New to Real Estate · Houston, TX · Member since 2019 · 34 posts · 3 votes
Hi, I am very puzzled. I am researching on how I can rent out single family houses by the room but it seems like every single HOA rules and regulations prohibits this. I'm in Houston TX area.
As far as I can tell every HOA document has something like this one form or another:
The term "single family residential purposes" also shall be defined as: (1) one or more persons related by blood, marriage or adoption, which may include only parents and their dependent children, siblings, parents or grandparents; or (2) by no more than two unrelated persons living together as a single housekeeping unit and their dependent children, siblings, parents or grandparents.
I'm reading this as - you can have either one roommate if you live in a house yourself or you can have two different people rent out two rooms in your house but that's it, you can't say get a 5 br house and get 5 roommates in.
So I do not understand how people can possibly be renting out houses by the room but I keep hearing about on BP podcast and other places?? What about student housing??
I am not talking about STRs (short term rentals) - airbnb is a whole other can of worms and I understand that there are a lot more regulations and rules there on city and state level. But how come it seems to be so impossible to rent by the room without a hanging threat of HOA lien over your head?? How do other investors do it?
Thank you for any piece of advice and wisdom in advance!
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
5y
You buy homes that aren't in HOAs since those restrictions don't apply. Or often places like that will violate the HOA guideline, but as long as the tenants aren't obnoxious it is usually not enforced.
Another point is many municipalities also exclude multiple unrelated individuals from renting. Again it isn't enforced necessarily, but if there are issues at the home that will be one of the codes at their disposal to shut the property down.
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
5y
You buy homes that aren't in HOAs since those restrictions don't apply. Or often places like that will violate the HOA guideline, but as long as the tenants aren't obnoxious it is usually not enforced.
Another point is many municipalities also exclude multiple unrelated individuals from renting. Again it isn't enforced necessarily, but if there are issues at the home that will be one of the codes at their disposal to shut the property down.
Baltimore, MD · Member since 2018 · 431 posts · 281 votes
5y
That is correct in most places, not just in Texas but in other states, in my experience. You have to find the right location.
Start with the "unrelated adults rule". In some places, it's 2. In some, though, it's as high as four. It just takes hunting. I rent to students so obviously have the same challenges. I own a unit that is in the middle of college student apartments and condos, so it's fine there. If I tried that in one of the non-college neighborhoods, it would be pitchforks and torches. Lol.
You buy homes that aren't in HOAs since those restrictions don't apply. Or often places like that will violate the HOA guideline, but as long as the tenants aren't obnoxious it is usually not enforced.
Another point is many municipalities also exclude multiple unrelated individuals from renting. Again it isn't enforced necessarily, but if there are issues at the home that will be one of the codes at their disposal to shut the property down.
That's literally what 3 different realtors told me but I still don't believe in luck and good human behavior and want to protect my rear with legality being on my side :)
That is correct in most places, not just in Texas but in other states, in my experience. You have to find the right location.
Start with the "unrelated adults rule". In some places, it's 2. In some, though, it's as high as four. It just takes hunting. I rent to students so obviously have the same challenges. I own a unit that is in the middle of college student apartments and condos, so it's fine there. If I tried that in one of the non-college neighborhoods, it would be pitchforks and torches. Lol.
Yea, that's what I started to do - go through HOA rules for each prospective house I want to buy. So far no luck unfortunately. Do you have any recommendations on how do this kind of research more efficiently? It's very hard to get those rules PDF docs and many HOAs don't even have a website and leave a phone number. For some I can't even find a phone number ....
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
5y
@Alex Bush I'm not saying whether you ought to do it or not, simply telling you what the reality is. You will generally find that almost everywhere, including unincorporated counties that house urban cities, rooming houses or border loging is specifically prohibited OR includes specific permit regulations like obtaining a Conditional Use Permit. Obviously it isn't everywhere...but I'd say it's the vast majority of areas. And the reality is that most people you hear on the BP podcast are just doing it without getting caught.
Again I'm not saying you should, just telling you how the world is operating.
