Room renting to college students

43 Replies

Greetings BP,

I have been running numbers and looking into renting a single rooms to college students vice entire homes to families. All the numbers I run lead to positive cash flow, but I’d love to hear from some investors that actually have experience in this area. I feel like if it were this easy, everyone would be doing it. Thanks, in advance.

@Kyle Tipton I live in a 7 bed / 5 bath house hack in Las Vegas.  I "house hack" in the sense that I have roommates, but with the number of roommates I have, I believe I fall more in line with the strategy of renting by the room.

My gross monthly is $3,650 with me living in the house.  I can add another $50 tomorrow if one of the tenants moves out and can turn the garage room/unit into AirBnB which could add another $500-$750 a month in income.  This is against an $1800-$2000 a month expense.  Point being - it's super profitable.

But what you don't see on paper is that it is very management intensive.  I can't speak specifically on managing a non owner occupied house where you're renting by the room as I have no experience, but I imagine it CAN BE similar to my experience with this house.  Remember, you're putting strangers in a house together.  You have multiple personalities, multiple ways of living, multiple comfort/discomforts, multiple lifestyles, etc potentially in the same house.  Ideally, you figure out how to manage the house well and can screen tenants not only for the ability to pay, but the ability to fit into the eco-system of the community you've built.

I'm looking to expand this strategy further as I think the returns are insanely high and worth the management.  I personally think you should live in something like this before trying to do it non owner occupied as you'll learn SO MUCH on what to look for in new tenants, what rules to implement, how you will implement the rules, what boundaries you will set, and how you will proceed with problem tenants.

Furnish the rooms. Rent by the room. Nearly everywhere in America the numbers work ON PAPER. But you will experience so much stress if you do this poorly that there may be some moments where you wonder if the 20%+ ROI is worth it. Do it correctly and it's the easiest cash you'll ever make.

@Spencer Cornelia

Thanks for taking the time to put that together. Your numbers are awesome and exactly why I want to get in this market. Great information and everything you pointed it is along the lines of what I’m trying to fully understand before taking the plunge. There are a lot of issues that could come from this time of renting that you don’t deal with in traditional landlording.

I’m curious, what’s your take on furnishing? Do you buy nice second hand stuff, or cheaper on sale items at big box stores or do you build your furniture out of lumber to extent its life and cut cost. I’ve been looking at several different ways to skin it and I feel like this is a huge difference as well.

Also, are you renting primarily to college students and is your turnover pretty quick?

Thanks, again!

I own a 4/3 house and rent out 3 bedrooms. I've furnished all 3 rooms, all second hand furniture. Most I've refinished myself to look nicer, or fix any stuck drawers, etc. I've spent ~$400 furnishing all 3 rooms and they look nice and photograph well for ads. You don't need to go crazy. A dresser, queen bed, and nightstand will do. Some of the stuff I've found on the side of the road - clean, sand, prime/paint. I found an Ikea bed frame once - it was missing the slats so I just got plywood cut to replace those. You can get creative. An end table could work for a night stand. A large desk could double as a dresser if you add shelves in the chair space. I scored a super nice 9-drawer mahogany dresser for $45 (new would probably be ~$2000, used maybe $500); Cherry/mahogany isn't really my thing, but it was a nice finish in great condition so I left as-is.

I live near the beach, so it's very easy for me to rent out my rooms. I rent to young professionals and heavily screen them (credit/background, calling references, asking pointed questions during the interview to gauge personality/compatibility with current roommates). The hardest part is finding your niche in your market. Once you find that, you're good to go.

@Kyle Tipton I furnish every room just like @Nicole Marshall does.  I order from a website here in Vegas and I've become friends with the owner.  His delivery is part of the cost and he's always available when I need a delivery.  I estimate around $600 per room to furnish.  If you want an idea of what my furniture looks like, here it is: 

https://absolutehomefurnishings.com/collections/bedroom-sets

I post my rooms on Facebook Marketplace and Craigslist.  If needed, I could use Roomster as well.  I rent to whomever.  Right now, the house has a professional MMA fighter, a grad student at UNLV, a day laborer, someone working customer service, a waitress.  I'm cool with anyone as long as they follow the rules.

My turnover is instant.  The reason why my situation is so sustainable is that I'm in a pretty desirable location and people are really struggling to find places to rent where they can afford it and qualify.  Every time I post a new listing, I have a qualified tenant ready to move in within like 3 days.  Since it's hardwood flooring, all I need to do is a quick clean of the floor and the bathroom and it's ready.

