alternatives to traditional rental?

Question

I'm wondering if anyone has creative ideas for how to make some income from a 3br SFH without renting it out as a full time residence. The house just became vacant, is located in Seattle, and I'm reluctant to rent this out to new tenants as a traditional residence right now. You can probably guess why.

I was imagining renting out the rooms as 'home offices' and/or storage. I don't expect to make as much as my usual rent, just hoping to make enough to cover taxes and utilities. At some point I hope to either rent it out as a residence again, or trade it for a rental in a more landlord-friendly city.

Is this a ridiculous idea? Does anyone have experience doing this? Thanks for any thoughts and suggestions.

Michael Haas · Answer

@Jim Bailey - I think this is worth clarifying, when you say "You can probably guess why" are you referring to the eviction freeze here in Seattle?

The highest and best use for your single family rental is to rent it as a dwelling, not as a storage facility, dog hotel, meditation chamber, or whatever other oddball deal we can come up with here. If you don't want to rent it, because of eviction bans or otherwise, you should sell. The market is HOT and you will get multiple offers within 7 days if you're priced right and don't have a god-awful layout or other issues.

Rent strikes are not happening in any meaningful way. As always, tenants who have the ability to pay are paying, and tenants that don't aren't. Screen your tenants and don't put high risk - low income tenants in your rentals now, as always, and there's a 98% chance you'll have no issues. If you're in the unlucky 2% reassess, pivot, learn from it, and move forward!

Matt Lewis · Answer

@Michael Haas - True. Anyone who wants to get out of this thing totally risk free should just sell now while prices are high and inventory is low. It’s the definition of a sellers market!

Nathan Gesner · Answer

I agree with the others. Do you think Seattle will loosen the rules for Landlords in the future? I wouldn't bet a bologna sandwich on it. If anything, you can expect larger cities to continue restricting Landlord/property rights while coddling renters because it's a great way to win votes.

Sell and move inland to a Landlord friendly state where you can get solid property management and some cash flow or appreciation.

Matt Lewis · Answer

@Jim Bailey - Hey Jim! I’m a Contractor in Seattle.

Depending on the neighborhood you can do Airbnb. I helped my mom retire by building a two story DADU on her property that she Airbnb’s. It still does well in this market.

The other option might be to do a house hack room rental to help diversify the risk between three tenants. Just make sure to screen your tenants really well! You want tech people in Seattle.

Maybe just update it and put it on the market.

Or sell it to me! Haha

Good luck!

Jim Bailey · Answer

Thanks for your thoughts and the reality check, everyone. With the exception of the 'rent by the room' possibility, it sounds like the consensus is to either rent it like usual or sell if I can't handle the risk.

@Michael Haas-Yes, I was referring to the pandemic protections, which I don't see ending anytime soon, as well as Seattle's overall restrictions on how landlords manage their rentals. I'm kind of an 'accidental landlord' and probably more risk-averse than savvy investors like you all. I tend to think of worst-case scenarios and would like to feel more in control than current restrictions allow landlords to be. Probably not cut out for this line of business! Yet I'm still not quite ready to sell...

I do think I'd be able to rent the house out easily (good house and neighborhood) - I'm just imagining not getting any rent after they move in. A couple of landlords I know have had this happen to them - no rent since April/May lease signing, even after screening for steady income - maybe that's an unlucky sampling but it definitely increased my concern. I appreciate hearing that chances of that happening are likely slim.

I have been managing the property myself, but might just hire a professional to ensure solid screening and hope for the best.

Again, thanks everyone!

Steve Vaughan · Answer

If I was this distressed about the local rental environment I'd sell and re-deploy elsewhere.

I'm in WA also so can understand.  11th hour Inslee actually helped me by waiting to extend the eviction moratorium from Aug  1 to Oct 15 until July 30th.

I timed my 14 day pay or vacate just right. She thought I had her a×× so she took all that rent she wasn't paying and moved.  Yippee for me!

Ganessan P. · Answer

@Jim Bailey

Hi Jim - I have recently from one of the BP podcast that an investor from Seattle has done rent by "bedroom" and "fully furnished". It is month-month, and you can label the tenant names in the refrigerator and find a housekeeping person to clean the home daily. Just a food for thought.

Bjorn Ahlblad · Answer

@Jim Bailey welcome to BP. You would have to check zoning and I don't think offices would be any safer than a regular tenant. Storage could work but a SFR is not ideally suited for storage. Many landlords are having no trouble filling rentals at this time-myself included. Your last idea has merit too; I hear the SFR sales market is still boyant and there are many better places to landlord than Seattle. All the best!

alternatives to traditional rental?

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