Multi Tenant Townhomes

[Matthew Church]

Hi. This is my first post. I was at dinner with my nephew and he was sharing a new strategy I had not heard of before. He has purchased brand new 3-4 bedroom townhomes and then rented each room to a young professional. The rooms have rented super fast and he is generating amazing cash flow. The tenants pay top dollar to live in a nice home with other professionals. They don’t want their own home yet and content to have roommates. This is such an interesting strategy. I live in a pretty up and coming tech community which I suspect drives some of this. I’d love to hear some others thoughts on this strategy of investing. Thanks. Matt

[Curt Smith]

Only mentioning potential down sides, but agree with the ambitiousness and profitability  of a very active job of running a rooming house.  This _is_ a rooming house!!  And runs into the local ordinances of rooming houses/hotels.

- If you buy property at retail and it won't cash flow traditionally with a std 12 mo lease renter and am to make it cash flow with short term rental scenarios:  AirBnb, VRBO, you actively manage a rooming house you run into risks;

- you are running risks with the local gov's regulating short term stay, neighbors complain to locals about parking, noise, or just to be mean and cause trouble.

Rooming houses have weak to no local legal basis in most cases.  To get legal and get hotel etc licenses is both hassel, inspections and may not even be possible.   These businesses work only when under the radar. 

- If you get caught and get a cease and decist (etc) you are now stuck with a high cost basis house that you can't profitably rent.  You may be forced to sell at a discount to get out.

I know many folks running AirBnb/rooming houses as well.   Its more work then you might imagine that includes mid night or later calls when alcohol and arguing roomie's get into it.  The main work is the turn over, re-cleaning up the rooms on a regular basis, inspecting the common areas that rarely are kept up by the residences.

A local company is Master Leasing from investors houses with 4 or more bedrooms:  padsplit.com  See their business model on their website.

LOL best of luck!