Where I think the rent-by-the-room strategy works is when you offer an alternative to apartments.  I don't charge a security deposit and I only ask for first month's rent.  I don't do a background check.  All I do is confirm employment, check their Facebook, and ask for references.  If they're employed, they've already passed any background check that I would have.

One thing to keep in mind is that you're going to be asking strangers to move in with each other and they're all counting on you to provide a safe and enjoyable living experience.  So they're compromising some of their quality of life.  This is why I charge below market, furnish the rooms, and make it a whole lot easier to deal with a "landlord" than traditional ways.

@Nicole Marshall . I love the idea of refurnishing furniture from a second hand store. I have also been looking at doing the same thing and going with the same set up you went with in the bedrooms. Do you take the same approach to the shared living areas?

I'm actually looking in an area close by you, over towards FIT. I have a buddy that lives in Melbourne and we talk about doing this all the time. One of the biggest issues we are seeing is how do we get our tenants to live together and be comfortable since neither of us wont actually be living there to be that nucleus of the house. Do you allow Co-ed and is that ever an issue? have you had students before?

thanks, for the reply!

@Kyle Tipton I have been doing the numbers for a college town in my area and they do look fantastic on paper. I can buy a 5 BD/2 BTH 2000 SQFT house for sub $100k and charge $400 per room for students.  The problem is that it's not an original idea and there is a major over supply of housing.  As others have mentioned it can work out because every location is different.  Just do your research and make sure it's a viable option for your area.  Also account for high turnover and higher wear on the units.  Best of luck.

@Spencer Cornelia . those are some great strategies and ideas. You bring up providing a safe place to live, so do you put coded key pads on each door, security cameras in the shared living areas or anything that's abnormal to traditional living. you also mention providing an enjoyable living experience, do you do anything in particular to accomplish this (extra TVs in the LR or a pool table, etc.)

I checked out that website and have been searching for something similar in my area. those room set ups for 500-600 bucks look awesome but what is the quality? Will they last through multiple tenants? that's a big reason i have been looking at second hand stores. I want solid wood that hopefully last a while. 

@Kyle Tipton Yes to the keyless door lock.  Would highly recommend for anyone with roommates.  So easy to change the code when a roommate moves out and you never have to worry about a dumb tenant losing their key and having to deal with a locksmith or leaving work to let them in the house.

The house doesn't have a living room or any additional things like tv's.  I've brought up to all the tenants that I'm willing to cover any streaming service that they'd use - Netflix/Amazon/Hulu/etc. - but they didn't budge.

For me, the value I offer is being on site to deal with any maintenance IMMEDIATELY.  Apartment living, they would need to put in some maintenance request, potentially wait days for fix, potentially need to leave work to deal with maintenance man, etc.  With me, I cover everything.  In the lease, I have penalties for late rent.  But in practice, I allow it.  These tenants are in positions where they might have infrequent pay or have unexpected expenses that cause them to be late on rent.  They appreciate that I'm willing to help them out of course but it also allows me to hold them to the important house rules (which is more important when you have so many people living in a house).

Additionally, there are a lot of people in Vegas right now who would struggle with qualifying for a traditional apartment because of a background check, not having two months rent, security deposit, etc.  I only ask for first months rent, work reference, and previous landlord reference.  So just offering these furnished rooms to them with very easy living setup AND below market rates that they'd pay elsewhere is super valuable.

@Scott Rogers . thanks for the info. I do see that the immediate surrounding area seem to be like this. I'm definitely looking and researching in depth to be sure its a safe/solid play. The houses where I'm looking are very similar to what you're looking at (5/2 2000) but cost closer to 200k. The rent however would be closer to 600 per room. At least what I have gathered through research. Best of luck to you too.

@Kyle Tipton Remember also that most of the people who chimed in on this thread actually live in the homes they are renting rooms in. When this is the case, you have a lot more latitude when denying applicants. Basically you can legally deny them for any reason when you live there and are not held to the same fair housing standards as a non-owner occupied landlord is. So if your plan is to non-owner occupy make sure you are very familiar with your local and state landlord/tenant laws.

@Kyle Tipton I do the same for the shared areas, but I generally like refinishing furniture haha. Let's me have a creative outlet. Roommates are free to use the whole kitchen, dishes, etc. They are responsible for their own toiletries/laundry, but that's basically it. I supply garbage bags, paper towels, etc, for the kitchen. It's not worth it to argue over whose turn it is to buy garbage bags.

