Rent Rooms instead of the House?
Hi all! My brother in-law (in the biz) said he is going to start renting out "singles" in a three bdrm house. He's planning to furnish with all of the basics (elec./local phone/cable tv) If one family brings in say...$650 p/mo. He thinks he can get about $350-375 p/room. Has anyone ever tried this - or heard about anyone doing it?
It happens a lot in a college town. We are paying $330 a month per person (4 bedrooms) Around here they rent out apartments by the bedroom and rents go from 230 - 400 per room. And thats just in apartment complexes. Houses and duplexes also use this same method, just not as much. There are some advantages and disadvantages to using this. An advantage is the total rent is kinda masked by the per person rent. You can generally command more rent by using this method. A disadvantage is if a tenant moves out or has to be evicted than that room will probibly stay empty since it would be hard to find someone to move into a bedroom after school starts. Another disadvantage is you have 4 leases with 4 different people on the same home. That can create a sticky situation when there is damage to a common area in the home and one person refuses to pay for it. It is a good way to make a little more cash flow, but just make sure you get your contracts looked at. Put something in there to cover common areas in the home.
Andy
Thanks for the insight Andy...ahh yes...reminds me of those college days. But - I digress.
I'm talking more about renting in a typical urban (or sub-urban) marketplace. My brother in law seems to think he'll have no problem finding tenants - I'm not so sure. The "common area" point is a good one though. Not sure how to protect that angle.
I don't know where you are located, but there are probably local ordinances that govern this activity.
For example, in Washington DC, several hurdles must be overcome to operate a rooming house to include obtaining a commerical operating license, obtaining a certificate of occupancy, obtaining a health certificate, obtaining an approval from the Department of Finance and Revenue, obtaining an approval from the housing inspector, etc.
Generally, if three or more rooms are made available to boarders, you may be required to comply with some local rules governing your activity.
Check your local ordinances carefully to be sure your proposed activity can comply with all of the applicable rules before you embark on this venture.
Hey there.
Yes, dividing a house into smaler "units" and renting them out is a great way to increase your cash inflow, but it will only work in certain areas.
If it is situated close to a university (college as you call them in USA) I would highly reccomend it. Not only is your total rent higher, but you also minimise your risks. Let me explain... If you rent the place out to only one family, and thay move out, you lose 100% of your income. If you rent it out to 4 students, and one moves out, you only lose out on 25% of your income.
Seconly, student tend to group together, and finding someone to fill a room is as easy as pie.
Another advantage to renting out to a bunch of students is that you do not deal with their financial sutuations, but with their parents' financial status. Being at varsity (college) you normally deal with the richer part of society. Paying accomodation for your child is not a hassle, but something you "have to do".
I know of a few people who make fortunes with investment properties close to tersiary institutions. Another hint, try and get a bunsh of girls to rent the place. They do not damage the place so easily.
Conclusion: I stongly reccomend not trying this in a normal subhurb, only close to a colege, where the demand for such a commune is very high.
Hope I was of help.
Rudolf
Hello Daja, I have heard of two brother in the Atlanta area that own 13 such homes. They rent the rooms by the week. They pay all the utilities. These are more like rooming houses. Each property houses 4-6 persons. From what I understad they earn in the 6 figure range. This is all they do for a living. They manage their own property, they rent to the lower-end clients.
So it can earn a lot of money by doing this type of renting. Just know what city codes would apply before jumping in too deep.
Daja,
I have several homes that I do this in and get a great positive cash flow. All are near colleges and universities and rent out on a month to month. I keep them full, with a standing wait list to get in.
The reason for this is when they are on summer vacation I do not charge them rent and hold their rooms.
[addsig]
Remember Daja, the most important factor in this kind of reltal setup is location. Keep it close to a college.