That is correct in most places, not just in Texas but in other states, in my experience. You have to find the right location.
Start with the "unrelated adults rule". In some places, it's 2. In some, though, it's as high as four. It just takes hunting. I rent to students so obviously have the same challenges. I own a unit that is in the middle of college student apartments and condos, so it's fine there. If I tried that in one of the non-college neighborhoods, it would be pitchforks and torches. Lol.
Yea, that's what I started to do - go through HOA rules for each prospective house I want to buy. So far no luck unfortunately. Do you have any recommendations on how do this kind of research more efficiently? It's very hard to get those rules PDF docs and many HOAs don't even have a website and leave a phone number. For some I can't even find a phone number ....
I'm afraid not. With absolutely no disrespect, when you rent by the room, you're basically running an unattended rooming house with a full kitchen. This tends to work when you have a specific clientele (students, midterm professionals, etc) or in places with insane rent prices. I wouldn't personally choose this model in Houston, as a more down-market clientele would be more expected since rents aren't that bad and with them comes the kinds of problems that you don't want in an unattended rooming house. Even Austin would be better. What exactly is your model there?
Financial Advisor · Portland, OR · Member since 2021 · 45 posts · 21 votes
5y
An HOA is there to protect the look and feel of a neighborhood. If they allowed people to rent by the room, you would have too many cars, traffic, and make the neighborhood look dumpier (you can't tell a tenant who has a crap truck not to park there). As well, if you think that the HOA wouldn't know if you had multiple tenants renting by room, you are mistaken. You have neighbors, and those neighbors don't want a ton of coming and going from a house next door. Even if you have good tenants, they will tell the HOA.
If the HOA hears about it and enforces it, you are now stuck with the bag of kicking them out prior to the end of their leases. You will most likely have to pay HOA penalty fees, fees by the state if they have tenant rights in place and potential lawsuits from the tenants. When you buy a home in an HOA you are signing a form saying you will comply, and trying to push these rules will only make your life harder. As well, generally not adviseable to "stretch" rules, as you are dealing with people's livelihood.
This is why you need to analyze the property/area with this in mind. This would be considered a political risk, and you should assign more risk to an area with more rules. If you aren't familiar, your expected return, aka discount rate, is determined by three areas; 1) risk-free rate (aka 10-year treasury bond) + operational risk (aka political, tenant credit quality, state, location, etc.) + liquidity risk (aka are you going to sell it? if so how long does it take to get your money back). Going against legitimate associations and ruling authorities is a game that you will most likely lose.
Real Estate Agent · Houston, TX · Member since 2020 · 175 posts · 75 votes
5y
Hey @Alex Bush! My advise is that if your looking to house more than 2 people that arent related to you to just look for investment properties in a neighborhood with no HOA. You also have to keep in mind HOA's can add and remove restrictions at anytime, so if your looking to rent out by that many rooms staying away from them is for best. I personally house hack my current home which is a 3/2 here in Missouri City with two buddies and I have no problems at all.
@Alex Bush I'm not saying whether you ought to do it or not, simply telling you what the reality is. You will generally find that almost everywhere, including unincorporated counties that house urban cities, rooming houses or border loging is specifically prohibited OR includes specific permit regulations like obtaining a Conditional Use Permit. Obviously it isn't everywhere...but I'd say it's the vast majority of areas. And the reality is that most people you hear on the BP podcast are just doing it without getting caught.
Again I'm not saying you should, just telling you how the world is operating.
it all makes sense. Do you know how multi-family houses legally operate? Or each individual unit in a dubplex/triplex/fourplex/etc. is considered a standalone dwelling unit and these number-of-people-under-one-roof-restrictions do not apply?
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
5y
The quote you posted above says 'as a single housekeeping unit' which identifies the restriction is per unit. Also this restriction you posted is a private restriction, not the City code. So you need to see what that says specifically to determine their restrictions. My guess is it is similar.
That is correct in most places, not just in Texas but in other states, in my experience. You have to find the right location.
