Profit From Renting Out A Room

Turning a spare room into cash couldn't be easier, but how can you be sure you manage the risks involved in finding the right tenant?

By Laura Howard

Board and lodgings - it sounds like a phrase straight out of Victorian times but in fact the concept is still going strong. According to recent research from Abbey, the number of homeowners renting out a spare room has soared by 152% in the past 12 months - from 388,000 to 981,000 - in a bid to stave off the recession. This means that 3% of all homeowners in the UK now have at least one lodger.

What Could You Earn?

Average rent generated from a spare room is currently £393 a month, according to Abbey - which translates into a very useful £4,716 extra income each year. But the benefits don't stop there. Under the government's Rent a Room scheme, which is designed to encourage the use of existing accommodation, you can earn up to £4,250 in rental income each year completely tax-free.

Nici Audhlam-Gardiner, director of Abbey mortgages, says: 'If you have a spare room that's just gathering dust, not only will you have some extra money each month by renting it out, but most of it could be tax-free too.'

You don't have to be a homeowner to take advantage of the Rent a Room scheme - although if you are renting a property, you will have to check your tenancy agreement to make sure you're allowed to sub-let a room.

And, whether rented or owned, the home will have to be fully furnished and used as your only or main residence. Also, bear in mind that you won't then be able to offset any expenses against tax, such as the cost of the lodger's furniture or their part of the heating and lighting.