Rooming House Woes. Cut you losses or make it work?

[Andrew Cox]

Hello Everyone,

I'm a new investor (under 2 years). I have never posted and truthfully forgot about this great site. I thought I would check it out and see what you all think of my situation.

I bought my first property in April of 2017. It is a rooming house in Windsor Ontario. I chose Windsor for the family connection there, cheap house prices and decent rents plus a 4% vacancy. I had bought it with 5 tenants with occupancy times of 1 yr, 3 yrs, 5 yrs, 7 yrs and 8 yrs. I was Leary of buying a rooming house but figured these guys aren't going anywhere so it's safe. Everything went great for a few months and that's when it started. 

One of the staple tenants moved out, my property manager turned out to be a terrible fit, the newer (1 yr) tenant stopped paying rent and I had to evict but not before he brought bedbugs into the place. Bed bugs took 6 months to eliminate which involved me having to ask another tenant to leave who was a hoarder and was making it impossible to exterminate the begs. These are just the highlights but you get the picture. As of now I have only 3 tenants out of 6 rooms but they all seem to be solid. 

I have hired a new property manager who is great. I have also bought another SFH which has great cash flow and I've never heard a peep from the tenants. I chalk this all up to a great learning experience and I got to learn most of the lessons people learn over years all in my first purchase and in under a year. Now I'm ready to dust myself off and move on. I have decided to sell the rooming house.

BUT part of me thinks since I have now suffered through all this, things must be ready to turn around right? And now that I have things sorted out I should stick around and reap the rewards. 

The other side of me says get out while the getting is good. There is every chance that the next problem is right around the corner.

SO I wanted to hear from anyone with experience. Is there a way to make a rooming house work? Any tricks I'm not thinking about?

[Anna Watkins]

In my experience, startups (buying a property and getting it the way you want) are always relatively expensive.  The rooming house is going through that period now - cleaning, repairs, etc -- , because the inherited tenants weren't part of YOUR program. Don't jump ship yet.  I'd hang in there, get good tenants (DON"T just take whoever you can get to fill the spot. That's probably how the place got bedbugs!), settle in with the PM, and then re-evaluate.  If you do decide to sell, you'll get a better deal with all that in place.  It's one of the things that sold you on it when you bought, right?? 

I don't know the Windsor student market, but I've got a 5-br student rental in Georgia that's rented by the room instead of by the whole house (my son is one of the "tenants"), and I'm just closing out the first year.  Last year was pulling up a house full of carpet, replacing a 32-year-old AC unit, lots of other energy-efficiency upgrades (rent includes utilities), and only 3 roommates for 4 bedrooms.  Starting this month for the coming year, all bedrooms are rented to a good bunch of boys, and I've got better systems and plans in place, and more income to pay for it all.  The first time around the cycle with anything new is more about learning and preparing than anything else.