Property Managers that do Room Rentals in SFH?

Question

Hello!  I am most interested in purchasing a single-family home in Orlando as a long-term buy-and-hold investment property.

For the rental strategy, I would like to rent out the home by room instead of renting out the whole property to one tenant.

I am located out of the country (in Dubai), so I will need to hire a property management company to take care of the home for me.

My challenge is that I have heard that property management companies will not rent out a property like this by the room.

Does anyone know of property management companies in Orlando that will do rent-by-room?  If not, are there any alternative strategies that I could consider to get this done as a long-distance investor?

Drew Sygit · Answer

---sigh---

There's reasons PMC's don't like to run boarding houses.

1) Most municipalities don't allow them

2) They don't work in every area

3) Owners won't pay enough to compensate for the extra tenant headaches

Every owner only wants to pay based upon everything going smoothly.

Well, how much goes smoothly in life?

@Matt Nico - pretty sure you're just trying to help a fellow investor out, but how well do you know Florida real estate statutes?FYI - you can't show a property you don't own or manage funds of others without a real estate brokers license.

Matt Nico · Answer

Hey Benton,

I own a handful of homes in the Disney area that I rent by the room, and they perform amazing. Most property management companies wont even touch a rent-by-the-room home in the area. And if they do they would charge a crazy amount. I could try to point you in the right direction or help with property management for you if you need a hand. The best homes for this are 5-6 bedroom homes in areas with good parking.

Good luck!!

-Matt

Joe Splitrock · Answer

@Benton Shortridge who did you hear that from? You can't afford to go off second hand information. Open up Google and search "property managers orlando". Start contacting them and ask if they do this type of management. If they say no, ask if know a company that does. I am fairly confident you will be able to find a company willing to manage. Just be aware it takes much more work to manage by the room rentals, so they will get paid more.

Alternative strategies would be renting LTR to a family or roommates. That you could probably do yourself from overseas.

Drew Sygit · Answer

Boarding house type rentals are actually pretty common in college towns.

So, are there any near where your property is? Maybe a PMC from a college town can stretch their territory to work for you.

The other option is to offer a PMC MORE money to justify the extra headaches. We beleive the best way is always to pay for performance. So, instead of a flat fee, offer a higher percentage of collected rents.

FYI - imagine it will also be harder and take more time to find suitable tenants that only want to rent a room. All the places we've seen locally, college towns excluded, were not in the best areas, so probably didn't have the best tenants. This amy also lead to high turnover. So, while you'll need to offer an incentive to a PMC to find suitable tenants and not just throw anyone in, you'll have to protect your downside somehow. In Class C areas we offer a 90-Day Tenant Replacement Guarantee - not to be confused with a Rent Guarantee - where we will not charge an additional Placement Fee if a tenant doesn't pay their 1st 3 months of rent and we have to evict them.  --Food for thought:)

Matt Nico · Answer

Benton, you are correct....I do self manage. I looked into hiring a property manager to do exactly what you are looking for and couldn't find anyone who wanted to do it to the level I was looking for. So I just started doing it myself. My Wife actually handles most of the property management stuff and I handle more of the maintenance, repairs, and searching for homes to buy. We don't really manage for other people but I can ask her if she would want to manage yours.

-Matt

Benton Shortridge · Answer

@Joe Splitrock

I have heard this after talking to a couple of agents in the Orlando area.  I should definitely reach out to more companies than I have, you make a good point.

Noted on renting to a family, I have been looking into better possible ways to break even since Orlando does not seem to be the best cash flow market at the moment.

Benton Shortridge · Answer

@Drew Sygit

That is a good idea!  Orlando is a bit less of a college town, but the same strategy may work in this area.

Providing a higher percentage of collected rents may be a great way to meet in the middle!

Thank you so much for sharing how this has worked out for you!  I really appreciate it.

Benton Shortridge · Answer

@Matt Nico

Yea, it seems like the strategy may work fairly well if you self-manage.  That sounds like a good setup!  It would be great to have a call sometime if you would be willing to chat about how you run an operation like this.

Benton Shortridge · Answer

@Drew Sygit

Thank you for the reasoning on why the companies do not like this setup!  Would you recommend any alternative strategies?

Thank you for the heads up about a broker's license!  What if the manager had a minimal stake in the ownership of the property?

Benton Shortridge · Answer

@Matt Nico

Got it, that sounds great!  Do you self-manage? Any property management help would be greatly appreciated!  Where should I start?

Property Managers that do Room Rentals in SFH?

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