Landlording & Rental Properties

5 Pitfalls of Renting by the Room (& How to Solve Them)

Expertise: Landlording & Rental Properties, Real Estate Investing Basics
19 Articles Written

The rent by the room strategy is a topic I see heating up on the BiggerPockets Forums. Or, maybe it’s the keywords I elected to be notified of when someone posts. Either way, I want to address a few items for a few reasons.

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Here they are:

  1. I am very passionate about this topic.
  2. I think it is the best way to rent out a space.
  3. It is all that I do.
  4. It can get ugly if you are not prepared.
  5. A lot of people do not understand the pitfalls.

Pitfalls of the Rent by the Room Strategy

I want to discuss some of the items you need to be aware of when using the rent by the room strategy. I have written other blogs about the benefits, but we should discuss possible issues that you may have, too.

Issue #1: Drama

You will have drama. End of story. You are putting strangers together in an apartment.

Have you watched any reality TV lately? OK, that sounds bad, I know. It is not quite like that, but you will have “tiffs” here and there.

The two most commons issues are cleanliness of the common areas and food stealing. People are not as clean as others. Some just pile dishes in the sink; that wears on others’ nerves. With the food, maybe they have had a few drinks and are feeling hungry. Maybe your roommate Joe’s Chinese takeout is looking real good.

two young men sitting back to back with arms folded in frustration in a living room setting

My solution to this? I pay $40 a unit for my units to be cleaned bi-weekly or monthly. It is worth the expense all day.

Should the food stealing persist, I have had people plug in a mini fridge in their room, essentially keeping their food locked up.

Related: Feeling Frustrated? Here’s How to Make Real Estate Less Stressful

Issue #2: Leases

I get asked this a lot. What works for me is having everyone on their own lease. This is what I have done. If you have intel on a better way, then I am all ears. I can tell you that having separate leases is really the only way I can see it being done.

Let’s go back to Joe (in issue #1) and his roommate Susan. If Susan doesn’t pay her rent, why should that be Joe’s problem? When you have separate leases, everyone is only responsible for their portion. If you are getting into a rent by the room situation, more than likely your expendable income is not great. You cannot be bothered financially or otherwise with what your roommate pays or doesn’t pay.

I know some people who put everyone on the same lease. Their thought is that if they do this and someone doesn’t pay, the others will essentially gang up on the one that doesn’t pay and badger them into making a payment. That is not how I roll, but I suppose it is possible.

For me, if you didn’t underwrite and vet your tenants’ finances well enough, that is on you—not anyone else in the unit.

Another question about leases that I get a lot is what to put in the lease about the common areas and who is responsible for what. To be honest, I have little in my lease about that. It might be a bad thing, but I am just being honest.

Another truth is, I have never had one penny of intentional damage to a common area. Yes, I have regular wear and tear but have never had to go CSI (the crime investigation show) on a unit, trying to figure out who put a hole in the wall. That is a lost cause. I do not believe anyone will own up to it, and I would rather fix it myself than listen to the old “blame game.”

Issue #3: Education

Have you ever gone into a store and there is a rep for a product there showing you how it works? Most likely that is because if you just saw it on the shelf, you would have no idea how to actually use it.

I would say all but 10 percent of the conversations I have with prospective tenants require me to educate them on how this arrangement works. Many did not even know it was possible.

young woman against a light blue background wearing a brightly colored striped sweater shrugging her shoulders with arms bent and palms facing ceiling expressing confusion

I cannot stress enough how important it is to be crystal clear from day one. The first thing I always say is, “Hi, this is a shared space with roommates. You get a private bedroom and the common areas are shared. Is that okay with you?”

This sets the tone and allows the prospective tenant to decide early if it is for them or not. There is usually little convincing going on. They either like the idea or they do not.

Issue #4: Town ordinances

The town I invest in has a town ordinance on this strategy. They allow “four unrelated people per unit.” Meaning, if you have a single-family house (one unit), you can only have four unrelated people in it. If you have related people (part of a family), that is a different story. If you have a duplex, you can have up to four people on each floor, and so on.

Check with your town. Every town is different.

Related: I’ll Never Evict a Tenant—Here’s Why

Issue #5: Tenant turnover

This is interesting because, for the most part, I actually have long-term tenants. I have had many, many people stay more than a year and even quite a few for three years or more.

Generally, what I see is a slight degree of increased turnover over regular per unit rentals from other investors who are doing this strategy. (I have experienced this in some cases, too.)

In almost all cases, a rent by the room situation is not someone’s final resting place. It may just be temporary. Maybe they just need the space for three or six months. I have grown to be somewhat flexible with lengths of leases.

Another reason for turnover could be drama. I had the boyfriend of a tenant clear out an entire unit, including themselves. I basically lost three tenants over one person who was not even on the lease.

