Latest research finding suggest that there are millions of homeowners across Australia who are missing out on reducing their home loans by $10,000 per annum. Are you one of them?
According to a recent Finder.com analysis, a spare room in an Australian household can be rented for around $10,000 a year, or $192 a week. These spare rooms were mostly found in owner-occupied homes, with more than 85 percent of these homes having a spare bedroom that was not occupied. Lets look at an example.
A home buyer who bought a home for $500,000 in 2014, rented one of the homes bedrooms for $200 a week, with all utility costs then split between the home owner and the room renter. This home owner was then able to pay this extra money off their mortgage, which reduced their mortgage by an additional $10,400 over the 12-months. Over 5-years, this is equivalent to more than $52,000 that the home-owner reduced their mortgage by, and this doesnt even take into consideration the amount of interest that the home owner saved.
For many home-owners earning an extra $10,000 is the equivalent of getting a second job. The extra income reduces their financial burden and enables them to get ahead.
How Many Spare Rooms are Available?
According to Finder.com research, there are 5.28 million owner-occupied homes in Australia with spare rooms, and approximately 1.73 million rented homes. Of course, for those who are renting property who would like to let a room, they must ask their landlords if they can sub-let. But, most state residential tenancy acts consider it as unreasonable for a landlord to refuse a request to sub-let a property. So it is highly unlikely that your landlord will not let you sub-lease.
How You Can Rent Your Spare Room
However, if youre going to rent out your spare room its important for you to do the following:
1. Advertise your room – List the room you have available on Gumtree, or in a local paper. Be sure to include the price youre asking, basic property details, and your contact number.
2. Interview interested people – Before you allow just anyone into your home, have a lengthy discussion with them over the phone and ascertain whether or not their enquiry is genuine. If this goes well and you think the person may be suitable, then arrange for the person to view the room you have available. At this time, you can also conduct an interview and have your potential house mate fill in an application, which lists their name, current and previous address, employment details, income, and at least two references. Also ask to see identification, such as a drivers licence and Medicare card. If youre concerned about letting a stranger into your home, then arrange for a friend or family member to be present when you conduct the interview. This way you are ensuring your own personal safety.
3. Conduct a background check Before you approve an applicant, check their application information. Talk to referees and assess their suitability to live in your home. If you think theyre a good fit then contact them and arrange for them to come back for a second interview so you can discuss arrangements.
If you decide to rent a room, just remember that any income you earn needs to be declared, and that you may have to pay Capital Gains Tax (GCT), due to your producing an income from your property. But, the up-side to this is you can also claim any expenses, such as advertising costs, room refurbishment costs, and a portion of your mortgage interest relative to the floor-area of the room you are renting.
Are you looking to decrease your mortgage? Then contact eChoice today, we can help YOU.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!