My Property Investment Journey – Part 1: Making £100k with Lodgers11 min read

My-Property-Investment-Jouney---Part-1 - Cashflow Cop Police Financial Independence


(no. 018)

Straight to the Point

  • Try not to sell up.  Buy and hold – enjoy the income and potential future capital gains.
  • I am not a landlord.  This is a business.  Give it the respect and attention it deserves to reap the rewards.
  • It is not passive income.  There is actually some work involved.  
  • Lodgers provide a significant source of extra income.
  • Lodgers have provided us with in excess of £100,000.


I Don’t Intend to Sell Property

Around 2008/09 time, I began taking in lodgers in a three-bed end terraced house within the South East of England (about an hour’s train journey into London).  The house was bought with my ex-partner and we jointly owned it.

After parting ways, I had a couple of options.  Keep the house by buying her out or have a clean break by selling the house.

The problem.  I didn’t have the cash to buy her out but at the same time, I didn’t want to sell.  I was getting quite a bit of pressure to sell up.  Understandably so.  She wanted to move on and so did I.  Selling up at that time meant that we would have had to put more money into the property because we were in negative equity.  

We bought in September 2007; the height of the housing boom.  It was on a 25-year repayment mortgage, with an interest rate of 5.79% fixed for five years.  In 2008/09, the house was worth significantly less than what we owed the bank, despite already two years into a repayment mortgage.  The property at the time was worth around £150k when we bought it for £185k.  We spend about £10k buying furniture, white goods, redecorating and fitting in a new bathroom and toilet.  Most of the work was done by ourselves with the help of family and friends.  

I was determined not to take this financial hit and I also did not want to relinquish ownership of what I believe was a property that will eventually regain its value given the location.  I knew very little about property investment back then.  However, from what little I did know, every fibre in my body was telling me that I would live to regret letting this property go.


Property Cycle - Cashflow Cop Police Financial Independence Blog
The Property Cycle


Eventually, I managed to persuade my ex-partner that it wouldn’t make sense to sell at a loss.  It would be financial self-harm.  I arranged with an independent solicitor to draw up a Declaration of Trust where from that day forward, I have full ownership of the property and by a certain point, I would pay her an agreed amount to buy her out.  This did two things:

First, it allowed us to ride out the market downturn.  

Secondly, it allowed her to remain on the mortgage because I would not be able to pass the affordability test on the mortgage myself at that point.  Whether or not the Declaration of Trust will hold any weight in the courts I don’t know.  However, it provided us with some reassurance that we will both honour what we agreed.  

It all worked out well.  My ex-partner was paid what we had agreed and I now still own the very first property I ever bought.  It is currently worth around £275k based on what similar properties are being sold for in the area at this moment in time (February 2019).

Based on my experience above, I don’t intend to ever sell a property I buy unless I really have to.  It needs to be the last resort.  I see it as a revenue stream.  The only time where I see this rule will not apply is if I intend to get into flipping houses (unlikely – don’t feel the need to at this point), upgrading our family home (currently live in military accommodation) or need a large amount of cash to build my own place on a plot of land.  

For clarification, this is what I refer to as ‘Property 1’ in all my writing.  It is the property I still live in whilst I am at work.  On the days when I am off, I head back to the military house where my family lives.  


I Am You Are Not a Landlord

Back to my lodgers then.  Obviously, now you can understand that it was a necessity.  I couldn’t afford the mortgage by myself once my ex-partner moved out.  In 2008/09 time, The Rent a Room Scheme gave me £4,250 tax-free rental income.  At the time of writing, this is now £7,500 per year.

I kept the best rooms for myself and I had one lodger for a few years in the smallest room.  It then struck me.  I could make a lot more money by putting myself in the box room and rent out the other two large rooms for significantly more.  