I always require crystal clarity on who will be staying in the unit. Generally, a boyfriend and a girlfriend staying in a room together is not a great idea. I have two rooms like that now but do not really suggest it. Usually those who rent from me are young people. Therefore, a young couple living together for the first time could be bad news.

I had a friend once who saw me doing this strategy and gave it a go for themselves. It was literally complete decimation. These tenants tore the place up. They tore my friend up. It got ugly.

I truly did my best to warn them of the possible pitfalls. I believe that given this person’s mentality and personality, it just was not a good fit from the start.

Overall, these issues are ones to keep in the forefront of your mind but should not deter you from this strategy. I truly think renting by the room is powerful from an investing perspective and fully believe that the pros outweigh the cons.

Do you have questions for me about this strategy? Have you experienced or heard about any other pitfalls related to it? 

Let’s talk in the comment section below. 

Ryan Deasy, of Deasy Property Group and RentReddy, is a long-distance landlord currently residing in Houston, T...
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    Wendy Forbes from Chelsea, Vermont
    Replied 9 months ago
    This is all very helpful. How many bathrooms do you usually have per rented room?
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Hi Wendy, i usually do 3 bedrooms per 1 bathroom.
    Austin Montgomery Rental Property Investor from Enterprise, AL
    Replied 9 months ago
    Thanks Ryan! This is great. I have been house hacking with two roommates and am about to leave to rent out the third room! I think these are all great and helpful tips. I am requiring my tenants to split the cost of utilities evenly (and they pay them). How do you handle utilities? Wendy - I rent a 3/2.0 so the person renting the master has their own bathroom (and pays a little more) and the other two share it. I have had no issues with that as long as they understand it up front.
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Austin, thanks for reading. i have just recently switched to including utilities with rent. i really am starting to like this model better.
    Wendy Smith from Decatur, GA
    Replied 9 months ago
    Good pointers Ryan.
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Thank you! Thanks for reading.
    Wendy Smith from Decatur, GA
    Replied 9 months ago
    So I'll add my 2 cents. @ Wendy Forbes, @Austin Montgomery. So I currently househack with 2 roommates. It's been pretty amazing so far. Like Ryan, I have separate month to month leases. It's a 4/3, with 1 male roommate and I sharing a bathroom and the other also male, having the entire basement with own bathroom which carries a 50% premium. My daughter uses the master bedroom which has its own bathroom. I've been fortunate that my screening has yielded great medium term tenants /roommates and I hope to rent the 2 rooms I currently occupy when I move out. In addition to the lease there are house rules, one of which is no wearing of shoes worn outside in the house. No issues really, we talk about things, share meals sometimes, but everyone is real respectful so no issue with sharing the refrigerator or anyone using stuff that's not theirs. The rent includes furnished rooms, all utilities, Wi-Fi and a smart tv in the living room with Netflix, Hulu, Prime etc. Doesn't cost me extra for those so it's passed on and no risk of someone charging for eg a movie or item to my account. Also helps with tenant selection, you get what you pay for. Entrance door is coded, so no lost entrance keys issue and I have duplicate keys for the bedroom locks but have had no reason to use (heck, need to look where I've put these spares.) House is semi smart, camera, doorbell, security monitoring, but I love my Nest as it allows me to control the temperature from my phone. This is great as I can adjust when no1 is home, which might not work totally with just a schedule set up. I also make notations as I go along for future, expecially when I will no longer be in the house. Learn as you go and adjust accordingly. It's a work in progress but so far it's been great. So while I get the argument for multi-family, for now If I can find more properties to replicate this strategy, I believe I can have some good cash flow. Thanks for reading, and all the best on our journey!
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    this is awesome! thank you for sharing this. you are doing all the right things. nice work.
    Andy Rousch from Andover, NJ
    Replied 9 months ago
    I was considering this strategy for my next house Hack rather than multi-family, only issue is I have two dogs and I would be afraid of tenants accidentally leaving the door open, or being bothered by barking, etc Anyone in here pull of this type of house hacking with pets?
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    hi andy, thanks for commenting. i have not heard of someone doing this. i think you would just need to find pet loving tenants. this is doable you just have to craft it right.
    Dave Rav from Summerville, SC
    Replied 9 months ago
    Great points! I currently have 9 doors, and have yet to try "rent by the room" or even the AirBnB approach. What concerns me is the drama, multiple moving parts, and potential for being overly active in the property (ie, a 1-unit now has 4x the tenant units assoc'd w/it). Maybe i am too worried..?
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    hi Dave, thanks for reading and commenting. i think you are thinking about all the right things. you will have some drama and some additional moving parts. i think these are items to be mindful of, but i would not say it is a reason not to move forward. if i can do it, you can do it! also, happy to help in any way. just send a message if you have any other questions.
    Jenine Maggio
    Replied 9 months ago
