Renting a single family by the room ?

[Account Closed]

I'm looking at an off market deal which is a 3 story, 7 bedroom with a bathroom and kitchen for each level. Needs lots of work, but the electric, plumbing, and roof all been redone this year, and its a nice brick house so won't need any siding work in the future. The house is within walking distance of 2 great colleges, and I own a duplex with a partner a few blocks away. 

Now for the questions.  It's currently zoned as a single family, but I'm looking to rent by the room for a fixed amount, and I'm wondering if this is even legal? Anything I need to look out for on the business / legal sides? It's also a row house with off street parking, would this be a turn off? 

House needs about $15K - $30K depending on how much of the work I hire out, I'm a full time contractor so insulating, sheetrock, and flooring is nothing for me. Comparable properties rented by the room in the area are going for $600 everything included, so this property if rented with 5 rooms should be bringing in about $3000/month. They're asking $35K for the house, and I'd be paying cash. Does it sound like a good deal? I plan on finishing the first floor and getting it rented, so I'm break even while I move onto the next floors. 

Anyone out there have success with renting by the room in college areas? How hard is it to get tenants? Any types of special things to include in the leases? Thanks in advance! 

[James Carlson]

@Account Closed

Knowing nothing about your particular market, that sounds like a decent find. I've worked with a number of people in Denver and Colorado Springs doing the rent-by-the-room or house hacking strategy. (Here's one example of a live-in house hack and another example of a rent-by-the-room investment property.)

A few things you need to be aware of:

• What are the occupancy rules for unrelated adults in Scranton? They vary widely here in Colorado from only allowing 2 unrelated adults to live together up to allowing 5 unrelated adults to live together. (Then there's the distinction between what's allowed and what you're willing to risk getting away with.)
• Do your due diligence when selecting tenants. Do a little extra work up front to ensure you get good people in there who won't cause headaches with the other rooommates.
• Get the right lease. A house-hack or rent-by-the-room lease will have all the standard lease language but with two big differences:
  • It will have additional language around where the liability lies for the other roommates. If you as landlord are selecting the roommates and then one of them causes damage to another roommate's property or assaults another roommate,  you want to be sure that you're not liable for having chosen that roommate.
  • Also, you'll have language that addresses common elements. How is damage to shared spaces handled? How is cleaning handled? How is payment for shared costs (toilet paper, dish soap, etc.) handled?

I wish you luck!