You’ve got a mortgage to pay, or perhaps your kids have grown up and you’ve got rooms that have the potential to increase your monthly income. Whatever your reason, there are plenty of benefits that come with renting a room to a trustworthy tenant.
After you’ve checked local laws and regulations, and once you’ve had a chat with your insurance agent to make sure you’ll be covered, it’s time to work out how much rent to charge for a room in your house. Use our quick guide to make this process easier and let your empty space help increase your bottom line.
Location matters: How your local market influences room rental prices
If you’ve spent time in different cities, you know that the rental market varies widely, along with prices. When determining how much rent to charge for a room, be sure to take local market trends into consideration. Here are examples of average room rental prices in some of the most popular cities and regions:
London: £365 – £1,076
London room rentals are unique, with prices being higher in areas with greater demand. You’ll be able to charge a bit more for a nicely furnished room in a house or apartment with a kitchen. Rooms with access to a private bath typically fetch even higher prices.
Research conducted by SpareRoom showed that South East London has the lowest prices, while West and East Central regions command the highest rents.
Birmingham: £65 – £412
The closer to desirable Birmingham transit locations, great shopping, and dining, the more you can charge for a room rental. Rooms around Duddeston, the Jewellery Quarter, Aston, and Edgbaston command higher prices than those located further from the city centre. Amenities matter here as much as they do in other locations.
Liverpool: £360 – £800
Live, work, and play around Liverpool, and make a little bit of extra while you’re at it! Take a look at real estate prices when you’re deciding how much rent to charge for a room here. Costs are typically higher than those found in less desirable parts of the UK, and room rental prices tend to reflect this factor, particularly when luxury en-suite rooms are on offer. Many private landlords charge their tenants weekly rather than monthly here.
Northampton: £300 – £800
As in other areas, landlords with rooms for rent in Northampton can charge more when the space is centrally located. For example, a furnished master bedroom en-suite in Upton (NN5) goes for a tidy £649 per month, and a double room in a historic Northampton (NN7) house fetches £700. Many of these rentals come with extras including utilities and a private bath, so renters generally enjoy a good value.
It’s worth noting that these are only a few local averages. Once you’ve decided which room you’d like to rent, take a look at your local listings and use them as a guide when determining how much to charge.
Other factors to consider
Your local rental market gives you an overarching view and helps you compete. But pricing set by other landlords is only the beginning.
Look at your home’s value.
Use a real estate website to come up with an estimate of your home’s value compared with other homes in the same area, or have your home appraised to determine its current value. The amount of rent you charge for a room should be a percentage of your home’s value. The standard for renting an entire house is to charge between 0.8 and 1.1 percent of the home’s current market value. Taking the time to check local averages will help you compete while attracting quality renters.
When renting a room – and perhaps a private bath – think about how much space it occupies in terms of your home’s overall percentage. Imagine you’re renting out a basement room with a bath, a mini kitchenette, and a private entryway. If that represents one third of your home’s usable square footage, you might be able to charge one third of the cost of overall house rent, i.e. £600 if your home is sized around 1,800 square feet.
Check into rent controls.
Some locations place limits on how much landlords can charge for a room, an apartment, or a home. Rent control also impacts other payments including late fees and security deposits. Be certain that you’re in compliance as you decide how much to charge for that spare room you’re itching to rent out.
Know what it takes to attract renters.
As you work out how much to charge per month, consider how close you are to major employers, shopping, great gyms, and other neighborhood amenities that might put you ahead of the competition. Let people know which of your home’s amenities they’ll be welcome to use, outside common areas such as living rooms, kitchens, and laundry rooms. Examples include:
- Garage parking
- Pool / hot tub
- Fitness room
- Extra storage space
- Access to local green spaces / beaches, etc.
In addition, consider including all utilities, and decide whether you’ll be asking renters to pay by the week or by the month: This is far easier than attempting to split costs and it might make your room seem even more attractive than others in the same price range.
Many landlords have enjoyed success when collecting rent according to their tenants’ pay schedule. This means renters won’t find themselves short and you won’t have to chase them for payment.
Knowing how much to charge for a room rental is just the beginning. After you’ve decided on ground rules and listed your space, take time to screen potential tenants by calling references including employers and previous landlords, and by conducting background checks.
What if you’re not attracting renters? You might be asking a little too much. Consider bringing the price down just a touch lower than your local average to generate more interest. The market almost always dictates the rent.