What’s your take on SRO properties?

Question

I’m currently reviewing a fully occupied mixed-use commercial building with 8 SRO (Single Room Occupancy) units but have never dealt with this type of property before. The rents are collected weekly instead of monthly, so there are more rental periods each year, but I assume expenses may be higher as well.

Does anyone have experience with SRO real estate? I’m also curious if it's possible to convert these units into regular apartments, as this property is located in the NY suburbs. Any insights on increasing rents or updating the units would be greatly appreciated!

Michael Belz · Answer

Thank you all for your comments and insights. I recently spoke with the town's zoning inspector, who confirmed that the building is in a GB (General Business) zone. The SRO units are likely grandfathered in, so converting them to multifamily isn’t allowed. However, the inspector mentioned that the 2nd and 3rd floors are labeled as "Artist Dwellings," though he wasn’t sure what that fully entails.

He suggested applying for a special permit to present the space as artist studios or dwellings, with the hope of eventually converting them into long-term rental (LTR) apartments under that designation.

Does anyone have experience or insights into what qualifies as an "Artist Dwelling"? How can I design or propose these apartments to meet this requirement while making them functional for long-term residents? Any thoughts or examples of similar conversions would be greatly appreciated!

Alex Casey · Answer

I own a 28 unit SRO rooming house. The majority of the residents pay on time on a monthly basis, but there always a few that I have to chase. Definitely look in to the laws regarding SROs in your area. Do you need to go through the full eviction process if someone stops paying? I've had to get rid 3 people for non-payment this year but in my area rooming houses are run like a hotel so we can just tell them to leave and/or call the police if they don't want to go nicely.

Gino Barbaro · Answer

@Michael Belz

Our very first property was weekly renters. Rents were higher weekly, than if they paid monthly. 25 units in Knoxville, TN with a mix of cottages, duplexes and a six unit efficiency.

We converted it to monthly renters, lowered expenses, billed back utilities  to the residents. It took some time, but we still own the deal.

If it was me, I would convert it to monthly. Your resident based will be much more stable, turn costs will drop.

DM me if you have any questions.

Gino

Les Jean-Pierre · Answer

They are very hard to convert. You need a Certificate of Non Harassment from current and past tenants. Then I think you have to convert the C of O. Google some articles but a tough road ahead.