Start with the "unrelated adults rule". In some places, it's 2. In some, though, it's as high as four. It just takes hunting. I rent to students so obviously have the same challenges. I own a unit that is in the middle of college student apartments and condos, so it's fine there. If I tried that in one of the non-college neighborhoods, it would be pitchforks and torches. Lol.
Yea, that's what I started to do - go through HOA rules for each prospective house I want to buy. So far no luck unfortunately. Do you have any recommendations on how do this kind of research more efficiently? It's very hard to get those rules PDF docs and many HOAs don't even have a website and leave a phone number. For some I can't even find a phone number ....
I'm afraid not. With absolutely no disrespect, when you rent by the room, you're basically running an unattended rooming house with a full kitchen. This tends to work when you have a specific clientele (students, midterm professionals, etc) or in places with insane rent prices. I wouldn't personally choose this model in Houston, as a more down-market clientele would be more expected since rents aren't that bad and with them comes the kinds of problems that you don't want in an unattended rooming house. Even Austin would be better. What exactly is your model there?
>I'm afraid not. With absolutely no disrespect, when you rent by the room, you're basically running an unattended rooming house with a full kitchen. This tends to work when you have a specific clientele (students, midterm professionals, etc) or in places with insane rent prices.
What's wrong with it? It is of course would be more work to manage, I understand that.
>I wouldn't personally choose this model in Houston, as a more down-market clientele would be more expected since rents aren't that bad and with them comes the kinds of problems that you don't want in an unattended rooming house. Even Austin would be better. What exactly is your model there?
The problem is I can't find anything decent that would cash flow positively in this market. Average math turns out like this - ~$250k single family house, $1900/month average rent. This is not a sound investment to make as it would not cash flow positively (with property management company, reserves for repairs and vacancy, etc.). The criteria I have for searching for a house is more or less good condition, good neighborhood, and houses no older then 20 years old. These criteria due to my personal constraints on time (I have a demanding full time job as many of us do) and on connections/team/expertise(I'm not an expert at rehabs nor do I have a team for this yet).
So given all of that I am researching on other clever ways of hacking the situation and conditions I'm in to still come out ahed so splitting houses I purchase up into multiple "doors" by renting by the room is a natural conclusion. I am a "techie" and I am targeting other "techie" clientele - i.e. people who need a quiet place to work remotely (with great internet speed) or who are in the beginning of their IT/desk-professional-job career and need an affordable furnished place for a few months/years. Another group I'm considering target is traveling nurses. I very much do not care for turning this into semi-section-8 type of housing. And this is how I started to wonder about all of those stories of wonderful returns renting by the room.
The quote you posted above says 'as a single housekeeping unit' which identifies the restriction is per unit. Also this restriction you posted is a private restriction, not the City code. So you need to see what that says specifically to determine their restrictions. My guess is it is similar.
The interesting thing is - most of the cities I'm researching on do not have any prohibiting ordinances at all, it's all the HOAs being difficult/draconian.
Hey @Alex Bush! My advise is that if your looking to house more than 2 people that arent related to you to just look for investment properties in a neighborhood with no HOA. You also have to keep in mind HOA's can add and remove restrictions at anytime, so if your looking to rent out by that many rooms staying away from them is for best. I personally house hack my current home which is a 3/2 here in Missouri City with two buddies and I have no problems at all.
Yea, for house hacking I worry about it way less. It's temporary in nature anyway. My goal is to legally do this on a long term basis as potential cashflow is insanely high despite the management headaches.
An HOA is there to protect the look and feel of a neighborhood. If they allowed people to rent by the room, you would have too many cars, traffic, and make the neighborhood look dumpier (you can't tell a tenant who has a crap truck not to park there). As well, if you think that the HOA wouldn't know if you had multiple tenants renting by room, you are mistaken. You have neighbors, and those neighbors don't want a ton of coming and going from a house next door. Even if you have good tenants, they will tell the HOA.
