Denver Renting by the Room

[Jenny Bayless]

Hi Denver Landlords,

With Denver's cost of living rapidly increasing and a lot of younger, more transient people moving into the city, I wanted to inquire regarding the thought of renting out a home by the room (separate lease per room).  I was thinking about buying a mid-grade home in a trendier neighborhood, and rent it out by the room at a higher rate than what I could get on a 'single-lease', in order to make the cash flow worth my while. I was thinking that it would make sense to furnish the common areas (kitchen, living room, dining area), and perhaps even hiring out a quarterly maid-service for the common rooms.

Initial Questions:

-Has anyone in Denver performed this strategy? Any legal issues to be aware of?

-If so, how much extra work would you estimate this type of property takes of your time compared to a standard 'single-lease' property? 

-Is there anything that you recommend in terms of screening for tenants differently than usual? 

-Do you have different lease addedums for these tenants as opposed to your single-lease tenants?

-Would you recommend utilities be included in the cost of the lease, or each tenant is charged a pro-rata amount of utility actuals?

-How do you account for maintenance issues within common areas, and how do security deposits come into play for common areas? How does this work for partially shared areas (i.e. 2 rooms are allocated to 1 bathroom).

-Does anyone have any examples of leases using this strategy? Do you allow for different lease lengths (i.e. 6 mos is standard)?

I have not put a ton of thought into this, as it just popped in my head this morning, so I wanted to seek initial opinions/advice before delving into this topic much further.  Based on some past experiences, it may be enough to sway me quickly to not look into this any further.

Thanks in advance!

Jenny

[Dan Mackin]

1 - Yes, people are doing this in the Denver ar ea. 

2 - Figure you're working with multiple leases compared to one. If you have a 3 bedroom house that's 3 leases which means if you do year leases you'll be looking for tenants 3 times at minimum. You also will have to deal with the occasional tenant bickering since they didn't pick each other.

3 - No different than usual. You may have to lower your standard just a bit, but not definitely.

4 - This is all specific to what you want. @Drew Fein has written up a fantastic Room-By-Room Lease.

5 - Utilities should always be included in the rent. This includes internet and some sort of cable/streaming service. You don't want to have to go back each month to try to split a bill. 

6 - The common area responsibility varies in each lease. It can be hard to place specific responsibility on a tenant if everyone can access the area.

7 - Lease length is up to you. Some will allow 6 months, but others want a full year. If you go full year your tenants can settle in with each other a bit better.

One big thing to think about with this method is where you are doing it. Denver proper doesn't have very friendly zoning to allow for this. You have to look at the laws about unrelated tenants in a property. If you can find a city/town that allows 4 then look around there. This method can be very lucrative if you play it right. Just takes a little extra work.