How Much Rent Can I Get?
How much rent can you charge? Rents start at around £300 per calendar month (pcm), but can be as high as £700pcm for a room in a very desirable house or flatshare in certain sought after London locations, or even for a less outstanding room in an average property in London travel zones 1 and 2.
The best way to ensure rent is paid on time is for the lodger to set up a standing order in your favour to leave their account the day after they're paid. However, if your lodger is unable to do this (for example, because they're financially excluded and can't get a regular bank account), or the lodger is really short of funds on occasion and would prefer to make the odd payment by credit card, there is a very useful website, Wrinq, that will allow your lodger to pay this way, for a very small charge if payment made by credit card (or it has to be converted from another currency) and without the need for registration.
- If the agreement runs from week to week, by law in England and Wales you must give your lodger a rent book, regardless of how the rent is actually paid. It is advisable to give them a paper copy. A legally compliant rent book, for all types of weekly let, including room lets to lodgers, can be downloaded for free here.
The easiest way to find out how much you can probably charge is to use the Spareroom Rental Index tool, but also compare ads for rooms as similar to yours as possible - the area, the room (single or double, presentation), the property (size, house or flat, presentation and facilities - e.g. garden, parking, extra bathroom etc).
But there is one important factor to bear in mind when you're advertising a room in a houseshare, as opposed to simply a whole property to sell or rent out. The existing residents will make or break a houseshare - so don't be afraid to tell room seekers a little about yourself and what you're looking for. If you value your space and want a quiet life, explain this (e.g. I work 50 hours a week/study at home and my home is my sanctuary. I am looking for a lodger who values a quiet, peaceful home environment). See Find me a lodger for more advice on how to advertise, and most importantly, ensure your ad is within the law!
The rent will reflect not just the room and location, but any restrictions imposed with that let - you may live in a desirable residence with plenty of amenities close by, but if, for example, you're not allowing overnight guests, or not allowing your lodger the use of your lounge or garden, and/or the lodger is also expected to obey proscriptive restrictions governing what he can and can't do on a daily basis (e.g. use of washing machine strictly timed, or showers restricted to 10 minutes, etc), the room becomes much less desirable, and you're likely to find yourself forced to reduce your asking price. Neither are you likely to attract the best people. See House Rules.
When you set a rent, don't set it too low - you not only will have to cover additional costs for bills (however, you cannot charge any extra for bills beyond the VAT charged by the provider and any Green Deal finance costs - which you must warn the Lodger about before they sign the Agreement or move in) possibly council tax, insurance, wear and tear etc - but you must make a reasonable profit (unless your motivation is purely to have some company or you just want to help out a friend in the short term). Unfortunately, at least in the UK, the word "profit" has rather negative connotations - if you were to substitute the words "salary", "wages", "earnings" or "pay", you begin to see that your share of the profit is simply your salary when you run your own business - you probably wouldn't work for free for your employer, so why would you not pay yourself a reasonable wage when you have to live? In addition, if you're not seeing enough profit from sharing your home with someone outside your circle of very close family and friends, you are very likely to start resenting that person, and worrying every time they use any power or water.
The question of bills is especially relevant if your lodger will spend a lot of time at home (which might be the case if they're a student, self employed or not working). You can charge the Lodger's bills separately, however, whether you include bills or charge separeately, you can only charge for the units they actually use (taken from the meter or the bill) plus the VAT added by provider and a fair proportion of any Green Deal finance costs you might be paying - in which case you MUST warn the Lodger before they sign the Agreement and move in.
If the lodger will spend a lot of time working or studying at home, is your broadband up to the task? In addition, there is an increasing trend towards people (particularly younger people in their first home and students) preferring to stream TV programmes (and music) from the internet, rather than have a TV. NB, if your lodger does this, if the programmes they stream are going out live, and / or they have a TV in their room, in the UK, they will need their own TV Licence.
@The_Landlord has kindly featured many of my answers to landlord's and lodger's questions on his Taking In Lodgers- ‘Rent-A-Room’ Scheme Guide on his comprehensive (and very entertaining!) popular landlord advice site and blog, Property Investment Project. Topics covered include how rent from a lodger affects benefits, lodger running a business, rent, tax and serving notice.