@Neil Hauger I personally don't like the rent units by the bedroom because if there is damage to common space it's going to be really hard to figure out what to do next, so if you do that figure in a higher CAPEX. I don't think you will have a problem with discrimination as you did not place the tenants in the first place, so your argument would be that you just managed the existing tenants by incrementally raising rents to keep a good renter. If you are renting by the bedroom on one side it is also a completely different situation because effectively you are renting out 2 one bedrooms versus a 2 bedroom. Most markets, a 1 bedroom is not 50% of the cost of a 2 bedroom.
@Neil Hauger As Casity said, existing tenant's rent is different from placing a new tenant. Where you might run into trouble is if you were to rent both units again, and they were essentially identical, and you discounted rent for one renter but not the other.
I have three places, all 4 bedroom and 4 bathroom that I rent by the room and have the basic utilities included in the rent. They are all located near a college, and most are students or young professionals. It works out great. Then as far as damage for common space items, I just charge everyone. If there is a whole in the wall and it takes $40 to repair, I charge each room $10. We state this in the leases.
The only real way of renting out by the room is to live in the property yourself. That way you can monitor all of the activities that go on in the house. Even then, you would want to make it same gender to avoid any issues resulting from different genders living together.
There are alot of issues with putting unrelated people together that share a common space, so I would tread lightly there.
In terms of legality, I don't know of anything that would prevent you from doing it..just the risks listed above.
And you can tell your wife that there is no such thing as discrimination for rental rates based on lease types. Month to Month Tenants are subject to rental rate increases. That's why it is encouraged to sign a 12 month lease to "lock" in their rate.
Originally posted by @Neil Hauger :
Here is the situation. I’m looking at buying a duplex. Currently under rented for the market by an easy $500/ mo.
I can get it to cash flow really well if I were to rent one side by the bedroom. $700/ bedroom ($1400) . Month to month is my plan.
The other side has a mom and two kids. My kind heart doesn’t want to put her out in winter. I’d rent to her for $900/mo. 12 mo lease. Which is still a great deal. Eventually I can get this unit to $1200/mo with upgrades.
My wife says I can’t do that. I’d be discriminating as she gets two bedrooms for $900. The other side has to pay $1400 for the same place.
My answer is “so what?” They don’t have a yearly lease. They pay monthly. Is my argument fair? Is there rent police going to jump on me?
Nothing illegal, but terrible plan. You are signing up to be a professional babysitter. Keep one tenancy per apartment. Your life will be a lot simpler. You don't want middle of the night phone calls when one of the idiot does something that the other idot (roomie) doesn't agree.
You are trying to squeeze profit at the cost of way too much headache.
Thanks for the input. Middle of the night phone calls are a matter of poor mgt in my opinion. I have had rentals since 1997 and never had one middle of the night phone call. Granted, I am small time I know. But, I think I pre- handle what is an emergency with my tenants. Train them.
These would all be young adults. 30 ish. Common area damage is a potential issue I guess. And anytime there are multiple people chance for issues goes up! Appreciate the fast and good input friends. I’ll let u know if I can pull this off.
One last question. What cap rate do u shoot for on a duplex? I usually look mainly at ROI. I guess I don’t understand the differences. Thanks?