Renting by the room vs the whole house?

3 Replies

Hello everyone! I'm thinking of one of the below options but am not sure which is better from both a financial perspective and an ease of management perspective. For background, I currently live in a 3 bed 2 bath home and my mortgage is $1,800 per month.

1. House hack by renting out the two vacant rooms for $800 each, thus leaving me with a $200 monthly mortgage payment.

2. Rent out the entire house for $2,000.

The goal is to have the loan be paid down by a renter for my current home so that I can move onto my second home and buy it as owner occupied and house hack that one. My hesitation with #1 is that renting a house out by the rooms could be a headache from a management perspective when I move out and into my next home...especially with the possibility of different timings in the lease contracts for each room. However, once I move out I can rent all three rooms in the house by the room and make up to $2,400. Or I can go with option 2 and possibly make $2,000 but probably easier to manage than three different renters in the same home. I really appreciate the help! Thanks!

Hey @Santiago Flores-Alvarez , welcome to the BP community!

It sounds like you already fully understand the positives and negatives of each strategy so now it just comes down to the financials. 

If you move out and rent the whole house, you will presumably be paying rent somewhere, correct? So, you'll want to factor this into your calculations. Once you have an idea of cash flow of one vs. the other you just need to ask yourself if the better cash flow of rent by the room is worth the increased management. Also, keep in mind that if you do decide to turn this over to a PM company they will definitely charge you more to manage rent by the room (some will not even agree to take this on). 

Rent by the room is a great strategy if you put in the work on the front end. Screen the heck out of your tenants and not just to make sure they'll pay on time every month, but also to have the best chance of them all getting along. Definitely have them all meet each other to see how they interact before sticking them in a house together. 

And please, feel free to message me anytime if you have other questions or just want to chat!

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