Renting by the Room in New Hampshire

[Alexander M Stanton]

Hey BP Fam! I'm in the process of buying a student rental in New Hampshire, and I'm just trying to make sure I don't get caught holding the bag on a bad deal. 

Right now, it's a 2% deal because it's being rented by the room to mostly students and ski-bum types. The current owner also converted the living and dining rooms into additional bedrooms, effectively turning a 3bed/2bath into a 5bed/2bath to reduce the risk of big parties destroying the property.

Can anyone point me in the right direction to make sure I don't close on a lemon?

Thanks!

[P.J. Bremner]

@Alexander M Stanton

Some great points you bring up, I think you are in the right path of questioning here to make a smart decision. I don't know your area so I can't comment on that specifically, but I've been managing student housing room rentals since 2012 so I'll be happy to share my experiences that may pertain to your concerns.

Occupancy concerns are definitely valid, however I have not come across any issues nor do I know anyone else running the same setup who has had issues with the city. My suggestion there regardless of being within county guidelines or not is to keep your neighbors happy and don't give the city ANY excuse to look at your property. Keep the parking under control, keep the yard clean and well manicured, keep noise levels down at night and get all of your construction/permit work and inspections done before tenants move in. I also think the class of the neighborhood makes a big difference - C class areas generally mind their own business. B and A class areas will be all up in your cool aid so if it's a nicer area, you have to be extra careful not to draw attention or the ire of your neighbors. Even if your rental is legit, they can still complain and have your business license revoked if your rental become a nuisance. I give my personal cell number to all neighbors and have them text me immediately if there are concerns. It's annoying, but better to deal with annoyances than a house you can't rent out anymore.

Also just a comment on the utilities - I prefer to include everything in the rental price. I manage about 30 tenants, so collecting rent plus all the utilities would be such a pain, it's not even worth the time. I've always included furniture, house supplies, house cleaning, etc. and can charge a premium to cover all of it. Just a basic example, rental comps for one of my rentals would be $2k - $2.2k. I currently collect $4,900 on that house and pay an extra $800 in expenses, so I collect more than double but pay about 33% of the increase in expenses which means I still net out much more.

I hope this helps and I wish you the best of luck with your student housing adventure!