My nephew and several others that I know that are in college rent out an individual room in a 4 bedroom house. The landlord loves it because they have 4 rooms they are renting out rather than one lower price point lease and the students (and the students parents) love it because they only have to worry about their own lease. They all of course use the kitchen and common areas. They always have a friend who is looking to move in so the houses stay very full from what I'm gathering.
So I am looking for a traditional 4 plex in the Phoenix metro area, but I am also considering buying a 4 bedroom house near ASU and doing what I described above. Dorm rooms rents and other housing in the area are skyrocketing so the demand is there. Anyone have thoughts or better yet experience with this kind of thing?
In times like this with a tight market, I think being creative in this way can be beneficial. I used to live in Tempe and have seen the area flourish since the crash. 1 bedroom spots rent for around $800-$1000 depending on the quality of the residence and the proximity to ASU, so you should achieve some pretty decent monthly rents.
A 4plex may run you about the same price if not more, and will probably be in a worse area of town. The downside with your plan is the transient and destructive nature of college-aged students, mostly that of the male variety. The turnover costs will probably be higher, but if the rents are good enough to offset it you may have a plan that works well for you.
@Marshall Gerston I've built my rental business in Tempe over the past 15 years, so I know the market inside and out. I've considered the individual room leases, but always find it has many more downsides vs any perceived upside.
- Are they actually getting a rent premium for an individual room? I can rent a nice 3/2 house for $1800/month (~$600/room). Why would students pay more than that to rent each room individually? $700/month/room? What's the value upside to the tenant?
- This situation is ripe for utility drama, common area drama, new roommate cycle drama, etc...just not worth my time. One house, one lease, you guys deal with your own utility splits and internal drama and keep me out of it!
- Definitely more turnover time, cost, paperwork, and headaches. One house/one lease = at most one turnover per year. 4 rooms = potentially four turnovers /year. If you're self managing, this is a major time sink. If you have PM, they charge "lease up fees" that would eat into your profit.
- The parents of students are most always involved in the leases (heck, they're usually paying for them). As a parent, I would want all roommates/tenants to be jointly responsibly and liable to the same lease. I would see 3 or 4 separate leases as being very risky. What if two other roommates just skip out mid semester? What happens to utilities? Does the landlord get desperate and place tenants in the two vacant rooms that I wouldn't want my son/daughter living with?
Happy to answer other questions about student rentals in Tempe!
You are correct that it is a stream of 4 renters vs. one larger lower rent home. BUT.... I had experience where the renters if they are not the right types can DESTROY the home and it costs you 2-3k to fix up. There are positives and negatives to both. I recommend getting a lease from EACH person with a security deposit of at least $1k each to cover destruction costs if any
Everything @Ryan Swan said x1000. Individual leases w/ college students are not worth the potential drama. Once you've been sucked into a semester long roommate fight you'll never do it again. 1 house/1 lease is the easiest path to getting paid and removing headaches. I've been doing it that way for 13 years and it's worked great.
I'd recommend talking to Ryan or somebody like him in the Tempe market who has spent a lot of time doing student rentals. It can be (relatively) painless if done properly but can be a nightmare for those unaccustomed to dealing w/ 18-21 year olds.
I'm not too far removed from college. While me and my roommates took pretty good care of our apartments, I wouldn't have rented a place out to half my friends because they trash places. My thoughts are:
- Might make great investment if you're willing to put more effort up front to screen and interview tenants.
- Obviously someone out there is making money renting to college kids, so learn from them. Maybe start by getting your nephew's landlord's information and asking him/her for some tips.
From the discussion above, it's pretty obvious a lot of people don't want to rent to college kids. If you can crack the code, it might make for a great niche without much competition!
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@Marshall Gerston , you can rent to college kids by the unit, instead of by the room. We have ours set up this way. We quote the total apt price to students and then break it down "by the room" but explain that they need to pick their roommates. Our lease specifically states that we do not get in the middle of roommate squabbles. This has worked so far. We still get the occasional issue, but we rely on the lease and offer suggestions on how they can settle the issue themselves. We want people to know who they are living with...or at least be the people that found them.
If they are doing this in Tempe, it is illegal:
I'm willing to bet that's the case for Scottsdale and Phoenix too.
Many cities have a limit on the number of unrelated people that can live together.
In Tempe's single family districts, the maximum number of unrelated people that can live together is three (3), regardless of the size of the home or number of bedrooms in the home.
Now, it's not like there are people out there regularly policing this (that I know of), but in the off-chance you or your buddy gets caught, there goes your rental.
So either go for three bedrooms and make the numbers work or a 2-4 unit property. Perhaps it is doable with a duplex that has 2/1 each side, but then again probably not.
Do your due diligence on the regulations for your area and know the risks involved. If you proceed, have a backup plan in case you're limited to three tenants.
@Christina Potosnak I'm honestly really curious to hear what the benefits are to have 3 or 4 individual leases. If the tenants are "picking their roommates", then how would it be different than having one lease for the property?
Do you get a rent premium for separate leases? I can't see what benefit a group of tenants would see to justify paying more for a property simply by having their leases separated.
@Ryan Swan I should clarify more. We do not split the lease. We have 1 lease per apartment. The apartment has 3 bedrooms. The apartment rents for 1200/month. Locals not in school will not pay that price. Students that inquire about the apartment will do the math and figure $400/room. Places that rent by the room are anywhere from $500-700/room depending on amenities and property class. We are at a premium for locals, but an affordable option for students.
It seemed the OP was wanting the increased rent option of student housing, but others were saying the drama would not be worth it. We like the middle ground. We will lease to anyone that meets the application criteria...it just so happens the majority of our renters are students. We are 1 mile from campus.
@Ryan Swan I have a rental in Tempe and it has been great. I currently have 4 tenants who's lease is up August 1, and I am looking for a new property management company. Do you have a management company that you would recommend? Thank you!
Fantastic information and thank you! As I see it, the advantage to multiple leases is, if one roommate flames out, then the whole lease isn't broken. Each renter is responsible for their own room. And, it would seem that higher overall rents would be attainable. But as mentioned, if the brain damage isn't worth it...More work to do, but again, many thanks!
Do you have new renters yet?
I’m looking for a 4 bedroom near ASU for 2019-2020 school year for daughter and friends.
@Angela Hollis Hi There! I have tenants renting now who's lease will end on August 1. I have not placed tenants yet for 2019/2020 school year. Please feel free to private message me!
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