Hi! I am in the middle of purchasing a 3/2 SFH in Tennessee about a half mile from a university. I want to try to increase rental income by renting room by room.

I was just wondering if anyone has had any experience with this.

If so, does if it makes other things more difficult like utilities, lawn care, common areas?

Lastly, has anyone worked directly with the university housing office to market the property or get on an approved list of off campus options?

Thanks in advance!

-Chris

From my experiences renting houses in my college town, typically the landlord either includes the cost of utilities in the individual rents or one of the student tenants will take on the bill and Venmo request the splits between the other tenants. At Wake Forest the different investment companies had to get their homes approved with the school before they could rent it out to students. They had limits on how many houses could be rented to students but that often varies from school to school. (Wake had a restriction on off campus living and sought to maximize the amount of students living on campus, oftentimes room and board was more expensive than the cost of renting off campus).

Look into the policies of the individual schools and try to find out what you need to rent to students in the area, that way you know what kind of process you'll need to deal with upon closing.

Hi @Christopher McConnell !  Where in TN is your purchase?  Typically when something is rented by the room instead of as a whole house, there are more costs for the landlord.  While this can vary regionally, typically in a "rental by the room" scenario the landlord handles utilities and lawn care.  I also recommend the landlord provide periodic cleaning service for the common areas for a few reasons- happier tenants who stay longer, eyes on the property, and preserving the condition of the house.  If something's clean, people treat it better.

Of course this is a case by case basis, but I've had clients who find the increased costs associated with renting by the room outweigh the increased income.  It depends on the region's rental rates.

We do these for our clients, couple different ways to structure it. Common space rules, parking, cleaning are the biggest friction points. Will you lease full year or just the semesters? Be sure your lease agreement reflects the terms, and price each room differently.

@Alex Uman just out of curiosity, on what legal grounds can Wake Forest say if you can or can't have students living in your house? @Christopher McConnell I keep all of my students on the same lease. The utilities are all in their name (we have to have the water in our name, we just pass the cost onto them). I would be hesitant to have everyone on different leases because if someone's not paying, the rest of the house can exert "peer pressure" on that person to pay their rent. Also, if you have to evict just one person, it could get really messy when they move out trying to take other people's stuff. It's also a lot less paperwork for you. Regarding rental rates, it's location location location... I have non-students that pay student rental rents to live in my houses. I hope that helps!

@Dave Poeppelmeier They have a running list of "approved student off-campus housing". Students need to register their off campus address with the school in order to be allowed to live off campus. They often allow exceptions for students who still live locally at home with parents. Trust me, I was not a big fan of this arrangement and was able to get out of their 3 year on-campus housing requirement when I returned from my semester abroad. Still had to live in a WFU approved house.

Various developers local to the campus have cut deals with the school to build cookie cutter student rentals (4bd/4.5bth new builds) and rent them out to seniors. Other than those it is difficult for local investors to get approval from the school without owning 4-6 doors in the direct vicinity of the main campus and for now only seniors are allowed to live off campus. As the school continues to grow I could see this changing, though the administration has expressed interest in making on campus living mandatory for all students.

In terms of legal grounds, I don't believe they have any and I don't think they should have the right to require students to live on campus (at a higher rent cost might I add).

@Alex Uman Appreciate the info! I had same thoughts about restrictions with school. I have a call planned with them to discuss options. I was thinking it would be easier to charge a little more and take care of utilities and lawn care and make it as similar to all inclusive dorm experience as possible.

@Adrienne Green Thank you! I like that idea of including cleaning. Purchasing in Cleveland at Lee University. Do you have any experience with that school or the students?

@Dave Poeppelmeier That's great advice thanks! I didn't think of the peer pressure but I think that makes a lot of sense. I was just concerned about not being able to fill with 3 tenants that know each others. It seems like if I can get a group of 3 together that it is the best way to go. Thanks!

@Ronald Rohde Thanks Ronald! Definitely a good idea to price the rooms differently. I plan to lease for full year. Do you have any insight for leaning one way or the other? 

@Christopher McConnell I know people who've gone to Lee University! There's a good number of alumi who are in this area.  Generally it's well regarded in the area.

