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Which is more profitable; renting rooms in a house or renting self contained flats?

PostsPosted by Annie Bennett Wed, December 02, 2015 00:50:01

With the economy of this country in jeopardy with the loss of critical NHS staff , lower number of police officers and high numbers of unemployed people claiming benefits in the UK, the government is correct in encouraging home owners to rent rooms in their homes.

This not only boosts the economy in the long run but allows the home owners who are struggling to pay their mortgages a chance to maintain their repayments. There are also those whose homes are about to be repossessed and this allows these home owners a chance to keep the mortgage payments going and keep their homes. Note that by becoming homeless these same home owners become a burden to society living off the taxes of the working population and a strain to the local borough councils to give them suitable housing.

The government is correct to try to find ways to boost the economy without increasing our taxes or cutting off some of our vital services like the NHS staff as well as the present situation where the government is forcing doctors to work more than the existing 72 hours which I personally think is too much. Most of the general population does not work more than 35 hours and I think it is unacceptable to force our capable doctors to become incapable by making them work long unsuitable hours not allowing them the rest they surely need like the rest of us. This is however a subject for another occasion.

Have a look at this link: http://www.lodgerlandlord.co.uk/2010/03/09/the-five-main-differences-between-a-lodger-and-a-tenant/ I will summarise what is on the link but for those of you who are considering a way to increase their monthly income do click the link for a more in depth summarisation.

See this link which states that UK homeowners are permitted to share their homes with up to 2 lodgers and they will not need planning permission to do this:http://www.lodgerlandlord.co.uk/2010/02/07/day-7-will-taking-in-a-lodger-turn-your-property-into-an-hmo/

As a rule, home owners are permitted to have 2 lodgers provided they are sharing the bathroom and kitchen. Once you have 3 lodgers it will then be considered a HMO- House in Multiple Occupation and requires planning permission. There is a rule that there should be no lock on the lodgers door and that the owner can enter the room from time to time. It has also been mentioned that provided both parties have the keys and the landlord is still permitted to enter the room, this is acceptable. Lodgers get a licence to rent a room in a house in the same way as guests staying at a guesthouse.

Another rule that constitutes the room being for a lodger or guest is that it is cleaned daily, towels and sheets are given, breakfast and perhaps the evening meal also is provided. Landlords living in the same house can give 28 days or less notice to a lodger to leave because it encroaches on the landlord's life if the lodger and the landlords family do not get on for some reason. The law is very much on the side of the home owner in this case and it is much easier to get a lodger out than a tenant.

Tenants in a self contained flat or room in a house can have ASTA - Assured Shorthold Tenancy Agreement. There is a 6 month clause in a tenancy agreement where the tenant must have stayed in the flat for 6 months before they can be given notice to leave by the landlord. The owner cannot enter the flat at any time without giving 24 hours notice to enter with adequate reason to enter. The tenant must also give permission for this entry. The tenant is normally given one years tenancy agreement in a self contained flat or room in a house.

It can be very difficult to get a tenant out as you need to given Section 21 two months notice to leave form and then if they do not leave apply to the court to evict them and this procedure normally takes 2 more months. It costs approximately £100 to apply to the court to evict the tenant if you pay online and the cost is slightly higher if you do this by post. The tenant will be expected to attend the court on the hearing date to state their case if they have not left already. The judge will decide to allow them to stay longer but the tenant cannot stay indefinitely and the judge may not allow any extra time if the reasons for extension of stay are unacceptable.

The tenant will be required to leave after a short time if the judge considers the eviction legal and acceptable. If the tenant still does not leave by this time, the landlord will have to apply for the court bailiffs to have the tenant evicted. This costs another £100 and a date and time of eviction will be given. Normally the tenants leave by that date but be careful as court bailiffs are not reliable and sometimes do not turn up per their own appointment. It is best to contact them by phone, email or post to ensure they will be turning up to the appt. Errors can of course occur at the court administraton section.

As you can see tenants are good rental income but they can take longer to evict. It is best to keep good relations with the tenants and try to get them to leave amicably. You will save yourself a lot of heartache if you do this. It can be hard when they are a nuisance and spoiling your flat or house that you have rented to them but in the longer run it may save you money which is the aim of renting in the first place. Tenants tend to damage properties in revenge when they are being evicted though all tenants are not bad.

