Starting a "Group House" (Rent by the Room) Questions

[Ron Gallagher]

Hi all,

I am buying a massive 4 level row house in Washington DC and I will live in the basement apartment unit and rent out the six bedrooms available on the three upper floors. 

My questions are--

1) Do you have the tenants sign a lease or just a roommate agreement with the house rules? I recently spoke to a friend who runs a group house and she said she doesn't have any leases with her current tenants. Does anyone have a copy of the lease/rental agreement they use for a group house they could send me?

2) Do you still ask for pay stubs and proof of employment when you are renting a room month to month? Do you still run a credit and background check as well?

3) I assume you still collect one month's security deposit from each tenant. How do you handle damage to the common areas since if someone breaks the dishwasher for example they probably won't admit to it?

4) I got an overwhelming response to the rooms for rent postings I did on Facebook and Craigslist last night, what is a fair and efficent way to deal with the dozens of responses?  Discard anyone who has pets and doesn't have a job (some people noted they are just moving to DC to start their new job or to look for a job)? Are their any qualities you would favor and select on?  For instance, since one level has 4 bedrooms sharing one bathroom maybe a guy would be more tolarant of sharing a bathroom with 3 other guys then 4 girls trying to share a bathroom. I was thinking of adding some questions to the rental application like - What times do you usually work and what times will you be home? Then I can pick people on different schedules so the bathroom shower won't be occupied at the same time. Then I can pick a few 9 to 5ers and a bartender and a waiter, etc... who will be working different schedules.

5) Bonus question- I see on roommate listings online "Females Only" quite often. I did a little research and I was surprised to learn that you can legally discriminate when looking for a roommate and that fair housing laws don't apply.  I am technically looking for 6 roommates so while I don't plan on discriminating on any other factor than their ability to pay rent and maybe a person's work schedule, I am curious if fair housing laws apply to me in this situation? 

Thanks in advance for any advise!

Ron

[Robert Brown]

Hey Ron,

You have a great plan here and definitely a good setup. I own and rent out rooms in my place here in Washington, DC as well (Petworth) and it's gone really well for me. For the most part. 

One thing I would stay is do a ton of research before you start bringing people in. DC is a city that is HUGELY in favor of tenants over landlords and if you get a bad apple you can be in a really, really tough spot with little reasonable recourse on your part. I've had one bad roommate here and it was a nightmare to get him out. 

Check these out:

https://www.lawhelp.org/dc/resource/frequently-ask...

https://www.nolo.com/legal-encyclopedia/overview-l...

You 1,000% percent want a lease. My understanding is that you still need a lease with a tenant, and the roommate agreement can spell out in more detail the day to day behavior and living conditions within the house - diving of chores, noise, etc. A lease wouldn't include those things, but a roommate agreement isn't the same as a lease either. 

Absolutely do credit and background checks. I've used MySmartMove before and it's super easy to do, you can set it up so they pay or you pay, or you split it. What I've done in the past is I have someone pay upfront, and then if I select them to move in I would either pay all or half of the cost of the credit check to them. Depending on where your spot is, and the number and quality of the folks, you don't have to refund that money to them by any means. It'll add up if you're paying $30 bucks for credit reports multiple times a year. Get pay stubs as well, and you can even ask for someone to provide a proof of employment letter. Their HR department can draw one up in 5 minutes for them. 

I'd be cautious of getting super wrapped up in picking the right people based on their schedules. You can only predict how well other people will interact. I get the idea of trying to plan out schedules for the bathrooms, but if you have people coming home at 3 am from their bar tending shift to people who are getting up at 6am to shower, that could actually be more frustrating for the roommates. A thought here, and I'd love to see if others think this is a good/bad idea is - pick a couple of quality tenants (good jobs, seem stable/normal/nice, etc.) and then involve them on picking the other roommates? People know who they connect with and who they will like to live with better than you can judge for them. Ultimately it's 100% your call, but if you're building a small community within that group home getting their buy in on new roommates can make the whole house function much smoother for you. Think of it this way, if you have 5 great people and one terrible person moves in, your ability to kick that terrible person out is virtually none as long as they pay their rent on time. But all 5 of those other people can move out pretty easily. 

As for damage to common areas - clearly state that it will be spread out evenly among the tenants unless one person is responsible and admits it. 

With regards to 'females only' I would shy away from that. Most people who are getting roommates on craigslist are just doing it for him/herself, and those kind of postings about females only usually aren't legally ok. It makes sense and it's not really an issue that anyone would find worth pursuing, but as a business owner (this is definitely a business) you have many more legal obligations and oversight from the city, and you have to be completely on point with your paperwork, filing, advertising, and how you handle things or you could wind up losing out in court. Not trying to scare you, but if you're here at BP then you're trying to do this in a professional manner, which means more work to do things the right way. I'm not a lawyer by any stretch, so take this as just friendly advice. 

There are a ton of great landlord resources out there for you, and also take some time to look over tenants rights info for DC, once you know their side and their rights you'll know better what obligations you need to meet to be a fair and upstanding landlord. 

Best of luck with this, and keep us updated on how this goes for you! Every time I pass by a huge row house I think about venturing down this path!

Rob