If you have been following the blog for a while you will know my most popular blog has been around house hacking in the UK. The idea that you can live for free by renting out your spare room is one that people seem to not be able to get enough of, and with the cost of living crisis the UK is currently facing I expect more and more people to look for new ways to save money.
Living for free is probably an oversimplification, the real key is to drastically reduce expenses and investing the money saved. In this blog post I explain the details of the scheme, including the maximum amount of tax-free income allowed, who is eligible to participate, and how to apply for the scheme. The benefits of the scheme are highlighted, such as the ability to generate extra income and the ease of use for individuals. The potential downsides and limitations of the scheme are also discussed, including the impact on benefits and the potential need for a landlord’s permission. My conclusion is that the Rent a Room Scheme can be a valuable option for those looking to generate additional income, but it is important to understand the rules and limitations before participating.
House hacking is a term that refers to a strategy for reducing living expenses by purchasing a multifamily property and living in one of the units while renting out the others. While the term is more commonly used in the United States, a similar strategy can be employed in the UK. Here are some steps to consider if you want to house hack in the UK:
- Research property options: Look for properties that have multiple units, such as a duplex, triplex, or even a larger multi-unit building. Consider factors such as location, price, and potential rental income.
- Get pre-approved for a mortgage: Speak with a lender to get pre-approved for a mortgage. This will help you determine how much you can afford to borrow and what kind of property you can realistically purchase.
- Crunch the numbers: Calculate your potential monthly rental income and compare it to your mortgage payment, property taxes, insurance, and any other expenses. Make sure that you will have positive cash flow after all expenses are taken into account.
- Find tenants: Once you’ve purchased the property, find tenants for the other units. Advertise the property online or through local listings, and make sure to screen potential tenants carefully to ensure that you find responsible, reliable renters.
- Manage the property: As a landlord, you’ll need to manage the property, collect rent, and handle any maintenance issues that arise. Consider hiring a property manager if you’re not comfortable handling these tasks on your own.
Overall, house hacking can be a great way to reduce living expenses and generate passive income. It’s important to carefully research and plan your strategy to ensure that it’s a profitable and sustainable investment.
The numbers for me have changed slightly as of February 2023, as the interest rate on my mortgage has gone up I have lost around £100 a month that would otherwise be going into my investment pot.