    This is such a great topic. I have thought of this idea numerous times, but kept thinking "how could it possibly work?". Thank you all for the input.
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Jenine, this means alot. thank you. it can work! give it a shot. for me, i am very happy that i adopted this strategy over just the per-unit model.
    Soliman Sayedi
    Replied 8 months ago
    Great post. I started this with m first property 3 years ago and now i live in another state and continue to use the same process. At the time everywhere article i read said that i should put all tenants on one lease, but like you mentioned, these tenants are young and do not have the financial means to pay for another tenants rent. As long as you vet the tenants, having each tenant on their own lease is the best way to do, IMO.
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Bingo. yup, you got it Soliman! i am right there with you. i think every market is different and if your market can support one lease for various reasons, then that is okay, but, otherwise, i really like separate leases.
    Nathan Rice Rental Property Investor from Austin, TX
    Replied 8 months ago
    Anyone know of a comprehensive or complete A-Z online course that teaches this rent-by-room approach?
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Also, i would be more than happy to help you. i do not have a course (although maybe i should) but would still be willing to lend my time to answer questions etc if you need something like that.
    Artem Belayev from Shoreline, WA
    Replied 8 months ago
    Thanks for the great blog! We use the same method here in Seattle since the housing market is so high but still able to cashflow! What do you use for rent collecting software? Online? Checks in person? We’ve had good and bad experiences with this method, it’s definitely more hands on then a traditional rental but I love it. If you have a vacant room or two at least the mortgage is covered. Have you ever considered if you were to scale how would you build your team? I haven’t heard of property managers that would take this on. Im sure some out there might. Would love to hear your thoughts! Thank you.
    Rohit Verma from Denver, COLORADO
    Replied 8 months ago
    I simply use "Zelle". All the tenants need is your phone number and payment is received almost real-time like in less than 5 mins
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    that is a great question. i do not think so. however, i am considering writing a book on it. i am also thinking of doing it under the BP umbrella. Stay tuned...
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Thank you to all that read and commented. i am so passionate about this strategy. as mentioned, considering writing a book about it. feel to let me know if you think it is a good idea! Also, please send me a message if you have any questions at all. I am here to help!
    Vanessa Willard from North Carolina
    Replied 8 months ago
    Thanks for the read. My question, is your home in a college area? I wonder what life would be like for an older population, 30s and up. I love the idea but in my area there are lots of older people looking for places to stay. Many have pets. Any thoughts?
    Rohit Verma from Denver, COLORADO
    Replied 8 months ago
    I use this exact same room by room strategy. I get people from all age groups. I buy like really BIG houses, 6 bedrooms, 4 living rooms. I make sure everyone is employed and have a job to go to. Also, I make it very clear to them that I want them long-term but I do ONLY month to month as an exit strategy so I can quickly deal with people who have issues following house rules. Many of my tenants have stayed more than 1.5 years plus
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    hi! thanks for reading. only one of my properties is a college rental. everything else is filled with mostly 24-35 year old and a few people are older than that. yes it can be done. only 1/3 of my tenants are students.
    Evelyn Tilman Real Estate Agent from Oklahoma City, Oklahoma
    Replied 8 months ago
    Hi,my husband and I are gettingstarted. We don't own property so I was thinking of renting a house and making profit by renting it by the room. Any tips on getting a landlord to agree?we do own a 2 bed house but not sure the return would be enough. I'm trying to convince my husband into making the dinning room into an extra room. Also how do I market this?and how do I determine the competitive rent amount? I have too many questions!
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Thanks for commenting Evelyn! i am here to help. i have not utilized the strategy of renting to turn around and rent again. i know it is doable and i know it is working for the AirBnB people. my best suggestion, is to just ask. you just never know until you try. it cant hurt! i bet you will need to ask quite a few landlords until you get a yes, but i believe it will be worth it. yes two bedrooms may not be worth it. if you can squeeze three that might be more attractive depending on your debt service and future maintenance on the property. are you in a position to house hack and rent that property out by the room? lets talk. i am happy to help.
    Allan Sabo Real Estate Investor from Scottsdale, AZ
    Replied 8 months ago
