Creating Extra Rental Income w/ Shared Housing Model in Sacramento
When buying investments, sometimes you need to look beyond the current property use to find a better use to maximize income.
I started my shared housing model as far back as 2007, while in college. Then paused and rented out the whole property. It wasn't until 2013, that I re-engaged this investment model -out of necessity as I was going through a divorce. It was at this point, I realized how easy (and profitable) shared housing is.
I converted a 1968 built 3bd / 2bth house into a 5bd / 4 bth, without any structure additions beyond the original footprint of the home. In fact, it created a better flow and modern day layout, and the rents per room equated to a 81% rent premium to what similar single family rental was getting at the time.
Here's example of what this property gets today:
5bd / 4bth, 1900 sq ft - Rm A $799 + $100 util, RM B w/private bath $799 + $100 util, Rm C Master $850 + $100 util (8yr tenant - market rate is $1099), Rm D $799 + $100 util, RM E $650 + $100 util (4yr tenant - market rate $799).
Total current monthly gross = $4,397
There's a lot of misconceptions about shared housing rentals, and now that I have been a practitioner of this investment model for over a decade now, I can confidently say the pro's far outweigh the cons:
For example:
Less management to maintain/re-lease as rooms become vacant. Existing tenants show vacant rooms when needed so no physical presence at the properties is required when re-leasing. Large pool of applicants when filling individual room vs whole home.
Option to convert some rooms to furnished mid-term rental for higher rent return.
Shared housing model allows maximum diversification of each individual house so you can more than cover mortgage even if rooms become vacant.
Accelerate Rent increases as rooms become available. I would easily increase $50-100 for one single room in a 12 month span.
Income reward of a multi-family without the multi-family baggage (nicer neighborhood, better tenant pool, better financing terms, larger pool of buyers upon resale). For example, get lowest 30yr fixed conventional rates as an SFR. Buy as primary, live in 1 room so you can put as little as 2% down.
If anyone is interested in knowing more about converting homes to this model or buying an existing shared housing property, I can show you the books and performance on 3 different properties I have and provide tips and tricks I've learned over the years.
If anyone is interested in buying an existing shared housing property, I'm selling 2 SFR properties and a Townhouse (considered SFR, not condo for loan purposes) near Sacramento State University (CSUS). All located in 95826 zip code which is a highly desirable B+ neighborhood.
