Renting Rooms Vs Units for Multifamily Apartment Buildings

2 Replies

Wouldn’t it be more profitable if for each apartment unit in an apartment building I rent them out by rooms rather than units. If so why doesn’t everyone do this.

For example let’s say I had a 4 bedroom unit in an apartment building renting for $2k a month. Wouldn’t it be better if I just rent out each room for $800 a month and make $3200 a month for the 4 rooms. 

Also as commercial real estate value is heavily focused on NOI renting by rooms could boost NOI and could force more appreciation and allow investors to perhaps refinance quicker and at higher valuations allowing them to do the BRRRR strategy to buy more buildings and repeat building wealth.

Though this option is technically possible, I feel you'd have a very difficult time finding enough people to rent all the rooms in an entire apartment building.  For instance you'd never get a family to live there, so your target market would be single people.  In a market like NYC or the bay area, I could see the demand being high enough from younger recent graduates that this would be possible, but in most markets I think you'd have a tough time finding people to rent by the room for an entire apartment building.  On top of this, you'd run into a lot of problems of roommates not getting along.  Not saying it's impossible, just would take substantially more work to keep the rooms filled and everyone happy!