Renting per room vs Renting the whole home as a whole

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Noah BaconPro Member
Property Manager · Lansdale, PA · Member since 2021 · 844 posts · 1k+ votes
2y

Hi Claudio!

If you rent by room, chances are you are going to have higher cashflow than renting out the entire property as one.

You will be having more than one lease in the house, so there are a lot more moving parts that can increase your chances of vacancy and maintenance issues. I know a lot of very successful investors who rent by the room house hacking and continue to rent by room after they move out to increase their monthly cash flow. @Danielle Daly does this extremely well in Denver, CO and I'm sure has a few golden nuggets on how to mitigate a few of the cons I mentioned by being a very good operator. 

I have rented my properties by room while I live there and turned them into long term traditional rentals at move out. I definitely could've tried to maximize my monthly income by renting the property by room, but with HOA restrictions and my inability to comfortably find a property manager that manages rentals by the room were my biggest reasons to rent out the entire property under one lease.

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  • Noah BaconPro Member
    Property Manager · Lansdale, PA · Member since 2021 · 844 posts · 1k+ votes
    2y

    Hi Claudio!

    If you rent by room, chances are you are going to have higher cashflow than renting out the entire property as one.

    You will be having more than one lease in the house, so there are a lot more moving parts that can increase your chances of vacancy and maintenance issues. I know a lot of very successful investors who rent by the room house hacking and continue to rent by room after they move out to increase their monthly cash flow. @Danielle Daly does this extremely well in Denver, CO and I'm sure has a few golden nuggets on how to mitigate a few of the cons I mentioned by being a very good operator. 

    I have rented my properties by room while I live there and turned them into long term traditional rentals at move out. I definitely could've tried to maximize my monthly income by renting the property by room, but with HOA restrictions and my inability to comfortably find a property manager that manages rentals by the room were my biggest reasons to rent out the entire property under one lease.

    3Reply
  • Michael Dumler
    Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
    2y

    @Claudio Garcia Zuniga, there are so many aspects that I can highlight, but long story short, renting the home will be way less of a hassle than rent-by-the-room; however, your return will not be as significant. Overall, that's the tradeoff. As noted above, you need to be mindful of and verify local ordinances when renting by the room. If you pursue co-living properties, I would still highly encourage you to analyze the deal as an LTR as a backup strategy in case things go sideways. Rent-by-the-room properties can be absolute cash cows, but proper systems and management structure are crucial. 

    3Reply
  • Mackaylee BeachPro Member
    Real Estate Agent · Kansas City, MO · Member since 2020 · 1k+ posts · 494 votes
    2y

    Renting per room can indeed maximize your earnings by allowing you to have multiple tenants contributing to your rental income. On the other hand, renting out the entire home can simplify the management process and reduce the potential for conflicts between tenants sharing common spaces. 

    Consider your priorities and circumstances carefully to determine which option aligns best with your goals and preferences. Remember, both strategies have their merits - it's all about finding the approach that works best for you.

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  • Matthew Gentile
    Real Estate Agent · Worcester, MA · Member since 2023 · 88 posts · 52 votes
    2y

    I agree with everyone above,

    I think from a management perspective, rent by room will have you involved quite often and unfortunately probably diffusing problems with shared common spaces. Renting the entire home as everyone has said will yield lower cash flow but if you have a family renting the home you're less likely to encounter issues with tenants. 

    We tend to see rent by the room more common for students around universities in MA at least. But it's less common in areas that are more remote in my experience. Mackaylee said it best, align your priorities with the strategies you employ and over time you'll find your most efficient and which ones you enjoy more. 

    1Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    2y

    I agree with everyone. Only thing I will add is if you rent by the room, you also have to factor in landscaping costs (mowing the grass) and ideally cleaning of common areas (eg weekly cleaning service).  You can mention those as perks and charge a bit more.  You will also need to factor in utilities as you will be paying those and expect some tenants to abuse it (or not use them wisely).  By the room will be more work as you will also have to deal with issues of guests.

    2Reply
  • Claudio Garcia Zuniga
    OP
    Member since 2024 · 20 posts · 9 votes
    2y
    Quote from @Noah Bacon:

    Hi Claudio!

    If you rent by room, chances are you are going to have higher cashflow than renting out the entire property as one.

