Rental Property Investor · Member since 2019 · 13 posts · 1 vote
Looking to purchase a multi unit property however cash flow will be tight. I was thinking instead of renting out one of the 3 bedroom apartments for 1100.00 to rent each room out individually for 600.00 each. So i will have 3 renters in 1 apartment sharing 1 bath and 1 kitchen....your thoughts? Is this something to consider or am i just asking for problems?
its actually the easiest value add. Bringing economies of scale to one apartment. Just make sure everyone meets each other before signing leases. Its not any more of a hassle than renting one unit to a group. Set rules for common spaces upfront. And likely you would have to furnish the common space to avoid any issues with ownership of items and privilege of use
But you really need to ask yourself if you want to look for tenants and roommates because trust me, you’ll run into crazy characters and start doubting it all. I’ve had some bad experiences.
Whatever you do get everything in writing and do not allow any of your tenants to workoff their rent because then things will get shady or misconstrued so trust me don’t do that. I had an awful experience
Also beware of any worker/tenants that could put a lien or threaten to put a lien.
The reasons I would rent to a group and not individuals are
- 3 tenants who are jointly and severally liable will hold each other accountable as opposed to 3 individuals
- If you are in a market where 3 Bed, 1 Bath rent for $1,100.00, $600 a month studios will be available (that is where the desirable tenants will turn to)
- Turnovers are likely to be greater
- Much greater risk of tenant problems - tenants not getting along (which is now your problem because you placed the tenants)
- Lower grade tenants
I guess it depends on your market but this is something I would never consider. It is not your job to be a match maker, have the tenants do that.
If studios rent for 600 and 3 bedrooms rent for 1100 and you set your room rental between 400 - 600 the math is simple which makes more money.
As far as attracting worse tenants - you have to screen all tenants whether its a room or apartment being rented
You have to know your market. In bigger cities this is very common and one of the few options people have to finding affordable housing. Not everyone may be able to afford a studio or know 2 other people in town to rent an apartment with them. This doesnt make them low grade or undesireable. Look up co-living. Its a movement.