If the HOA hears about it and enforces it, you are now stuck with the bag of kicking them out prior to the end of their leases. You will most likely have to pay HOA penalty fees, fees by the state if they have tenant rights in place and potential lawsuits from the tenants. When you buy a home in an HOA you are signing a form saying you will comply, and trying to push these rules will only make your life harder. As well, generally not adviseable to "stretch" rules, as you are dealing with people's livelihood.
This is why you need to analyze the property/area with this in mind. This would be considered a political risk, and you should assign more risk to an area with more rules. If you aren't familiar, your expected return, aka discount rate, is determined by three areas; 1) risk-free rate (aka 10-year treasury bond) + operational risk (aka political, tenant credit quality, state, location, etc.) + liquidity risk (aka are you going to sell it? if so how long does it take to get your money back). Going against legitimate associations and ruling authorities is a game that you will most likely lose.
>An HOA is there to protect the look and feel of a neighborhood. If they allowed people to rent by the room, you would have too many cars, traffic, and make the neighborhood look dumpier (you can't tell a tenant who has a crap truck not to park there). As well, if you think that the HOA wouldn't know if you had multiple tenants renting by room, you are mistaken. You have neighbors, and those neighbors don't want a ton of coming and going from a house next door. Even if you have good tenants, they will tell the HOA.
I am not thinking that, I know it will be found out this is why I am researching to figure out how to do this legally so that it's not an issue and that I'm not breaking any rules.
>If the HOA hears about it and enforces it, you are now stuck with the bag of kicking them out prior to the end of their leases. You will most likely have to pay HOA penalty fees, fees by the state if they have tenant rights in place and potential lawsuits from the tenants. When you buy a home in an HOA you are signing a form saying you will comply, and trying to push these rules will only make your life harder. As well, generally not adviseable to "stretch" rules, as you are dealing with people's livelihood.
That is true, again, this is why I'm researching on this prior to getting into this mess. I am not posting here saying "hey, I got myself into this mess, how do I get out??? hoa is evil!!!", no I want to provide good product, cheaper clean furnished rooms to "techies", and abide by the rules as much as possible because I don't have resources yet to fight battles like this.
>This is why you need to analyze the property/area with this in mind. This would be considered a political risk, and you should assign more risk to an area with more rules. If you aren't familiar, your expected return, aka discount rate, is determined by three areas; 1) risk-free rate (aka 10-year treasury bond) + operational risk (aka political, tenant credit quality, state, location, etc.) + liquidity risk (aka are you going to sell it? if so how long does it take to get your money back). Going against legitimate associations and ruling authorities is a game that you will most likely lose.
That's precisely the original inquiry in my post - how do people do it given that most HOAs won't allow it. Seems like the answers: 1) find HOA that allows to have more people, such as 4 under one roof 2) find houses with no HOA. Either option is a good one.
That is correct in most places, not just in Texas but in other states, in my experience. You have to find the right location.
Start with the "unrelated adults rule". In some places, it's 2. In some, though, it's as high as four. It just takes hunting. I rent to students so obviously have the same challenges. I own a unit that is in the middle of college student apartments and condos, so it's fine there. If I tried that in one of the non-college neighborhoods, it would be pitchforks and torches. Lol.
Yea, that's what I started to do - go through HOA rules for each prospective house I want to buy. So far no luck unfortunately. Do you have any recommendations on how do this kind of research more efficiently? It's very hard to get those rules PDF docs and many HOAs don't even have a website and leave a phone number. For some I can't even find a phone number ....
I'm afraid not. With absolutely no disrespect, when you rent by the room, you're basically running an unattended rooming house with a full kitchen. This tends to work when you have a specific clientele (students, midterm professionals, etc) or in places with insane rent prices. I wouldn't personally choose this model in Houston, as a more down-market clientele would be more expected since rents aren't that bad and with them comes the kinds of problems that you don't want in an unattended rooming house. Even Austin would be better. What exactly is your model there?
>I'm afraid not. With absolutely no disrespect, when you rent by the room, you're basically running an unattended rooming house with a full kitchen. This tends to work when you have a specific clientele (students, midterm professionals, etc) or in places with insane rent prices.
What's wrong with it? It is of course would be more work to manage, I understand that.
