How to divide rent on a house hack

Question

Hi Everyone!

I am a new investor, and I'm about to purchase my very first property!! I intend to start house hacking right away, and I have a question about the Bigger Pockets Rent calculator. I am currently looking at a property that has a calculated rent of $1,600/month, and I would have 2 tenants living with me. Should I divide the full rent between my tenants? Or should I absorb 1/3 of the $1,600? Or something in between? Thank you in advance for your insight!

Leo R. · Answer

I agree with @Caleb Brown--you should base the rent for each tenant on the room they're renting (in most houses, the bedrooms are not identical, and some rooms are more desirable than others).  Square footage is one factor, but also consider things like: does one room have more windows, higher quality flooring, better paint, a larger closet, a better location within the house, etc.?

Where did you get the $1,600 number from? (was it based on market analysis focused specifically on single rooms in a shared house?).  If not, then you'll want to re-analyze the market focusing solely on single rooms within a shared house (which is what you're offering).

Good luck out there!

Lauren Cromie · Answer

Thank you everyone for your incredible advice! I will plan to rent out each bedroom individually and adjust prices based on other listings in the area & the amenities offered.

Andrew Valeri · Answer

@Lauren Cromie

Andrew Valeri · Answer

One of my friends recently bought a 3 bed 1.5 bath. He was looking originally for rent to break even with PITI.After showing him the higher costs of reserves/capX than he anticipated he aimed to shoot higher.I strongly suggest doing what I suggested to him - know the area that you are in. Know it well. What neighborhoods are better and worse than where your house is. Be realistic of where your house is.

Now go to Zillow Rentals or whatever is the hot rental listing site in your area. Pull in the area you are in addition to some of the nicer and the lower scale locations around you. Keep track of what stuff is listing for and how quickly it is removed.

How nice is your unit/rooms/amenities compared to what else is being listed at same price point.?

Price yourself in accordance with what the market dictates.

So - Understand how these variables effect pricing in your market:

1. Location

2. Finishes

If you are house hacking a one unit by the room with strangers find out what you value most.

If it is money then be all over your comps and push to top of market.

If apprehensive about living with strangers then be slightly below market so you can have pick of the litter.

Go too far below market and you will likely attract the wrong tenants and have too many people to screen.

Good Luck!

Nathan Gesner · Answer

You should include yourself in the charge. This keeps you budgeted as if you were paying rent, it's that much money you can set aside for reserve or the next investment, and it helps you show the numbers to a potential buyer in the future.

Colleen F. · Answer

@Lauren Cromie you are using the BP rent estimator to get your rent.   I would reccmmend a couple of other sources as well like rentometer and local ads. If you are renting by the room this is another situation.  You estimate whether the property is worth it to buy by estimating the full value of rent without you living there.

You estimate what you would charge for rent based on what a room for rent goes for in your area. So if a room for rent is going for $800 that is what you charge for the room.  You can look on craigslist, roomster etc to get an idea.  Rooms with their own bathroom go for more. Tiny rooms for less or may not be worth it to rent. Decide if you want to go furnished or unfurnished depending on your market. Doo you want a traditional roommate or more of a short term arrangement.  What arrangement will you have as far as rules, what amenities?  These will all impact your price. Good luck!

Caleb Brown · Answer

I would charge by the room size. In my market a typical room (8x8-10x10 ish) depending on the area would go for $400-$600. See what 1 bed units are going for in the area and price it less than that. This would also depend on the amenities and space.

How to divide rent on a house hack

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