    Great article, very refreshing to hear someone else that see's the market as I do. By choice, I decided to start renting rooms in the home I live in almost 12 years ago. Like anything, I've learned a lot about the co-habitation dynamic. But given those lessons (and my techniques to reduce them as issues) I'm soo bullish on this space that I'm actually looking to build a type of house that’s better suited for the room rental market, and I'd like to build a whole lot of them. I wanted to add to your solutions to the above issues: 1) Cleanliness - I also experimented with assigning chores with due dates (that carry fines if not done). This worked well as a means to get buy-in for the cleaning people, which is closer to $50 a week, so the $200/month split 4 ways got them to accept a $50 rent increase. I was easier to keep rates more competitive, then push the increase later. 2) Unauthorized food sharing - I picked up an extra fridge, and then again, assigned 2 people per fridge, if there were issues beyond that, the mini-fridge was often recommended as a solution. 3) I put everyone on their own leases - this is a selling point as many are so strapped, they wouldn't qualify to be on the primary lease anyway, nor will you really be able to collect on some of these renters without a great deal of heartache. 4) I have had rather nice items get a little abused and over time, the amount of small stuff that goes missing starts to add up. When someone moves in there is a checklist with condition and counts on all items. The lease states that IF something is damaged or goes missing, EVERYONE gets charged full replacement value. That’s right, if the $30 coffee maker gets knocked off the counter and breaks, then either the offending party can just replace it, or I'll charge $30 to each tenant. This method has solved so many problems - people no replace broken glasses or dishes, they replace missing silverware, etc. This has saved me so much headache and proactively resolved issues LONG before they turn into problems. 5) Education - YES! This is huge. Like you, I do have to over explain the mechanics. Some people even argue with me telling me I can't do this - lol. I notice there is a direct inverse correlation between how much time and effort I spend educating them over all the aspects of co-habitational living, to the amount of issues I experience with that tenant. 6) City Ordinances - This is the biggest challenge, especially if you are using single family homes built with the intention of nuclear family as occupants. However, I maintain that with a little effort spent working with the city, they soon realize that housing demographics are shifting, and few homes are made up of "relatives" and as a needed affordable housing option, cities need to reconsider their ordinances. 7) Turnover - whenever possible I aim for a 12 month lease, but like you, I'm flexible. I have someone that rented week to week, and has been with us now almost a year. But, he's got flexibility, and that tends to be a huge selling point is knowing they don't have to be tied down for a whole year. Thus, I'm generous on shorter leases and after the first term, leases default to a month-to-month (with 30 day notice and a small increase - which often motivates to re-up the lease). As I said earlier, I love this technique, and it's far more than just a hack - it's a solid high profit yielding system. I love it so much that I plan to design and build houses even better suited to this kind of needed housing. I am looking for Investors - so, If anyone is interested, please do not hesitate to reach out to me (mediamanx [at] gmail -dot- com)
    David Brow
    Replied 7 months ago
    Thanks for the information!
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Allan, wow, thanks so much. i appreciate you sharing all of this. let's talk further. i am always curious about how other people are doing this. i think building houses for this strategy is a good idea in the right market. i will reach out to you. thank you.
    Rohit Verma from Denver, COLORADO
    Replied 8 months ago
    Hi Ryan Deasy, Im following this exact same strategy, question I have for you is around scalability/remote-management. Repairs etc I simply hire contractors, for payments I use Zelle. One thing I have not been able to crack so far is showings. What do you do for showings? How do you show property to a new potential tenant remotely? I have thought of using existing tenants in the house for that and it might work, I background/credit check all my tenants but still a part of me thinks that I NEED to see new potential tenant and use my special superpowers to guess if they will make a good tenant or not. What are your thoughts on it? Thanks, Rohit
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Hey Rohit, thanks for commenting. i have solved this easily. at first i was having other tenants do showings for 20$ a piece and sometimes included a bonus if they closed the person. now, i have an amazing dedicated showing lady. SHE IS AWESOME. i found her on a facebook group. i recommend you reach out on various platforms looking for a showing person. mine actually came as a referral. i bet you, if you join some REI facebook groups for the Denver market (or wherever you are exactly) and make a post stating that you are looking for a showing person, someone will pop up and offer. having a reliable showing person has been massive for me.
    Christine McBride
    Replied 8 months ago
    Hey Ryan. Very informative post! I’m looking into this strategy as well. Do you furnish your units? I know some people furnish common areas only, but others provide some basic room furnishings as well (bed, dresser) I live in a city with several colleges and I’m wondering if that provides any competitive advantage. I imagine it would bring more in for rent
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied 8 months ago
    Hey Christine: It is market dependent to a degree. i stopped furnishing my places because it did not make much of a difference. although, i know someone people that swear by that. i would see what others are doing in your local area. i think providing some furnishings it fine. maybe try it out and see what your feedback is.
    HC Mattei
    Replied 8 months ago
    Hi! Just wanted to thank you for this very informative and timely article since I am considering doing something similar with a duplex unit I own. Have always rented it as a 2/1; now, thinking it might be time to rent rooms instead. How difficult was it for you to get started -- rent rooms instead of apartment unit?
    David Brow
    Replied 7 months ago
    This is all a lot of great information and I thank everyone for their input!