See this link which states that since 25/3/15 UK homeowners are now free to share their homes for up to 90 days (3 months) without a council permit. UK Housing Minister Brandon Lewis said that he updated the outdated rules for the digital age of the 21st century previously faced with nothing but bureaucracy and red tape: http://publicpolicy.airbnb.com/queen-signs-home-sharing-uk-law/

Rooms that are tenanted are difficult to maintain but there is more control when it is just one room in a house than a self contained flat or house where when the tenants stop paying the rent it affects the mortgage repayments and a chance that the owner could lose his (or her) property. Rooms are tedious to rent rather than the whole house but the knack is to get good tenants. Well, you know that is the luck of the draw. You must ensure that you do the usual checks before the tenant moves in; Work acceptance letter, 3 mths payslips, 3 mths bank statements, previous landlords reference, passport, photo driving licence, tenancy application form asking for tenants work details, next of kin details, National Insurance No and nowadays the government requires that by law we must ensure that the tenants have leave of stay in the UK so we need that page in the passport also or a home office letter to prove this. There is a fine of £3000 if a landlord takes in people who do not have leave of stay to live in the UK. See this link from The Daily Mail regarding this: http://www.dailymail.co.uk/news/article-2354878/Landlords-face-3-000-fines-renting-illegal-immigrants-report-reveals-half-people-live-areas-hit-migration-surge.html

If you keep the rooms you rent to a high standard you can get more rent and good tenants that want to stay. Ensuring that you have set the rota for cleaning in the house will allow the house to remain argument free and if tenants do not stick to the rota the tenants can always contact you and then you can try to resolve the situation. If not, notice to quit can be a large deterrent to someone who is lazy to clean. There will always be someone who does not want to pull his weight in the house but this can cause a lot of rift in the property. After all, no-one wants to live in a dirty household.

The more rooms you rent in the house the more profit you get. You need to balance the profit with loss when renting rooms or flats or houses. The trouble you get trying to evict a family in a flat or house can cause you to lose a lot of money in loss of rent, court costs, bailiff costs and then eventually maintenance costs as half the tenants that are evicted trash the flat before they leave. This can amount to thousands of pounds before your property is ready to rent to new tenants.

You are losing rent while the building works are being done to make the property ready. With rooms the most a tenant or tenants can do is trash the room. They will not trash the house they are sharing as the other tenants will not allow that and I doubt that tenant or tenants will have the guts to do that to the other tenants living in the same property. The balance still shifts to renting rooms than renting a whole property out. There can be peace of mind in renting out the whole property which is why a lot of people do it that way. Provided they keep visiting the property from time to time and maintaining it accordingly you may be lucky but once a tenant stops paying rent that is when the problems start. Whether they lose their job or lose their benefits, you get nothing. Usually it is where the letting agents or landlord is lazy to visit regularly that tenants will damage the property as no-one is keeping an eye on them. Remember no-one cares the same for a property unless they paid for it. The pain is always felt by the purchaser more than the letting agent who just gets his 15% letting fees. That is no where the mortgage repayments.

I conclude that renting rooms in a house is better than renting out self contained flats for the sake of less stress in general. You need to make your own decision regarding this. Remember that once a tenant moves into your flat or house you lose control of that property. It no longer seems to be yours. The courts support tenants more than landlords. This is how the law is at the moment as they consider the tenant poor and the landlord rich. I think that the courts should think the opposite as I have seen the results of tenants not paying their rent, damaging property, going to court and the landlord being dumped with all the costs and arrears and cost to repair the property.

It can be a very difficult time for the owner. Squatters can also be a problem as you need to get a court warrant to get them out and you have to pay to go to court to do this. Never keep your property empty if you can help it. Sleep there if you can or get a friend or relative or stay there while it is empty. It will cost a lot more to take squatters to court and 2 months before you get your property back.

I bid you adieu now. Good luck in letting out rooms, flats or houses. Whatever you decide to do, ensure you go to check your properties regularly that they are not being trashed or treated badly. Maintenance of gutters, roofs, boilers are some of the most important parts of running a property. I am always interested in what you think so please do write your comments here.

Annie Bennett - Customer Services Manager
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