Two or Three bedroom?

12 Replies

Hello BP community.

I am looking into single family homes in my area to purchase, then rent (investment).  The reason being the great schools and very low availability of home rentals in this area. Can folks give me positive and negatives between two and three bedroom houses?

I am trying to establish which home will be more desirable to rent based on bedroom count.

Thanks in advance for your help.

Originally posted by @Paulo Gama :

Hello BP community.

I am looking into single family homes in my area to purchase, then rent (investment).  The reason being the great schools and very low availability of home rentals in this area. Can folks give me positive and negatives between two and three bedroom houses?

I am trying to establish which home will be more desirable to rent based on bedroom count.

Thanks in advance for your help.

 Regarding rental income a 3 bedroom unit will no doubt command higher rent, but...the ease of finding potential renters at each size depends on your regional demand. We have a few rentals near a university in Northern MN. Rent is $400/bedroom for 2-4 bedroom homes rented to students. Cash flow is higher for a 3 bedroom vice 2. When you reach 5 bedrooms the per-room rate drops and turnover becomes slower, negating cash flow gains. 

Two questions we answered before purchasing:

-What size has shortest turnover (we discussed with local property mgr)

-Who are desired renters (college students, families)

By catering to your desired renter base you'll be better armed to evaluate available properties. Ultimately, I'd look at both and let cash flow make my decision.

It really depends on how much you pay for the property. I have 3   two bedroom sfh's in blue ribbon school districts .  They always rent and they cash flow rather well .  Larger families pass on them due to the size , but there is always a single parent with 1 or 2 kids that rent them . 

@Paulo Gama there are two approaches here.

1) Do a market analysis and see which returns more on your investment in your area. I can not answer that for you because it varies with the area and the prices.

2) Decide what kind of tenant you want and buy what they will rent. Families want 3 bd and singles and couples tend to go for the 2 bd. 

Study your market and see what it says. Marry that with your own desires for dealing with people and returns.

@Paulo Gama

I personally prefer 2 bedrooms or smaller 3 bedroom properties... less than 1,000 sf.  Smaller properties are easier to control tenant and turnover cost.  These properties rent for $800-1,100 per month.  The pool of tenants wanting/needing these properties is enormous in Central California if you have a good product.


Frank

if you are near a school district I would go with the 3 bedroom. You got a lot more opportunity to rent it, on average there 2 kids in the family. Many people are working from home too that extra bedroom can be used as a office.

Good Luck

3 bedroom is definitely a better choice than a 2 bedroom. 

Families will want a 3 bedroom. And, even roommates will want a 3 bedroom because it'll be cheaper for them to split the rent among 3 people than 2 people.

I have a 2 bedroom that's the same square footage as a 3 bedroom in the same track so everything is pretty much the same except for the difference in number of rooms. And, those 3 bedrooms can charge $400-$500 more in rent because of that. 

The only time somebody might prefer a 2 bedroom to a 3 bedroom is if its only one person who'll live there and doesn't want to pay for that extra room. But, then that single person is just as likely to want a studio rather than a 2 bedroom.