Is the Easy Money in Rent-by-the-Room Over?

Question

Rent-by-the-room still gets pitched as simple math:

Take a 4-bedroom house. Rent each room individually. Collect more than you would from one traditional tenant.

Operationally, we're seeing a much more competitive picture.

Residents have choices. Two rooms in the same house can perform completely differently. A $10–$15 weekly pricing difference can matter. And a room sitting vacant for 45+ days can quickly erase the additional income the strategy was supposed to create.

The model still works.

But I think we're moving into a phase where execution matters more than the strategy itself.

The operators who understand room-level pricing, days vacant, resident experience, turnover and their specific submarket will have an advantage over those simply converting houses and assuming the rooms will fill.

I'm curious what others are seeing.

For those operating rent-by-the-room right now: is your market getting more competitive, or are you still seeing strong demand?

Joseph Cacciapaglia · Answer

All good points, but also it depends a lot on what market you're in. Co-living is really just getting started here in San Antonio. We're a few years behind Houston, and probably a decade behind Atlanta. I've invested in Padsplit properties in several different markets, and what you're saying is true in a lot of them. It's just a matter of time until it's the case everywhere, but for the moment, there seems to still be some low hanging fruit.

Amanda Riggs · Answer

Exactly, Diana. That’s very consistent with what we see in our co-living portfolio day to day. The model can absolutely perform well, but strong management is a major part of what makes it work.

We’ve also seen owners struggle with rent-by-the-room when they underestimate the operational side of it. Pricing the rooms is only one piece the real work is managing turnover, resident communication, shared spaces, house expectations, and vacancy at the room level.

In my view, co-living isn’t an “easy money” strategy. It’s a management-intensive model that can perform very well when the right systems are behind it

Amanda Riggs · Answer

Great point, Joseph. Market maturity definitely plays a big role. We operate across several co-living markets through PadSplit, and we're still seeing strong demand in some of them, while others have become noticeably more competitive at the room level.

That's why I don't think the opportunity in co-living is going away. It's becoming more market-specific. What works in one city or even one submarket can look very different somewhere else.

I think the next phase of co-living will reward investors who understand where demand is still outpacing supply and operators who know how to compete once a market starts to mature.

With your experience across several PadSplit markets, have you noticed any early signs that tell you when a market is starting to become more competitive?

Alyssa Marquez · Answer

I agree that you hit the nail on the head withexecutionbeing the differentiator. The higher gross rent looks nice, but vacancy and turnover at the room level can quickly erode that advantage. I’d also be paying attention to how long it takes each individual room to turn over,not just the overall vacancy on the house. In a tougher market, I would imagine thatprice, the condition of the property, location, and the resident experience play a much greater role than just having rooms available.

Diana Khan · Answer

@Amanda Riggs I agree. Rent by the room can look great on paper, but the day-to-day management is what really decides whether it works. Turnover, shared spaces, house rules, and communication between residents can add up quickly. Having a clear system for all of those things seems just as important as getting the pricing right.

Joseph Cacciapaglia · Answer

One thing that has scared me is when purpose built co-living starts popping up in a market I'm in. If you look at Houston, for example, there are developers pumping out 10 bedroom homes with 10 ensuites, multiple kitchenettes and large laundry facilities. Once you have to compete with properties like those, the easy money is probably gone.

Robin Simon · Answer

No, but I have long-struggled to find appetite for Loan Investors or Lenders for SRO - padsplit, would love to be able to give an option to some investors on it because usually I have to say they are out of luck (despite these often being pretty good deals)

Joseph Cacciapaglia · Answer

Yes. I have a few good options. Is that something you do as well?

Robin Simon · Answer

Did you ever find a reliable lending source for these padsplits / SROs?

Is the Easy Money in Rent-by-the-Room Over?

Is the Easy Money in Rent-by-the-Room Over?

Most Popular Reply

9 Replies