I posted about “house hacking” specifically focused on the UK in the middle of last year when my cousin moved into my house for 12 months. The results have been staggering, and a big contributor to my net worth increase over the past year, despite taking a may cut in June 2021.
If you are not aware, the “rent a room” scheme in the UK allows you to rent out a spare room(s) and the income is tax-free up to £7,500. If you are a higher-rate tax-payer this is equivalent to roughly £15k a year in gross income. On a salary of £60k, you would need to earn around £75,000 to make the equivalent from work (I have student loan repayments which add an extra 9% to my tax burden).
That’s equivalent to a 25% pay rise for living with someone. Of course, there are some increases in costs, but these are minimal and will vary. The hard part is finding someone to live with that you get on with and actually adds value (beyond the financial). That way you are enjoying yourself, gaining money, and learning.
I am going to put my property online this weekend, and see what interest I can get in my small double bedroom. My property has off-street parking, is close to a train station with direct links to London, and is near all the pubs, etc.
With the cost of living going up significantly this year, this will probably be the only way I can manage to keep the income up. My plan is to rent the room for £500 per month, or £6k per annum. With my current tax burden, tuition fees, and national insurance going up, this will be a 20% net income increase for me. A darn-sight is better than my 4% work payrise!
I will update this blog with how it goes, I have lots of use cases for an extra £500 per month. So I will see what I can do. This would also mean my mortgage would essentially be “interest-only” as this would cover the entire principal.
My previous article is below, if you’d like to read more: