Rent entire house vs by the room

[Ben Sorochuk]

I've got my first house a few months ago, and currently househacking it. It's going great, it's got 7 rooms. I'm living in a room and renting out the rest. Mortgage: $3650. Rent income: $5100. I'm seeing other houses that have a lot of rooms relative to the square footage, like houses that are 2000 sq ft and 7 rooms and considering buying more houses and renting them out by the room. If I rented the house to a single tenant I'd get maybe $3000/month. If I rented by room I could get $6000/month. Obviously I will have to manage more tenants and deal with more short term type tenants but it seems like a slam dunk home run. Is there a reason this isn't done as frequently? Obviously it's more involved but the way I see it, if I buy multiple properties and rent out each entire house to a single tenant, I'll basically have to deal with more hassle when I could get comparable cashflow with just one property that's rented by the room.

[Ron Brady]

@Ben Sorochuk

My wife and I rent several furnished homes by the room and have found it to be a good fit as part of our portfolio for several reasons.

They are located in a working class area that is also appealing to new-to-the-workforce individuals. An area around a university should have a similar market. This niche results, for us, in lower vacancy rates because an affordable room is always in demand. There is higher turnover though, but we manage that and word-of-mouth amongst our residents proves very helpful in filling vacancies quickly. We allow any resident to leave with 60 days notice and we almost always back fill by each resident's departure date. Some elements we enjoy most about this niche include a) a single room non-payment for one month allows us to still break-even on a property for the month because the other paying residents cover all our costs b) existing residents help with turns and thus turns tend to be very cost-effective, c) there is a big market beyond students or new-to-the workforce for rooms.

The risks to this approach is managing residents. We screen diligently and conduct house meetings when a new group is put together in a home and thus set out ground rules.  We have to intervene when there are conflicts, which are inevitable. My wife used to be a school disciplinarian so she is used to this. But if you truly dislike dealing with adult conflicts, you will tire of this niche.  We find that when we a) set out ground rules from the beginning, and b) allow existing roommates to interview and give us feedback on potential new roommates, conflicts are minimized. We, on the other hand, are willing to deal with the conflict for the added yield that you've cited. For us, its worth it.

Happy to answer any questions, share our roommate meeting agenda and anything else if you PM me.

Best wishes to you?