Pros and cons of rent by the room?

Question

Up until now, we have shot down any opportunities to manage rent by the room properties; however it is a conversation I am having more often these days and considering it more seriously. What are the pros and cons of rent by the room?

Maxwell Caggiano · Answer

In my experience in Boston it can work well if you're in an area with lots of students.

A system that can work is offering furnished apartments Sept-June and then a three month rental for the summer months in the rooms where people want to leave for the summer.
Tenants not knowing each other will make them much less likely to be throwing parties and takes away a lot of the normal risks when renting to students.

The higher rents do come with a lot more management, you're essentially managing every room as a separate property

Ryan Swan · Answer

PROS

+ Potential for much higher gross and net revenue

+ Removes the large swings in vacancy commonly associated with SFRs. Instead of being 100% occupied or 0% occupied, your vacancy rate would be more consistent (4 out of 5 rooms rented = 80%). This makes it more akin to a small multi-family property

CONS

- Potentially higher turnover

- You need to keep utilities in your name so they remain on when tenants come/go

- Potential for roommate disputes

- Potentially more wear and tear on the home

Bhekizwe M. · Answer

Interesting discussion.i remember looking at a building with about 40 rooms.it was student housing.One room with one or two beds , cupboard, communal showers, laundry, dining area.Good systems make it work..House of Multiple Occupation.(HMO)

Jonathan Bombaci · Answer

From a PM standpoint renting by the room is going to be quite a bit more work than renting traditional apartments. The easiest way to do it is to allow tenants to sublease and let them find their own roommates and you just manage the 1 resident who has their name on the lease. The upside is you can charge a higher % of rents to manage the unit and it will expand you market share because MOST PM"s do not do rent by the room given the additional complexity and extra work. The downside is you're going to earn that extra income and you better get a great system in place to help you manage the extra workload.

Scott E. · Answer

I have never done rent by the room but I highly considered it a few years back on a flip deal that I did in Tempe by the college. My consensus was...

PROS: Higher gross rent potential compared to renting out the entire house to 1 person/family

CONS: Higher turnover, establishing and enforcing house rules, managing drama between roommates, more people to chase down for rent collection

Pros and cons of rent by the room?

Pros and cons of rent by the room?

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