I've considered buying houses around FIT (I actually almost did before I bought my current house). I even went to FIT (undergrad and grad), so I know the location/demographics very well. However, the housing market has increased too much over here for it to be viable. Most students are pretty savvy as far as what they would pay for a room - from what I've seen they are more likely to go out and find other people to rent a house together than they would be to rent a single room with people they don't know. Also, timing is imperative. A student is not going to rent a room in the middle of the semester, and most students rent before the fall semester. You need to buy the house, rehab if necessary, and rent it out before the fall semester to reduce your holding costs.

I have had students, but not during the school year. Melbourne is a major tech hub, so I've rented to interns during the summer months, if I have a room open at the time.

I live in the house in which I rent the rooms, so being on-site has its benefits. I would be hesitant to do this without living there (it's an expensive asset, after all). I currently have 2 guys and 1 girl renting (1 guy and 1 girl even share the same bathroom), so co-ed isn't a problem. If the potential tenant has an issue, move along to the next one. I do have a keypad on the front door, easier for everyone. They don't have to worry about a key and I don't have to worry about changing locks. I also put keyed handles on the bedroom doors (I was changing out all the door knobs in the house anyway). I don't really find that anyone uses it, but it's there if they want it.

Also, be aware of your local housing codes. In my city, I'm not allowed to have more than 4 unrelated people living in the house. I count as one of those people, so I only rent out 3 rooms. I have a den that I've considered airbnb-ing, but it's basically my catch-all/storage room. I guess my disorganization is costing me money right now, but it's also keeping my sanity. There's a balance there somewhere.

@Kyle Tipton , this is the model a lot of student housing takes.  Often when you rent-by-room, you're furnishing the basics.  It's more capital upfront but it could very well generate you more income.

It's possible to do, but make sure you have a good lease in place.  Consider your areas of risk: what if 1 tenant damages the property, what if 1 is late,what if there's a dispute, etc.  If you're comfortable, then furnish the place and make a few extra bucks!

@Nicole Marshall

yeah that makes total sense about buying basic household items, especially the consumable ones. I could see that being an issue, especially in shared bathrooms. the same person always buying the soap and stuff. lol its the small things in life, right. So with that, I assume you provide beds in the bedrooms, do you always offer linen and items like that?

that's what i'm seeing too in the market. Houses are over priced on average. I've been looking at nothing but major fixers, i figure that's the only place to make it work and since I want it to be walking distance to school, it narrows my search down. 

glad to hear the co-ed piece isnt an issue. that was a concern of mine originally. 

good call on the non-related occupants. I read that too and was only planning to go with four bedrooms. I want a five bedroom because i was thinking a larger living room would desired, but after talking on here, it seems it wont be. 

@Spencer Cornelia I'm glad to hear you agree with the door locks. I also thought it was a no brainer.

So what do you do with the livingroom area? did you convert it to a bedroom or what use do you get out of the space?

That's crazy about the streaming? i figured everyone would enjoy a service like that. I just assumed i would need to set up a "hang out" area. So do they just have TVs in their room and hang out there mainly?

I think the ease of Maintenance and working with younger people get on their own is key to this approach. You'll definitely run into more unique situations.  i can see why you're doing so well. 

@Kyle Tipton we don't have a living room area.  The only place where any congregation exists is in the kitchen or in the garage unit.  The guy in the garage unit plays music and smokes weed so some people like to hang out there.

I personally like that there isn't a hangout spot.  I want people to get along but it's really easy when everyone just goes to their room and minds their own business.  I don't necessarily see any issues with having a living room, but with as many people as there are in my house, I like that there isn't much incentive to bring friends over and treat the house like the 'hangout' spot.

Keep in mind I have 7 people (and sometimes 8 when a guest stays a weekend) so my opinions come from running a mini hotel basically lol.

Similar to Nicole, I provide toilet paper, paper towels, all cleaning supplies, laundry detergent, etc.  I make so much money on the house that it's just easier to buy stuff in bulk from Costco and let them have another reason to appreciate living here.

The #1 thing that matters with any house hack or "hotel hack" as I like to call it is that people follow your house rules.  There will be nearly no headaches if everyone follows rules.  So if you provide them every reason to enjoy living in your house, then the more incentive they have to follow the rules, and thus want to stay in the house.

@Spencer Cornelia man, that's solid advice. I appreciate that. I like the idea of only have a kitchen common area and not really a livingroom. Changes the dynamics of the house completely but by doing so, you can create larger rooms and potentially personal bathrooms, which in return could create more cash flow. 

wow, eight ppl at once! that is a min hotel. lol do you have a policy against having guest or if one of your tenants consistently had their gf/bf over? This is another fear of mine, especially like @Nicole Marshall mentioned above, if oyur local laws have a limited number of non-related occupants able to be living under the same roof. I could see this being taken advantage of.

