Renting out Rooms in a Property 

Even if you are renting a room to a friend or family, it is worth having a short agreement called a ‘licence’ drawn up. These are available to download from the internet and  in case of a disagreement, it explains to both of you what you can and can’t do while living together.

Renting out rooms in a property as opposed to renting out a room in your home is much more complicated.

The first thing you need to know is there are strict rules about how many individual rooms you can let out before you need a licence.

This is typically called a Home in Multiple Occupation (HMO). These rules vary from one local authority to another. Some local authorities require you to have a licence for just three people – even including children, others might allow you to rent three individual rooms to different people. 

Also, some local authorities require the rooms to be of a certain size and adhere to strict health and safety rules and regulations, including protecting tenants from a fire. 

Some people will tell you renting rooms is a great way to make money and suggest you can secure yields between 15-20%. However, you must look at HMO returns from a net profit or net yield perspective. 

To convert a property to an HMO will typically require planning and building regulations sign off which can cost around £25,000 if done properly. 

In addition, they can be expensive to run as you have to pay the utility bills and refurbish more often. It's also easier for tenants to skip after having run up rent arrears.