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Updated almost 6 years ago,

User Stats

177
Posts
82
Votes
Amy E.
  • Investor
  • Bonaire, GA
82
Votes |
177
Posts

Rent by the Room

Amy E.
  • Investor
  • Bonaire, GA
Posted

Hi,

I've begun exploring the option of buying an investment property with the intent to rent by the room. Where can I find more info on how to safely and legally accomplish this? Google has not turned up much. So far, I have checked the Fair Housing Act and I can rent to same-sex occupants without violating it (apparently if you have shared living/common areas you can restrict your room rentals to one sex only). I have also checked my local municipal code and there are no restrictions on the quantity of un-related folks living together.

The reason I wish to pursue this option is purely from a cash generating standpoint. I can meet the 2% rule (just barely) in my area with a SFR, but I am only going to get $800-900/month depending on the neighborhood. So while my percentages are fine based on investment amount, I'd like to get a little more bang for my buck so to speak. I checked my area and you can rent a room in a person's house for $400-500/month. I did not see anything advertised for a whole house that rents by the room.

Here are the various clientele I am considering:

Student - we have several small colleges in the area. However, because the colleges are small, most of the students are either adults returning to school or kids who are bunking at home until they get their core classes done and move off to a larger university. So I'm not sure how large the rental pool would be for this and I would be limited to specific neighborhoods near the schools.

Military - We have a huge military base nearby with mostly mid-career folks stationed here. I actually work on base, and know many of the folks there are on temporary assignments (3 years or less) so they come unaccompanied (without their family). Additionally, with every mid-high ranking officer come the junior officers to take care of them who have a much smaller salary and are always looking to save a buck. I can also get with the housing office and market through them. I would be limited to neighborhoods near the base (well, maybe not, but it would be a big selling point).

Disabled- We have a shortage of group homes in the area for the infirm. I have been approached by a friend of a friend who runs a home health care management company. Their clients are mostly folks who can't mentally fend for themselves, but are still physically capable of many things (they can bathe, feed and dress themselves; but can't shop, administer their meds or cook for themselves). Most are entitled from Medicaid to 8 hours of care per day (either babysitter or nurse type) and if three live together then they are cared for 24/7. In this scenario, the management company is responsible for ensuring the home is approved by the state as living quarters (and any licenses that go along with it) and I would either rent directly to the management company (for market value of a whole house, which wouldn't help me) or by the room to each individual (where I could charge the area's going rate and increase my cashflow).

Here're my questions:

1) What types of things need to go in the lease when you have shared common/living areas vs. a regular lease?

2) Are there any other ways to increase cash flow other than by the room rentals? I am in a rural area, which limits me a little bit. And no, I have no interest in investing elsewhere right now.

3) Should I consider different types of insurance right now? I have liability through my rental's homeowners policy.

4) Are there things I should do to the property (like installing locks on each bedroom) that are specific to by the room rentals?

5) Anyone have direct experience with this and have any tips?

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