Any success with rent by the room?

[Bridger L Logan]

I am looking for a 4-5 bed house in the phoenix area with an ADU for my fiance and I to live in. This househack strategy has been suggested to me considering the scarcity of cash flowing residential multifamily properties. Not saying there isnt any but when they do appear, they go fast and cash buyers prevail.

Has anyone else had good experiences with a larger house (5/3, 5/2) that has been rented by the room in the Phoenix area or other hot real estate market areas?

[Curt Smith]

Hi Bridger,  Back ground;  most counties/cities have zoning and regs on;  max number of unrelated adults allowed in a rental.  Some are at 3.  ALSO they have regs on rooming houses only allowed in specific zoning, similar zoning as for hotels;  only on main streets in business districts AND you have to apply for licensing and blabla as for a hotel..

That said;  there is a small movement supporting rent by the room as a small step toward solving affordable housing.  You might study up on this Atlanta business that is growing their business with private offerings (funding)   padsplit.com

They have a shades of gray solutoin for the unrelated adults, and rooming house zoning that is sort of working in the Atlanta area.   Padsplit as a company has greesed alot of palms to be an acceptable violatoin of zoning and business licensing requirments for a hotel.  IE City of atlanta is lookign the other way.  Suburbs have filed zoning violations againsgt investors I know who have put their expanded bedroom suburbant houses onto the padsplit.com platform.   No cease and desists yet, but its touch and go.  Legaly all rent by the room operations are in violation of hotel, zoning, and rooming house regs.  Like the push to get tiny houses accepted and zoning changed,   a "cleanly well run rooming house" business model has yet to get much muninicipal acceptance tracktion.  

What to do;  this only works where the house has lots of parking, distance from neighbors.  100% of the time its a neighor who turns you in.   So if lots of parking, ideally walking distance to busses or transportation to cut down on cars, you might get away with it (legally).

Operationally;  this is a can of worms to manage.  Midnight drunken brawls happen, but are more infrequent then you might guess depending on your screening.  But always complaints about guests (residents) leaving common space a mess, some resident gets mad they have to clean up...   

Simple furnishings bought used, a single bed, and dresser.  Common area TV/internet.  Each bedroom has a electronic combo lock.  To evict just put their stuff outside and change the combo lock.  Its hotel law not landlord law. 

Best of luck.