A house is the biggest asset most of us will ever own, but could yours be generating a regular income, too? Grand Designs explores the practicalities of putting your property to work.
We put our hearts, souls, savings and all our future earnings into finding and securing a home, yet it never even occurs to some of us to ask for something in return. Many homeowners never seek to capitalise on the value of their biggest asset until it comes to remortgaging to release equity or getting ready to sell. But, increasingly, canny homeowners are joining the nation’s self-made property developers in finding ways to earn extra money from their bricks and mortar. It’s an attractive way to supplement your pay packet – without adding extra work hours in some cases; it can give parents the flexibility to earn and be at home, and if you find a clever way to charge for your living space (without even having to be there), it could take care of the mortgage. Here’s how to find out which idea might work for you and your home.
Rent out for photo shoots
Operating as a location house can be a hugely lucrative – and fun – way to earn money from your home, bringing in between £600 a day for a small advertising campaign shoot to £3,000 for a feature film. Production companies are always on the lookout for new, characterful locations with large rooms, an abundance of light, easy access for crews and good parking facilities.
According to Emma Clarke-Bolton at the Sarah Eastel location agency (020 7739 7788; saraheastel.com), homes within striking distance of London still host the majority of shoots, but Manchester and Bristol are on the rise, and if there’s something really unique about your home’s architecture, crews will travel further from their bases. When it comes to decor, big statements can capture a photographer’s imagination, but Clarke-Bolton advises that a highly flexible and adaptable space will ensure a regular flow of business. She recommends keeping abreast of popular styles in consumer homes and interiors magazines and TV commercials.
Registering with a location agency, which will charge commission at about 20 per cent, will help your home to attract attention and the right fees. But what will you have to pay for? Production companies and crews have to obtain a licence to shoot at your home, and have public liability insurance to cover any personal injury and it’s their responsibility to cover any damage to the property – but it’s worth ramping up your own policy anyway, just to be on the safe side. Quarterly deepcleaning of carpets, upholstery and windows will maintain a professional standard and make your home more hireable.
Run a B&B or holiday let
If you can afford to let go of part of your home for good, there’s the option of setting up a B&B – this sector of the UK’s tourist industry turns over £2billion per year. Be aware that it’s no easy feat – expect early mornings and having to work at weekends. You also need to be prepared to work hard – cleaning rooms, cooking breakfast, doing laundry, general maintenance and keeping strict up-to-date accounts. It’s a competitive industry so you’ll need to put in the hours to make it work financially.
Bear in mind that you’ll need to keep your family space separate from the B&B and most guests will expect a private bathroom, so you may need to invest some cash in converting your existing home to suit your new business. You’ll also need to take out insurance – not only your usual buildings and contents, but also public liability, cancellation insurance and personal accident (in case you’re unable to work), for example. Make sure you have sufficient car parking available and, in order to assess whether your business venture is sustainable throughout the year, make sure your home is in a good location for nearby attractions. Visit your local council and tourist office to see how many people visit the area, the type of activities available and whether tourism is seasonal or not.
Alternatively, if setting up a B&B isn’t for you, but your home is near the location of an annual event, such as Ascot (for the races), Wimbledon (tennis) or Henley (regatta), for example, you could rent out your whole house during popular periods. Eventful Stays (0333 800 1330; eventfulstays.com) is an online company that rents out people’s homes during big events.
Buy to let
With the predicted rise in interest rates and lenders toughening their borrowing criteria, many would-be-buyers will now be looking to rent. The shortage of homes in cities, particularly, means that if you have cash to invest in another home that could be used as a buy-to-let, the rewards could be substantial – the average monthly rental price for a two-bedroom flat in Wandsworth, London, for example, is £1,839.
Buy-to-let mortgages usually require a deposit of at least 25 per cent, and you’ll need to demonstrate that the rent will cover your mortgage repayments by at least 125 per cent to cover void periods and maintenance costs. Arrangement fees of up to £2,000 need to be factored in, but one of the most significant costs is tax: stamp duty (if the purchase price is more than £125,000), income tax on the rent, and capital gains tax if you ever sell (although mortgage interest, letting agencies’ fees and some maintenance costs are deductible from your income).
It’s sensible to buy close to where you live, as it will be much more convenient. University cities, transport hubs and areas around hospitals and large companies are a good bet for a steady stream of would-be tenants. A managing agent, while it will charge you a fee, may save you money in the long run as it will have the benefit of experience when it comes to dealing with accidental damage, upkeep and problems with tenants.
Sell your garden
There are many self-builders out there looking for a site. Residential land prices are rising across England and Wales – not just in London and the South East; the north of England market jumped 8.1 per cent in the first quarter of 2014.
‘The value of garden plots per acre directly correlates with the housing market,’ says Shaun Peart, regional managing director at LSL Land and New Homes (lsllandandnewhomes.co.uk). While there are countless variables that affect land prices, a rough rule of thumb for calculating the true value of your plot is to work backwards by studying house prices in your area, which can be broken down roughly into land costs plus build costs plus a 20-30 per cent margin.
Although possible, it’s inadvisable to sell your land without planning permission in place, Peart says, as you won’t make the most of its value. Obtaining planning will depend on your local council’s priorities – whether it’s to protect a conservation area or to provide housing wherever possible. It will also be affected by the ground conditions, topography, drainage and utility supply, and you will need to investigate if there are any covenants that affect the removal of old trees or boundaries.
It’s best to engage a land and new homes business early on: it will advise (free of charge, initially) on dealings with the council, planners and architects. Homeowners hoping to sell a plot should anticipate that it will take 12-18 months from the point of their initial enquiry, and expect to pay upwards of £10,000 (for a single dwelling) in fees and costs, between consultations, planning applications, architects and estate agencies.
Set up a home office
Working from home is at its highest level since records began – 4.2 million people in the UK now do so. That’s 13.9 per cent of the workforce, with 1.5 million of those working solely at their home rather than using it as a base. Research this year has also shown that the average pay for home workers is £13.23 per hour compared with £10.50 for those who work elsewhere.
The rising standards in bespoke garden offices certainly make them an attractive prospect. A garden office allows you to go to work each day, without letting your work take over your living space. Forget the makeshift shed-style workshops of old; this is about sophisticated, fully insulated buildings set up for modern business, and yet they are generally categorised as permitted development and don’t require planning permission.
The initial cost of a garden room may be anything from £15,000 to £75,000 but, according to Greg Southall, a chartered structural engineer who works from a garden studio in Cheshire, it quickly pays for itself. ‘You save the cost of commuting, you’re more productive, and the other start-up costs, such as putting in broadband and phone lines, are all manageable,’ he says. Self-employed people can offset a percentage of the overall property’s utility bills against their business.
Southall’s advice is to buy the best you can afford – it really adds to the value of the house – and to invest in a top-of-therange alarm (about £3,000, with a £50 monthly fee for monitoring) for peace of mind.
Image: Will Pryce; Jefferson Smith; Chris Tubbs; Mel Yates