Subletting in the Bay Area

[Braden Evans]

Situation Overview:

My brother has been living in the Bay Area for 7+ months now, and I will be moving there in May 2019 after graduation. We plan on living together and have been looking at apartments to rent. We're both trying to get our feet wet in real estate, and recently found a 5 bedroom house in renting at $5,200 a month. That would mean roughly $1,040 per room.

Our idea:

We believe this is a steal given the local market. It seems most rooms rent for roughly $1,400 per month. Our idea is to sign for the entire home ourselves and sublet out the other rooms at perhaps $1,350. This would mean our personal monthly rent would be cut down from $1,040 to $575 (This equates to $465 in monthly savings per person).

Thought Process:

I've been reading as much as I can on best practices on subletting to gain perspectives of both the landlords and ourselves. Here's what I've gathered:

1. Transparency - We need to be totally upfront about our plans to sublet with the owner and get an agreement in writing.

2. Tenant Quality Control -  Landlords are extremely worried about quality control of their tenants so people on BiggerPockets have suggested on other forums to let the landlord have the final approval on all possible tenants we qualify.

3. Risk of the possible vacancy on our parts - This would be a big risk on our parts by taking over the entire lease. However, my brother's church group is extremely well connected meaning young, single adults from the same community like to live together. His church group's values also consist of no drinking, smoking, partying, etc. so I believe there would be an advantage to us finding like-minded people to give the landlord high-quality, easy to manage tenants.

Core benefits for both parties:

We see this as being valuable for both the landlord and us as they get peace of mind knowing we're fully responsible for all rental income damages for all tenants, and we would gain value by the increase in personal cash flow, as well as learn the ropes on tenant management.

Other than what I've described above, what am I missing?

Are we stupid to do this? Or is this a good opportunity? Would this be a bad decision to make given our circumstances?

What other best practices or pitfalls would you suggest I and my brother look at before getting into something like this?

Any advice or recommendations would be greatly appreciated!