@Kyle Tipton I don't have an issue with overnight guests.  I tell everyone that their guests follow the same rules that they do and if the guests cause problems with anyone in the house then they need to go.

This is part of the learning process though.  I was way too lenient when I first began managing the Cornelia Hotel lmao.  I've had two tenants with long term guests (5+) days and both presented a lot of issues so I've had to become a lot more strict with it.

The lease for a venture like this grows with every tenant.  You start with a template, wait until a tenant does something you would have never considered, then you add to the template with another clause lol.

After I take on another couple of these mini "hotels", I'm going to write a book and have a YouTube series on it.  The amount of headaches I will be able to save future rent-by-the-room investors is going to be super valuable.

Side note: you will experience a lot of headaches renting-by-the-room when you first begin.

"Hey Kyle, so and so roommate has been eating my food and he won't stop after I told him not to."

If you don't have any children, you'll get a lesson in running a day care lol (at least if you deal with some of the tenants I've had lol).

@Spencer Cornelia

Oh my goodness, the amount of things I've had to add to my house rules! One tenant blamed me for her bike chain rusting because I don't have storage room for it (she bought the bike after she moved in). She wanted me to pay for it. I was like, "Uh, no." She ended up being a PITA with everything after that, but luckily decided to move out on her own. I've had to add a rule about not parking too close to the mailbox. I had one tenant just up and leave, left all his earthly possessions (which wasn't much since the room was furnished). That had never happened to me before, and there are lots of ambiguities on what to do with the stuff they leave behind, so I made sure to add a line about what will happen to the stuff they leave behind, how long I'll hold it for, etc.

The biggest thing I think I've added (and not necessarily from a bad experience), is about my tenants having to evacuate during a mandatory evacuation during hurricane season. My house is on a barrier island so anything more than a tropical storm and we get mandatory evacs. That's something I make a point of during my interview with a potential tenant. And that I'm not responsible for any fees incurred due to the evacuation.

@Nicole Marshall It's hilarious how many "issues" arise.  Unfortunately, I've positioned myself as the solution to all problems so I hear about all of it.

This week alone I've had to deal with a tenant threatening to leave because another is eating his food, the same tenant having a girlfriend over and causing all kinds of issues, another tenant leaving a room key in a different city, roommates leaving all utensils in the sink, etc.

@Kyle Tipton Hi Kyle. I’m getting ready to close on five houses here in Central NY that are being used for student rentals in a small college town. Rents range from 350-600 per room in this particular area based on whether utilities/internet is included in rent. My rooms rent for 400. Utilities and internet are not included and they bring their own furnishings. Many landlords here will charge an additional 100-150 per room for utilities and make that a profit center as well. Up here in cold and snowy Central NY I’ll leave the utilities to them lol. I think it’s important to have a good team in place. In my case, they are yearly leases from June-May. The summer is spent on the turnovers and being able to complete them as efficiently as possible is important. The tenants have one lease they all sign and are responsible for whatever the total rent for the house is. If one student leaves during the year they are well aware they are responsible for that part of the rent as well. That’s why many times a group of friends will all rent together and not have to worry about renting with strangers Good luck with your search!

@Kyle Tipton Hey Kyle, some investors actually focus on Student Housing, so some investors understand this tenant demographic. 

What we do with students or new graduates is get their parents to co-sign, so that way, the student tenants feel a bit more responsible with the house. We have definitely made it work in Baltimore.

Student housing is very lucrative, and often, the parents are paying the bills. So the rent isn't the biggest problem when the parents cosign or pay. I have a couple of experiences, we rent a room to offset costs in my daughter's college condo. They want to rent by the semester or school year, so the turnover is high and we've had some down time in the summer months. The income is high and it works for us.

But, students are usually young, often on their own for the first time, and definitely not likely to know how to fix anything or be the least bit inclined to do so if they know. Consider them at the "beginner level" of tenants. They don't know much. I had to help a student move the fridge cord to a different outlet to see if it would run using a different outlet. She thought we needed a new fridge. Turns out she tripped the GFI and it just needed to be turned back on. She gouged the hardwood floors moving the fridge to get to the plug. sigh...

Your student housing will run smoother if
1) You live there or have a designated person as a liaison with you.
2) You live nearby to handle the simple repairs and input needed.
3) Your lease covers the summer months