Investor · Covington, LA · Member since 2016 · 51 posts · 12 votes
Hello BP,
I'm considering buying a rental in my town that currently rents each room, "by the room". They have each tenant sign a 6 month or yearly lease. Cash flow will be around $500-$600 per month- this will be my highest cash flowing property yet. I only own single family homes so this approach will be new to me. Any advice/pitfalls/upsides to renting by the room like this, from your experience? Each room is currently renting for $600 and one of the tenants is kind of the "mother hen". Responsible for finding new tenants if one leaves, and she gets a slight discount on her rent. There are 4 BR and 2 Baths. Thanks in advance!!
Jenny
You need to check city code for renting out this house, if owner occupied, then renting rooms usually is OK, IF not it needs a particular type of rental license.. DO the current owners have that now?? IF not might not be legal and you could get shut down. So due diligence in checking for the rental license requirement. A house monitor is wise. basically making sure all are doing their fair share for cleaning and maintaining the peace.
I have a 6 room house, sober living, NO alcohol, all guys, it works. I only do month to month and would never stray from that for this type of rental arrangement. and my other buildings are all on month to month also.
Jenny Gremillion
I don't have any rent by room properties. However, I have a few questions about the set up (that hopefully helps those more experienced in this area give solid advice).
Is this a college rental? Or are we talking about adults (non-students)?
This "mother hen" tenant - does she pick and choose as she sees fit? Or does she have guidelines and tools to adhere to those guidelines?
Lastly, are there any local laws that would prevent 4 non related adults from living in the same home? 4 doesn't seem like a high number so you are probably ok there - but I would at least want to confirm that.
Certainly sounds profitable - if you can make it work and keep vacancies down. Do you know what the vacancy rate looks like historically?
Good luck!
Michelle
This approach works very well in College towns or where you have companies with seasonal employees. In college towns you can get the parents to be on the lease, which helps make sure you get paid. You can also get a premium for rent. I know of a 4 bedroom house that would normally rent for $700-800/mo that the landlord rents it for $300/room ($1,200/mo). Just make sure you have a good lease that outlines common areas usage and rules, etc. Also, you can add in the option to lease your tenants bedroom furniture for additional income. I know several landlords doing this with their by the room rentals. For example, you could make it $600 for an empty bedroom or $625-650 for fully furnished room.
We're not in a college town. But the house in close to the downtown area innour town. These are twenty something year old adults looking for inexpensive rent. Rent is extremely high in our area- nothing worth living in below $800-$1000 per month for one bedroom.
You need to check city code for renting out this house, if owner occupied, then renting rooms usually is OK, IF not it needs a particular type of rental license.. DO the current owners have that now?? IF not might not be legal and you could get shut down. So due diligence in checking for the rental license requirement. A house monitor is wise. basically making sure all are doing their fair share for cleaning and maintaining the peace.
I have a 6 room house, sober living, NO alcohol, all guys, it works. I only do month to month and would never stray from that for this type of rental arrangement. and my other buildings are all on month to month also.