I got out of the landlord mindset and started to run some numbers on a spreadsheet.  This was the point when I no longer considered myself a landlord.  I looked at the whole lodger operation as a business.  I was in the business of attracting good quality lodgers, maximising rents by looking after them, minimising costs and looking after my key asset – the house.  I was a property investor.  

This is perhaps why so many BTL landlords are selling up.  They saw it as easy money.  They left it to their letting agents thinking that it was a ‘passive income’.  They did not look after their investments by keeping up with repairs.  They did not do their due diligence and did not create a business plan with enough breathing space for all the changes that have and will continue to take place.  Business plans?  Who am I kidding?  Anecdotally, a large portion of BTL landlords failed to properly do the simplest of return on investment or net rental yield calculations.


The Founder - McDonald's - Cashflow Cop Police Financial Independence
Movie: The Founder (2016)


This reminds me of the movie: The Founder.   Before I saw the movie and read into it a bit more, I always thought McDonald’s was a catering business – the business of selling burgers.  I was so wrong.  It is a $30bn property empire.

Interested in property?  Lodgers are a good starting point.  Dip your toe in the water so to speak.  

First rule: you are NOT a landlord.  You are a business owner.  

Second rule: it is not a passive income.  

Third rule: Letting agents are merely your faux employees so review their performance.  Give them the boot if they fail to understand that you are running a business.  This means looking after your tenants (your source of income) and promptly sorting out repairs on your property (your income producing asset).  I’ll talk more about this later when I discuss our other properties.  


Finding the Lodgers

When I first started out, I switched between two sites: Roomgo (previously EasyRoomMate) and Spareroom.  I have had more choice and success with Spareroom so to this day, it is the only one I use.  I would say give them both a try because I imagine it will very much depend on your region.  There would be many other sites around these days.

I found that finding a lodger was very much like writing an online dating profile (yep, I met my wife on  It is very much an art and takes practice.  I guess my best advice is to be honest in what you expect from your lodgers but don’t come across as a pedant (even if like me, you can be one at times).  

Never accept a lodger if you haven’t met or interviewed them.  I have heard of stories where people have just taken money from potential lodgers via bank transfer after just a phone call.  The goal is to find lodgers I can live with and for them to want to remain.  

Void periods are losses in revenue.

Finding a new lodger takes effort and time.  

Getting rid of a lodger (although easier than a tenant) can still be stressful.  

So the best approach is to do it right the first time.  

I use lodger agreements, interview them, ask for written references which I check, take copies of their ID and check their bank statements.  Why the last one?  I want to make sure they are good with money and don’t miss payments.  It is not a simple case of renting out a house and I live elsewhere.   I am letting a stranger come live with me.  I want to know all I can about them before I let them under my roof. If they don’t like my checks, then they can look elsewhere.  

Which brings me on to the next point.  The rent I charge is around 10% lower than the market rate.  I do this to allow me to choose from a larger pool of people.  It is not drastically lower than the market rate where I would only attract a certain demographic.  I get a wide mix of people.  I usually let out my spare rooms within a few days (usually within 24 hours) after interviewing about five potential lodgers per room.  

My lodgers usually stay for between two to five years.  I do not increase their rent for as long as they choose to stay.  The condition of this deal is that they pay on time and they help out with the housework.  A lot of the time, once a lodger leaves, a friend of theirs replace them.  I assume they hear good things about the place so I get recommended.  


Tax Returns

From 2011/12 onwards, I started to complete self-assessment tax returns because our lodger income grew to be more than the Rent a Room Scheme tax-free allowance.  As can be seen from the chart below, sometime between 2014 and 2015, our lodger income exceeds all costs associated with the house.


Lodgers - Income and Expenses Chart- Cashflow Cop Police Financial Independence
Lodgers – Income and Expenses Chart


The table below gives the full break down of our income and expenses for this property.  You will notice that after 2011, I stopped paying for a TV licence.  It was money down the drain.  I don’t watch or listen to any live broadcasts at home, nor do I use BBC Iplayer.  As a result, I placed it into my Lodger Agreement that if any of my lodgers wish to do those things, they will need to get their own TV Licence.  

