Rent By The Room Strategy Any Tips U Can Share

[Edwin De leon]

What are the pros and cons of the rent by the room strategy

Any investors have experience with it and how would do it all over again if starting out as a newbie investor renting by the room 

[Jeff Copeland]

We recently launched our first coliving/homeshare property (as a property management company) in St Petersburg FL. Here are a few lessons learned:

Zoning: You'll need to do some research with each local municipality. We found that in most Cities, 5 to 6 people in a home seems to be the line in the sand. Below that, it's no different from roommates. If you have 6+ people, some cities consider this a roominghouse or boarding house, which triggers different requirements. Parking is often another limiting factor.

Marketing & Fair Housing: While you can certainly target them with your marketing efforts, you can't limit your property to only nurses, or only college graduates, or only males/females, or impose age restrictions. You still have to comply with Fair Housing laws, and an applicant is either qualified for your rental unit, or they are not, based on your published (and legal) screening criteria. 

In terms of minimizing headaches, obviously you need crystal clear screening criteria as well as established, published, and posted household rules that everyone understands and agrees to up front (and via their lease). These need to be stressed early and often. 

In terms of challenges, the lease-up process is much more involved and takes a lot more legwork. For a traditional rental, you may show it 5 or 10 times, take a couple of applications, them move forward with a lease. In a coliving environment, you might show each room 10+ times, and then reject more applicants (because you don't have as much flexibility with regards to screening, pets, # of people, etc). You also have to educate a lot of people who don't understand the co-living model.

We provide wi-fi only. Most people stream their entertainment these days and cable TV is getting more and more antiquated. 

And yes, someone (such as a property manager) needs to be in charge, obviously. I do not think it would work well placing one of the tenants in charge. 

BTW - The coliving model seems to be more aligned with large single family homes. I could foresee some additional challenges trying to implement it in a multifamily setting. 

Also be sure to check out https://www.biggerpockets.com/...