise the rent collection, it removes a source of potential tension in the landlord-lodger relationship.’
If you take in a lodger you will get a minitax break under Revenue & Customs’. You are allowed up to 4,250 pounds tax-free in any one tax year from letting a room in your main home under the Rent a Room scheme. That income limit includes anything you receive for meals, bills or laundry. No expenses can be offset against your income, to qualify for the concession.
If your income from rental is more than 4,250 pounds, you become liable for income tax on the extra sum. A couple who jointly own a property are each allowed half of the Rent a Room allowance.
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