@Adrienne Green That's awesome to hear! I am an out of state investor doing my first deal so although the numbers look good, the bit of extra positive vibes helps keep the newbie nerves at bay!

@Christopher McConnell regarding roommates, it's usually very common that people form groups to look at houses. Occasionally we'll have 1 person wanting to find other roommates, and we don't do matchmaking like they do in the dorms. 

@Alex Uman

You can set up a contract for each BR. Give access to the common areas and appliances with the understanding that they are shared.

Damage deposits and letters securing extra damages to property if it happens, spread equally between all tenants.

Get a parent to sign off as responsible and agreeable to paying for damages if any.

You let them figure it all out.

My daughter had a room deposit AND property damage deposit. If her bedroom was not as clean as it was at move-in, or if the room or private bath was damaged, that came from one deposit. If the common areas were trashed, each tenant was financially responsible.

It worked out quite well.

The leases were not yearly, but according to school access dates. Even if they were to live there the next year, they needed to vacate the property at each school period.

It was a bother, but now that I see the other side, it was needed.

No college kid is mowing your lawn.

They are not changing filters or fixing the loose door knobs. You need to pay someone to keep an eye on the property and to know when to check for damages after big game weekends and the like.

Sure money, but it takes work.

Good luck!

I have some experience renting by the room in my house hack and am doing this strategy with a newly acquired single family home near University of Miami. Based on what I have gathered from others that have experience in this niche, here are some suggestions:

-Include all utilities and lawn care. You can mention overages charged separately if desired.

-At a minimum, common areas should be furnished, but bedrooms should likely be furnished as well. Know that you are competing with student apartments near campus that are furnished and this is a huge incentive for some students.

-Put every student on an individual lease, that way you can get rid of a problem tenant if they violate any rules rather than worrying about having to vacate the entire unit during the school year.

-For any student that does not have steady income and/or renters history, have a guarantor on the lease (usually a parent)

I would also add that you shouldn't be focused solely on students. I had this mindset, but have found that traveling medical professionals need furnished rooms and are able to pay a higher premium because of their stipend. I would aim to fill any short-term vacancies with medical professionals or students, then get a group that is interested in signing a 1 year lease to a term for August 1st to July 31st of the following year, as this is the most typical lease agreement for many students. 

@Daniel Smyth I suppose that only works if each of the rooms are separately metered. In the two houses I rented back at school they were simply 4bd/2bth homes with one meter. In the first house we lived in we paid $750/room with utilities included (wifi, heat, electric, water, etc.). That house also came with furnishings such as couches and beds. The second house we rented was a year long lease from July 1st to June 31st paying $630/mo. We had to pay all utilities except for water and the house only came with 4 bed frames, a small couch and a small dining room table. We had to supply all mattresses and split the utilities evenly between the four of us. I'll mention that lawn mowing and city trash collection were included in our rent. Our deposits covered the entire house, our rooms included and we had to fight pretty hard to get the majority of them back from our second landlord.

That being said, Winston-Salem is essentially a small suburban town in comparison to most bigger college cities, especially in the area that the university was located. My girlfriend and other students living in the more common cookie-cutter newer build 4bd/4bths I mentioned, paid anywhere from $800-$1000/mo for their own bathroom, mattress and utilities included. Most landlords for these homes didn't want to have to worry about separately metering these properties nor having utilities shut off for students forgetting to pay a month.

I'm sure my experience at a small school of only 5400 undergrads (of which less than a quarter live off campus) differs highly from the common experience of those renting and living off campus at larger schools. Figured I would at least provide my experience as many investors I know have targeted such specific areas to reap higher rents from students with parents paying for them.

Originally posted by @Christopher McConnell :

@Ronald Rohde Thanks Ronald! Definitely a good idea to price the rooms differently. I plan to lease for full year. Do you have any insight for leaning one way or the other? 

 Pros and cons for each. 

1 year: lower per month price, regular occupancy, maybe less competitive

term only: can have vacancy for repairs, capex, consider airbnb or STR for summer months, harder to smooth out your cash flow.