Families versus Groups of Unrelated Adults in SF Residence?

Question

Hi! I'm a fairly new landlord. I have a 4/2 Single Family Residence in a suburban neighborhood half a block away from a very desirable and highly ranked public elementary school. My town is also a university town. I've had mixed results with tenants: Tenant #1 was a dad with a toddler who broke his lease after he lost his job. Timing was not great since it was in the fall, and the only applicants I had were groups of university students. I leased the remainder of the year to four university students who despite the fact that I had gutted the house and almost everything was redone and was pretty clear on the house rules, has pretty much never cleaned the house and it's filthy (after doing the inspection). They are not renewing their lease anyway. I'm in the process of trying to find new tenants, but overwhelmingly, I keep getting groups of unrelated people-mostly 4-5 university students, some graduate students, or newly graduated/still in college. I'm really hesitant to rent to groups of unrelated people as I just don't think they have the vested interest in keeping the house and tend to be harder in general, on properties (I have a couple of landlord friends who rent properties close to the university and they confirmed that students tend to be harder on properties).

So my question is this: how do I attract more family groups rather than unrelated adult groups that tend to turn over more quickly? Any suggestions you have would be appreciated, or any insight. Maybe it doesn't even matter?

Also, can I legally limit the number of unrelated people (say to three) that live in the house? There are no local zoning laws on this particular matter.

I should also add that the rental inventory is extremely low and the vacancy rate hovers around 3%.

So my question is this: how do I attract more family groups rather than unrelated adult groups that tend to turn over more quickly? Any suggestions you have would be appreciated, or any insight.  Maybe it doesn't even matter?

Also, can I legally limit the number of unrelated people (say to three) that live in the house? There are no local zoning laws on this particular matter.

I should also add that the rental inventory is extremely low and the vacancy rate hovers around 3%.

Stephanie Jamgochian · Answer

Thank you Nathan G. this is really helpful.  I've read the 2 person/bedroom rule and in California, things are more liberal (read in favor of tenants) than landlords.  I'll read through "Keating Memo HUD" for reference and may do the "You plus two" policy.  Is this something you tell people verbally? Do you put this in your polices and procedures information?  Would love to hear how you communicate this to prospective tenants.

Nathan Gesner · Answer

@Stephanie Jamgochian I'll address the occupancy limit first because it confuses many. Yes, you can limit the number of occupants in your home but the limitation should be "reasonable," whatever that means. Do a Google search for "Keating Memo HUD" and you can read up on it. I set a limit of two persons per bedroom but I am also willing to flex a little based on room size and overall home size. For example, four adults in a little two-bedroom apartment is tight. Four adults in a 2,000 square foot house is plenty of room. You may also have additional living space that could be used as a sleeping space, for example a basement family room. If someone files a complaint, you have to be able to show that your restrictions are reasonable and not unfairly biased against people with kids.

Everything rule or policy should be designed to mitigate your risk. You have a lot of college kids that want to pool their resources and rent your house. You need to either turn that option off or find a way to mitigate the risk of them turning it into the Animal House. One way to do that is to create a "You, plus two" policy which is what I did. Basically, I will not rent to more than two unrelated people. Some examples of what I will accept:

- Husband, wife and children

- Two brothers and one of them has a girlfriend

- Single mom with kids and a second single mom with kids

You take two people (two) related by blood or marriage, and then add one more (you). Here are some examples of people I will not rent to:

- Four unrelated friends

- Single mom with kids, second single mom with kids, and a boyfriend

- Two brothers and both of them have a girlfriend

I couple this with my limitation of two people per bedroom. In other words, I still wouldn't accept a single mom with two kids and another single mom with three kids (seven people total) and squeeze them into a three-bedroom home that is limited to six occupants.

This "You plus two" sounds like discrimination but I can assure you it has been tested in courts across the nation. I think the best example you can read about is Fort Collins, Colorado.

If you decide you want to rent to college kids, you just need to find a way to mitigate your risk. There are many Landlords and Property Managers that do this successfully. If I were considering this option, I would approach it with the intent of making more money while reducing my risk of loss. Let's say it rents for $1,000 a month to a typical renter but college students want to rent it and split the cost. Instead of $1,000 a month for the entire house, charge each student $400 for a bedroom which brings your total income to $1,600 a month. If the last group of students cost you $3,000 in cleaning/repairs then charge each student a much higher deposit and last month's rent so you have enough cash on hand to cover the potential damages. Require parents to co-sign so you can go after them when little Johnny trashes the place. There's more work involved, but it could be lucrative if done correctly.

I recommend you try to find some other Landlords or Property Managers in your area and ask them how to successfully handle this. I know you would prefer renting to a nice family that will treat the home like their own but it sounds like you're swimming upstream and your true market is college students. Find a way to mitigate your risk and make money off it.

Stephanie Jamgochian · Answer

Thanks Bethany! I'll add a little more to my listing to emphasize the quiet nature of the area. I have listed that it's near the local elementary school, but will add a bit more.

Families versus Groups of Unrelated Adults in SF Residence?

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