Student housing. 4 bedroom house near ASU vs 4 plex elsewhere.

[Marshall Gerston]

My nephew and several others that I know that are in college rent out an individual room in a 4 bedroom house. The landlord loves it because they have 4 rooms they are renting out rather than one lower price point lease and the students (and the students parents) love it because they only have to worry about their own lease. They all of course use the kitchen and common areas. They always have a friend who is looking to move in so the houses stay very full from what I'm gathering.

So I am looking for a traditional 4 plex in the Phoenix metro area, but I am also considering buying a 4 bedroom house near ASU and doing what I described above. Dorm rooms rents and other housing in the area are skyrocketing so the demand is there. Anyone have thoughts or better yet experience with this kind of thing?

[Ryan Swan]

@Marshall Gerston I've built my rental business in Tempe over the past 15 years, so I know the market inside and out. I've considered the individual room leases, but always find it has many more downsides vs any perceived upside. 

• Are they actually getting a rent premium for an individual room? I can rent a nice 3/2 house for $1800/month (~$600/room). Why would students pay more than that to rent each room individually? $700/month/room? What's the value upside to the tenant?

• This situation is ripe for utility drama, common area drama, new roommate cycle drama, etc...just not worth my time. One house, one lease, you guys deal with your own utility splits and internal drama and keep me out of it!

• Definitely more turnover time, cost, paperwork, and headaches. One house/one lease = at most one turnover per year. 4 rooms = potentially four turnovers /year. If you're self managing, this is a major time sink. If you have  PM, they charge "lease up fees" that would eat into your profit.

• The parents of students are most always involved in the leases (heck, they're usually paying for them). As a parent, I would want all roommates/tenants to be jointly responsibly and liable to the same lease. I would see 3 or 4 separate leases as being very risky. What if two other roommates just skip out mid semester? What happens to utilities? Does the landlord get desperate and place tenants in the two vacant rooms that I wouldn't want my son/daughter living with? 

Happy to answer other questions about student rentals in Tempe!