Any success with rent by the room?
Rental Property Investor · Missoula, MT · Member since 2019 · 85 posts · 35 votes
Any success with rent by the room?
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Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
6yHi Bridger, Back ground; most counties/cities have zoning and regs on; max number of unrelated adults allowed in a rental. Some are at 3. ALSO they have regs on rooming houses only allowed in specific zoning, similar zoning as for hotels; only on main streets in business districts AND you have to apply for licensing and blabla as for a hotel..
That said; there is a small movement supporting rent by the room as a small step toward solving affordable housing. You might study up on this Atlanta business that is growing their business with private offerings (funding) padsplit.com
They have a shades of gray solutoin for the unrelated adults, and rooming house zoning that is sort of working in the Atlanta area. Padsplit as a company has greesed alot of palms to be an acceptable violatoin of zoning and business licensing requirments for a hotel. IE City of atlanta is lookign the other way. Suburbs have filed zoning violations againsgt investors I know who have put their expanded bedroom suburbant houses onto the padsplit.com platform. No cease and desists yet, but its touch and go. Legaly all rent by the room operations are in violation of hotel, zoning, and rooming house regs. Like the push to get tiny houses accepted and zoning changed, a "cleanly well run rooming house" business model has yet to get much muninicipal acceptance tracktion.
What to do; this only works where the house has lots of parking, distance from neighbors. 100% of the time its a neighor who turns you in. So if lots of parking, ideally walking distance to busses or transportation to cut down on cars, you might get away with it (legally).
Operationally; this is a can of worms to manage. Midnight drunken brawls happen, but are more infrequent then you might guess depending on your screening. But always complaints about guests (residents) leaving common space a mess, some resident gets mad they have to clean up...
Simple furnishings bought used, a single bed, and dresser. Common area TV/internet. Each bedroom has a electronic combo lock. To evict just put their stuff outside and change the combo lock. Its hotel law not landlord law.
Best of luck.
59 Replies
- Rental Property Investor · Kansas City, KS · Member since 2015 · 45 posts · 29 votes6y
We currently have 23 single-family homes in the KC metro (120 bedrooms) utilizing this model and while its never boring - I really enjoy it and it's definitely a favorite way to invest in real estate to date.
Have a few tips and tricks we've learned - send me a message if you have any questions.
- New to Real Estate · TX · Member since 2021 · 10 posts · 9 votes4y
Hello everyone!
I am planning to do this route in the next 30 days. @Bridger L Logan any updates? How has it been?
- Member since 2020 · 984 posts · 1k+ votes4y
I wrote this posts about 20 times about a girl who ran away from her home in Japan because her parents were physically abusive. When she arrived in the Unites States she was totally broke. When I met her she had been in the United States 7 years, never had a job, never got a driver's license and never had a boyfriend. She did babysitting, banked about $7,000, invested the $7,000 into a co-op in downtown Los Angeles with another Japanese girlfriend. Her girlfriend moved back to Japan and left her with the co-op that in which the equity for each partner increased to $30,000 each. The Japanese girl kept the co-op, got a loan and purchased a beautiful condo about 2 miles from a community college. She rented the condo to about 10 or 12 students for $400 to $600 per month. She literally had 2 or 3 students living in bedrooms, the living room, garage and she even had students living in bedroom closets and laundry rooms.
When I met her, 7 years after she was in the United States she owned 18 properties and I figured if she cashed out she was would go back to Japan with $2.3 million. Then, she purchased a house in Victorville California (don't know the price), but at the same time she purchased a $550,000 house in Las Vegas and I stopped communicating with her back in about 2006 or 2007 and don't know how she did through the 2008 bubble and COVID probably did a lot of damage to her assets since she rented to only students from Japan.
This girl was a strange duck because I saw her walking down the street one day and asked he if she wanted a ride. She said she was taking a bus about 11 miles away to pay an electric bill and refused my offer. I asked why she didn't mail the payment and she said she did not want to pay the 49 cents for the stamp, had an annual bus pass and riding on the bus gave her time to read books about real estate investing.
- Oh, this is so funny. " Inventory should increase and prices should dip" Ray,you were so wrong in that prediction because as everyone knows, the interest rate dropping and many people's rush to buy housing so they could work remotely actually caused price increases in so many places. I point this out not to denigrate Ray, but to illustrate how so often it's very difficult to predict the future of real estate. What Ray predicted seemed to make sense, but unfortunately there were other factors that interrupted his predicted scenario. Real estate is a difficult business and getting things consistently right is not easy.
Quote from @Ray Lai:
For San Diego, central areas around Clairemont Mesa/ Serra Mesa / Kearny Mesa / Linda Vista. You want to consider the quality of tenants you get and being in a central area means people can get to their jobs / school conveniently. Things to consider
1) Number of bedrooms / bathrooms / space for your tenants you can get for the $ you spend. I bought a 4/3 and only rented out 2 of the rooms for sanity so that everyone could have their own bathroom. I also bought another fridge as well. I turned the extra room without a bathroom into a workout room as a bonus amenity. I'd rather rent out my 2 rooms for more, than 3 rooms for less and overall more but deal with another tenant. The house is comfortable renting out to 2 tenants with their own bedrooms and an extra fridge.
2) You should wait until after this COVID bust. 30% of mortgages in the United States were laid or in default in April / May. Inventory should increase and prices should dip. Also mortgage rates are dropping. I just refinanced my 3.875 30 year to a 30 year fixed. So you got lower prices and lower interest rates coming. Start doing your due diligence.
3) Your focus should be more on $$ paid for amount of bedrooms / bathrooms. As long as the neighborhood isn't sketchy, it's OK. You don't want sketchy areas because you will get crappy tenants and smart females won't want to live there (too dangerous at night). So that rules out areas like City Heights / Skyline / etc.
4) Parking - make sure you scope out the parking situation before you buy. I only rented out 2 out of my 3 rooms because parking ain't the easiest in my hood.
5) I rented to professionals (and one PHD student) so that's why I chose the neighborhoods I listed. If you have a different strategy you might consider different places.
- 3yJohn WilliamsBusiness MemberProperty Manager · Clarksville, TN · Member since 2018 · 443 posts · 210 votes
I've executed the rent-by-the-room strategy around several military towns. For many reasons, this seems to work well for that niche!
Rent My Home - Property Management4.8212 Reviews - Jarrel, TX · Member since 2017 · 44 posts · 2 votes3y
How you guys handle if a couple wants to rent a room? Is that asking for drama?
- Real Estate Agent · Seattle, WA · Member since 2017 · 150 posts · 80 votes3yNot necessarily asking for Drama. Just make sure that expectations are clear and set up front! Also to have a lease agreement in case things go wrong you have a way to protect yourself.
Quote from @Tanim J B.:
How you guys handle if a couple wants to rent a room? Is that asking for drama?
- Rental Property Investor · Oak Harbor, WA · Member since 2022 · 29 posts · 18 votes3y
I've self-managed a rent by the room situation in FL. It takes a bit of work upfront, but it is actually a good set-up if you want to be a more hands-on investor. You have a ton of say about what goes on in the property that allows you to keep a close eye on the home and those in it. We have, however, found that renting out the entire place fully furnished is much less hassle.
- Member since 2020 · 3 posts · 0 votes1y
Quote from @Chris Bown:
@Bridger L Logan
Make sure you get a bed bug addendum. Going thru that now on a 5/3 where we rent rooms.
What is a bed bug addendum? Please & Thank you!
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