Room vs house: Which rental strategy offers the best value?

It’s common for landlords with larger properties (i.e. three or more bedrooms) to rent out the whole house to a single person, family or group of tenants, rather than letting rooms on an individual basis. But is this really the most profitable option?

CIA Landlords Insurance conducted a study to find out where in the UK landlords can make the most money from renting an entire property vs letting individual rooms, as well as where tenants can find the best deals on rent. We compared average rent costs for 3-bed properties and single rooms in a property across the top 30 most populated cities in the UK, revealing which UK cities – and which rental strategies – offer the best value for both landlords and tenants.

The most profitable UK cities for landlords to rent out the whole property

By calculating the average rent price of 3-bed properties in different cities around the UK, we were able to reveal which cities allow landlords to make the most profit from letting an entire property.

• London

Unsurprisingly, London ranks as the number one most profitable location for landlords who choose to rent out their entire property to multiple tenants.

High rental prices in the UK capital mean that the average monthly cost of a 3-bed property is £5,078, which works out as £1,693 per room. This is more than double the cost of the second most expensive city, Edinburgh, making London by far the most profitable location for landlords looking to bring in the highest earnings.

2. Edinburgh

Rental prices in Edinburgh are significantly lower than in London, but landlords still stand to make a very decent profit in the Scottish capital.

The average cost of renting a 3-bed property in Edinburgh is £2,511 per month, which equates to £837 for each room. This cost per room is almost the same price as renting a whole property in the cheapest location, Stoke-on-Trent, where average monthly rent is just £842.

3. Bristol 

The UK’s third most profitable city for landlords is Bristol, where rent is lower than in London and Edinburgh but still relatively pricey. The average monthly rent for a 3-bed property in Bristol is just under £2,000, or around £659 per room when split between tenants.

Glasgow and Milton Keynes round out the top five, where landlords stand to make on average £1,703 and £1,623 per month respectively for a 3-bed property.

Top 5 most profitable UK cities for landlords to rent out a 3-bed property

The most profitable cities for landlords to rent rooms individually

Landlords may choose to let rooms individually rather than rent out a whole property, but where can they make the most profit from this? To find out, we calculated the average cost per month of renting a room in cities around the UK.

• London

London was once again revealed as the most profitable city for landlords, with an average monthly cost of £972 to rent one room in England’s capital.

This is more than double the price of renting a room in the UK’s cheapest location, Preston, where landlords make on average just £440 per month from letting out an individual room.

2. Bristol

Bristol, which ranked as the third most profitable city for landlords to let whole properties, is actually the second most profitable for letting individual rooms.

The average monthly rent for a single room in Bristol is £710, which is around £51 more expensive than the price per room when renting out a whole property (£659). This means landlords in Bristol stand to make more money by renting out rooms on an individual basis, rather than letting a whole property.

3. Kingston-upon-Hull

Kingston-upon-Hull in the north of England is the third most profitable location for landlords to rent out rooms individually. The average monthly rent for a single room in Hull is £697, which is only a little less than the average cost of renting an entire 3-bed property (£862).

Edinburgh and Milton Keynes rank fourth and fifth, with a single room costing £663 and £635 respectively in these cities.

Top 5 most profitable UK cities for landlords to rent rooms individually

The cheapest UK cities to rent a 3-bed property

As well as investigating where landlords can make the most profit from renting a whole property, we’ve revealed where tenants can find the cheapest deals on rent for a 3-bed property.

• Stoke-on-Trent

Stoke-on-Trent is the cheapest city in the UK to rent a whole 3-bed property, making it the ideal location for tenants looking to save on rent.

The average rent price for a 3-bedroom in Stoke is £843 per month, which is over £4,000 cheaper than the monthly cost of renting the same-sized property in London (£5,078). This works out as just £281 per room.

2. Kingston-upon-Hull

Kingston-upon-Hull, which was the third most expensive location to rent a single room (£697), is actually the second cheapest city to rent an entire 3-bed property.

The average monthly rental cost for a 3-bedroom property in Hull is £862, which equates to £287 per room. This is over £400 cheaper than the cost to rent a single room in a property, so tenants in this city could stand to save money by renting an entire property as a group and splitting the cost.

3. Sunderland

The third cheapest city for tenants to rent a 3-bedroom property is Sunderland, just south of Newcastle. The average price to rent a 3-bed in this city is £968, working out as £323 per room. This is cheaper than the average monthly cost of renting a single room (£589).

Bradford ranks fourth with a monthly cost of £983, followed by Derby in fifth with a cost of £1,069.

Top 5 cheapest UK cities to rent a 3-bed property

The cheapest cities for tenants to rent by the room

We’ve calculated the average cost to rent a single room in a property in cities around the UK to reveal where tenants can find the cheapest deals.

• Preston

Preston is the cheapest city in the UK for tenants wanting to rent by the room. The average monthly rent for a single room in a property here is £439.60, which is over £500 cheaper than the cost of a single room in the most expensive city, London (£972).

2. Liverpool

The second cheapest city for tenants to rent by the room is Liverpool, where the average monthly price of an individual room is £439.86 – just marginally more expensive than Preston.

3. Bradford 

Bradford is the third best location for tenants looking to save some money on a single room’s rent. The average cost of renting an individual room in this northern city is £459 per month.

Stoke-on-Trent (the cheapest city to rent an entire 3-bed property) is the fourth cheapest city to rent a single room at £463 per month on average, followed by Aberdeen in fifth (£466).

