3 bedroom or 4+, 5 bedroom for rental property

[Zeeshan Mallick]

Around July 2020, I am planning on purchasing my first rental property.

-The rental property will be near Arizona State University (one of the biggest universities in the country)

-I am paying for the rental property with a 3 % down payment 

-My monthly payments will be high due to low down payment and PMI payment

-I plan to rent by bedroom, rather the entire property to, for example, a family. This is because rent by bedroom makes more rental income

-I plan on being the landlord for the property

Near this university area or right outside of it, I am looking for a 3, 4 or even 5 bedroom house to make a rental property. However, because my monthly payments are so high due to the low down payment and PMI payment, a 3 bedroom is usually a negative cashflow or BARELY breaks even monthly.

However, with a 4 bedroom and especially a 5 bedroom, I see quite a positive cashflow each month, with each bedroom being rented out to a single person. So it is evident that a 4 bedroom and 5 bedroom will do better for monthly income, regardless of the higher home price.

However, I have a few concerns that I would love opinions on:

-Is it being too idealistic to assume I can rent out a 4 bedroom and 5 bedroom house in this area?

-Will there always be an element of vacancy I will be fighting due to the large amount of bedrooms?

-Is it unrealistic to assume that these houses will always be rented out?

-Am I in over my head with trying to take on the difficult task of renting out a 4 or 5 bedroom house, and should just stick with a 3 bedroom house for safety, regardless of the rental income it brings when compared to the 4, 5 bedroom houses? Due to this being my first property.

All opinions and guidance/consideration is greatly appreciated.