After 2013, I also decided that heating insurance was a waste of money.  I decided to self insure by having a cash reserve for repairs and maintenance.  

From 2015 onwards, our mortgage interest drastically dropped.  This was because my wife joined me on the title deeds and together we significantly reduced the term of our mortgage.  It is amazing how much interest this saved us – an annual drop of almost 35%.

2017 was an expensive year.  We replaced the boiler and all the radiators in the house.  Considering how little we have spent on the house so far, it wasn’t that bad really.  


Lodgers - Income and Expenses Table- Cashflow Cop Police Financial Independence
Lodgers – Income and Expenses Table


Including the forthcoming tax return (2018/19), lodgers have provided us with an income in excess of £100,000.  That’s not a sum to be sniffed at.  It has allowed us to reduce the term of our mortgage from 25 years, where we will now pay it off within 13 years (in 2020).  

Extrapolating this out to our FI date in 2025 means having a couple of roommates will have provided us over a quarter of a million – £264,545!

It may be that you have young children and it is simply not appropriate to have lodgers.  You need to decide whether or not it is right for you and if you can live with strangers.   Believe me, for the first couple of weeks, you will feel uncomfortable in your own home.  This feeling is very temporary and fades away quickly.  Before long, you’d be thinking to yourself:

“Why the hell didn’t I do this sooner?!”


Further Reading:

Our FI Plan

Our Numbers – from the very beginning…

Property Moose: Why Property Crowdfunding Is Not For Me

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4 thoughts on “My Property Investment Journey – Part 1: Making £100k with Lodgers11 min read

  1. FS Reply

    Great blog. On this particular point, though, I do wonder if living in having military accommodation as a separate place for yourselves makes it psychologically more palatable than if you were in a standard domestic set-up. As ex-military myself, I can’t overstate how much difference the subsidised accommodation makes. I went from 80%+ to ~30% SR overnight when I left. Much of that was due to moving to a higher CoL area and taking a significant salary drop (military salaries – for officers at least – are great compared to the average in some parts of the country), so I’m not putting it all down to that, but I used to live in the mess, paying 1/5 of what I ended up paying in rent, and renting out a house I owned. Your mrs sounds like a massive asset to your FIRE plans!

    • Cashflow Cop Post author

      Hi FS. Thank you for stopping by and taking the time to comment.

      I agree wholeheartedly with both your points in relation to Military subsidised accommodation and Mrs CC. I had touched on them in past posts and perhaps could have made them more explicit in this one.

      The subsidised accommodation is unbelievable. We recently moved into a three bed due to a growing family and it is as you allude to. Our rent is about 30% of the market rate with council tax and water included. When we were living in single quarters, it was even cheaper. From speaking with Mrs CC and anecdotally at least, I sense many in the military (perhaps those younger and of lower rank) do not take advantage of this unique financial gift they have been given. Maybe it is due to lack of knowledge and guidance. Maybe it is intentional. You have done well to buy a house and rent it out.

      In relation to Mrs CC, I have a post planned dedicated to her. You’re spot on again. She has been essential to our success so far and we would not be where we are without her.

      I feel very lucky and grateful for what I have. I completely understand not everyone is in the same position as us, but what I hope to achieve from this blog is to allow others to take from it what they can to improve their own financial positions.

    • FS

      To be fair, military accommodation is a bonus open to almost anyone if they want it enough (i.e. enough to do the job or marry someone that does) so anyone that’s feeling too envious can always get themselves down to their local careers office.

      Funnily enough, though, knowing the value of a decent relationship is partly why I left. Dunno if your wife has deployed much, but I spent most of my time away from home, and divorce was pretty much a common denominator amongst my superiors, so I don’t miss that aspect. I look forward to reading your Mrs CC post!

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