    You will be having more than one lease in the house, so there are a lot more moving parts that can increase your chances of vacancy and maintenance issues. I know a lot of very successful investors who rent by the room house hacking and continue to rent by room after they move out to increase their monthly cash flow. @Danielle Daly does this extremely well in Denver, CO and I'm sure has a few golden nuggets on how to mitigate a few of the cons I mentioned by being a very good operator. 

    I have rented my properties by room while I live there and turned them into long term traditional rentals at move out. I definitely could've tried to maximize my monthly income by renting the property by room, but with HOA restrictions and my inability to comfortably find a property manager that manages rentals by the room were my biggest reasons to rent out the entire property under one lease.

    Thank you for sharing Noah. Very insightful and informative. I am looking to rent by room with my new rental, but I thought I would ask the BP community.  

    2Reply
  • Claudio Garcia Zuniga
    OP
    Member since 2024 · 20 posts · 9 votes
    2y
    Quote from @Michael Dumler:

    @Claudio Garcia Zuniga, there are so many aspects that I can highlight, but long story short, renting the home will be way less of a hassle than rent-by-the-room; however, your return will not be as significant. Overall, that's the tradeoff. As noted above, you need to be mindful of and verify local ordinances when renting by the room. If you pursue co-living properties, I would still highly encourage you to analyze the deal as an LTR as a backup strategy in case things go sideways. Rent-by-the-room properties can be absolute cash cows, but proper systems and management structure are crucial. 


    Thank you Michael for sharing. I am leaning to rent by room, given I could use the extra cash flow, and I currently work for a property management company so I have a good system in mind to use. 

    1Reply
  • Matthew Kwan
    Lender · Seattle, WA · Member since 2022 · 482 posts · 768 votes
    2y

    Renting by the room allows you to maximize the rental capacity, especially for Single family. However, the management of tenants are more and possibility of conflicts could be higher.

    As for renting the whole house, rents would definitely be lower, since not many household or single individuals can afford paying for the whole house, so most likely you will be attracting a family with children. The pros would be less hassle since you are dealing with on tenant, but cons would be if that specific tenant does not/cannot pay rent, then it will create extra burden for you to pay your mortgage. As if you were renting by the room, you could still receive partial rents from each individual tenant.

    @Carlos Valencia @Albert Bui 

    3Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    2y

    I have been interested in this particular model before, but was unsuccessful finding somebody to manage it.

    1Reply
  • Account Closed
    Investor · Houston, TX · Member since 2017 · 20 posts · 2 votes
    2y

    @Joe S. Are you an out of state owner or in state but too busy to manage yourself? Can such a model be managed remotely, but hire someone per hour as needed for in person stuff?

    1Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    2y
    Quote from @Account Closed:

    @Joe S. Are you an out of state owner or in state but too busy to manage yourself? Can such a model be managed remotely, but hire someone per hour as needed for in person stuff?

     I have some properties out of state as well as in-state.  We have enough properties that it makes sense to hire a property manager. When I say it makes sense it makes sense for me. Other investors might would be better at self managing rentals. I’m a real target for a sad story from a tenant that doesn’t want to pay.

    Do you self manage through Pad Split?

    0Reply
  • Account Closed
    Investor · Houston, TX · Member since 2017 · 20 posts · 2 votes
    2y

    @Joe S. Ok. I get that! 

    0Reply
  • Rich Davis
    Member since 2024 · 23 posts · 11 votes
    2y

    Most states, and some towns/cities, have specific laws surrounding this rental method.  I am in Maine, and in Maine if you rent more than 4 rooms individually, you are a rooming house.  Once this threshold is crossed, all the laws change, some for the better, some for the worse.

    Example: You are no longer a landlord, you are a business owner (like a hotel).  You have guests, not tenants.  There are no leases, but rather a guest agreement. There must be someone available 24 hrs a day. If the guest's stay is under 6 months, you don't need to legally evict them. You can eject (legal term) them immediately.  Over 6 months and they are then considered tenants, and must be evicted per usual tenant eviction laws.  Guest logs must be kept.  A safe must be made available to guests. And a plethora of other strange little things.

    Bottom line: Know the laws in your state before you leap into this.

    1Reply
  • Brett ReedBusiness Member
    San Antonio, TX · Member since 2024 · 3 posts · 2 votes
    2y

    The problem with rent by the room is you end up becoming a counselor or a people manager. It's always surprising how much people will fight with each other over the weirdest stuff. You have to have extremely clearly defined rules and even then those are always misinterpreted.

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