Top 5 cheapest UK cities to rent a single room in a property

Cities where renting the entire property is the most profitable renting strategy for landlords

For landlords looking to maximise their profits, it’s important to know which is the more cost-effective option: renting out their entire property, or renting rooms individually.

To discover the cities where landlords stand to make the most profit from renting out a whole property, we’ve compared the cost of renting a 3-bed property with the cost of renting a single room in cities around the UK. Our analysis revealed just four cities where this is the most profitable rental strategy:

• London

London ranked as the most profitable city overall for landlords, both to let a whole property and to let rooms individually. However, our analysis revealed that to truly maximise their profits, landlords are better off renting out an entire property.

The average monthly cost of renting a 3-bed in London works out as £1,693 per room, whereas the average cost of renting a single room in a property is just £972 per month. This means landlords could earn on average an extra £721 per room (or £2,163 overall) by choosing to let their entire property.

2. Edinburgh

Edinburgh is the second most profitable location for landlords to rent out an entire property instead of letting individual rooms.

The average monthly rent for a 3-bed in Scotland’s capital works out at a cost of £837 per room, which is £174 more than the average cost of renting a single room in a property (£663). This means landlords could earn on average an additional £522 per month by letting their whole property.

3. Aberdeen

Aberdeen, another city in Scotland, ranks third. The average monthly cost to rent a 3-bed in Aberdeen works out at £517 per room; meanwhile, the average cost to rent a single room is £466.

This means landlords could earn an extra £153 per month on average by letting out an entire property rather than letting rooms to individual tenants.

4. Manchester 

Manchester is the fourth and final city where landlords can make the most money by renting out an entire property.

The average monthly price of renting a 3-bed in Manchester works out at £518 per room, which is £16 more expensive than the average cost of renting a single room in a property (£502). This price difference could earn landlords an additional £48 per month on average.

Cities where renting out an entire property is more profitable than renting individual rooms

Cities where landlords can maximise profits by renting rooms individually

We found that, aside from the four cities discussed above, renting out rooms on an individual basis is the most profitable option for landlords.

We’ve ranked cities based on the cost difference between renting a whole property and renting a single room, to reveal where landlords can make the most extra cash from this rental strategy.

• Kingston-upon-Hull

Kingston-upon-Hull offers landlords the opportunity to make the most additional profit from renting out properties by the room. While the average monthly cost of renting an entire 3-bed property in Hull works out as £287 per room, the average cost of renting a single room is £697 per month, which is over £400 more.

This means landlords could earn up to £1,230 more per month by renting out rooms on an individual basis, adding up to an additional £14,700 per year.

2. Sunderland

In Sunderland, the average cost of renting a single room in a property is £590 per month, which is £267 more per room than the average monthly cost of renting a 3-bed property (£323). Consequently, landlords in Sunderland could make an extra £801 per month by using this rental strategy, adding up to an additional £9,612 per year.

3. Nottingham

Nottingham is the third best location for landlords to maximise profits by renting out individual rooms. The average monthly rent for a 3-bed property works out at £366 per room, whereas the average cost of a single room is £581 per month.

This additional £215 per room adds up to an extra £645 a month, or £7,740 per year.

Top 10 cities where landlords can make the most profit by renting rooms out individually

Pros and cons of renting by the room

For landlords, renting property by the room generally offers a higher return on investment and is, therefore, a more profitable rental strategy overall. However, there are some potential disadvantages:

• Unstable income due to high tenant turnover: Renting by the room is often a temporary arrangement for tenants, and contracts are often shorter term (6-12 months). This means income may be unstable as tenants move out and leave rooms unoccupied.

• Potentially more work involved: Renting on an individual basis means you will have to deal with each tenant individually, write up multiple individual contracts, and respond to individual complaints. This can be a lot of work.

• Higher expenses: More tenants in a property may lead to higher expenses, such as needing to spend more on repairs. However, good landlord insurance may help with these costs.

For tenants, renting by the room is also generally a more cost-effective option as it means you don’t need to pay the cost of an entire property. It’s also ideal for tenants looking for a temporary living arrangement.

However, renting by the room means you may live with strangers and have less control over your living situation. This could lead to conflicts or awkward situations.

Pros and cons of renting a whole property

Renting out an entire property is generally a less profitable strategy for landlords, but this does depend on location. It may also be more favourable for landlords wanting to guarantee a more stable, steady income, and it usually involves less work overall.

As for tenants, choosing to rent a whole property is often more expensive than renting a single room and may also be a bigger commitment thanks to generally longer-term contracts. However, it also allows you more control over your living situation and means you don’t have to worry about sharing your space with multiple other tenants.

Overall, there are pros and cons to each rental option for both landlords and tenants. It’s important to carefully consider your options, and choose the right strategy.

Methodology

A seed list of 30 cities across the UK was compiled based on population, selecting the 30 cities with the largest number of inhabitants.

We gathered average prices for a 3-bedroom home based on Rightmove listings in every city to establish a base price. This number was divided by 3 to determine the hypothetical price per room if a home were to be bought.

Additionally, we took prices of rooms for rent on SpareRoom in each city, to determine how much renters pay on average for a single room.

We then divided the price per room of a bought property by the price of a single room for rent, to find out the difference between the two in price and percentage.

Sources

• worldpopulationreview.com

• rightmove.co.uk/property-to-rent.html

• https://www.spareroom.co.uk/