>I wouldn't personally choose this model in Houston, as a more down-market clientele would be more expected since rents aren't that bad and with them comes the kinds of problems that you don't want in an unattended rooming house. Even Austin would be better. What exactly is your model there?
The problem is I can't find anything decent that would cash flow positively in this market. Average math turns out like this - ~$250k single family house, $1900/month average rent. This is not a sound investment to make as it would not cash flow positively (with property management company, reserves for repairs and vacancy, etc.). The criteria I have for searching for a house is more or less good condition, good neighborhood, and houses no older then 20 years old. These criteria due to my personal constraints on time (I have a demanding full time job as many of us do) and on connections/team/expertise(I'm not an expert at rehabs nor do I have a team for this yet).
So given all of that I am researching on other clever ways of hacking the situation and conditions I'm in to still come out ahed so splitting houses I purchase up into multiple "doors" by renting by the room is a natural conclusion. I am a "techie" and I am targeting other "techie" clientele - i.e. people who need a quiet place to work remotely (with great internet speed) or who are in the beginning of their IT/desk-professional-job career and need an affordable furnished place for a few months/years. Another group I'm considering target is traveling nurses. I very much do not care for turning this into semi-section-8 type of housing. And this is how I started to wonder about all of those stories of wonderful returns renting by the room.
What's wrong with it is that you have a massive, massive liability case if one of your tenants kills and eats another. Or lets their meth-head friend crash for the night and their pimp comes by and they end up stabbing each other.
No, SFHs don't make one lick of sense to buy as rentals in Houston right now. They almost never make any sense to keep as rentals. SGFHs are terrible, terrible cashflow investments, and if you're making money on them, it's often because people are neglecting capex and the house is rotting or it's paid off any they just don't have the sense to realize that there are so many better investments than keeping the money in a house. Some serious rehabbers can make money on SFHs, but they're almost contractors who have a side-hustle as landlords, and even they tend to sell the houses whenever the prices are great.
So you've revealed that you actually don't have a business model that makes sense for the Houston market. You have no demand but want to make the supply because you think it'll make more money. Stop looking at SFHs and start looking at 2-4 units. That's the sweet spot for most individual investors, money-wise.
Hey @Alex Bush! My advise is that if your looking to house more than 2 people that arent related to you to just look for investment properties in a neighborhood with no HOA. You also have to keep in mind HOA's can add and remove restrictions at anytime, so if your looking to rent out by that many rooms staying away from them is for best. I personally house hack my current home which is a 3/2 here in Missouri City with two buddies and I have no problems at all.
He isn't planning on living there and having roommates. He's planning on running a rooming house.
@Alex Bush I'm not saying whether you ought to do it or not, simply telling you what the reality is. You will generally find that almost everywhere, including unincorporated counties that house urban cities, rooming houses or border loging is specifically prohibited OR includes specific permit regulations like obtaining a Conditional Use Permit. Obviously it isn't everywhere...but I'd say it's the vast majority of areas. And the reality is that most people you hear on the BP podcast are just doing it without getting caught.
Again I'm not saying you should, just telling you how the world is operating.
it all makes sense. Do you know how multi-family houses legally operate? Or each individual unit in a dubplex/triplex/fourplex/etc. is considered a standalone dwelling unit and these number-of-people-under-one-roof-restrictions do not apply?
They are...MULTIFAMILY, which means they are separate units. The restrictions apply to each unit. You cannot subdivide your lot or turn a SFH into a MFH without zoning permission. Often you can have an ADU without a problem, especially if it lacks a full kitchen, but as soon as you rent it to 2 different people, you're back in hot water. ADUs are good for whatever home you're planning to live in.
The quote you posted above says 'as a single housekeeping unit' which identifies the restriction is per unit. Also this restriction you posted is a private restriction, not the City code. So you need to see what that says specifically to determine their restrictions. My guess is it is similar.
The interesting thing is - most of the cities I'm researching on do not have any prohibiting ordinances at all, it's all the HOAs being difficult/draconian.
In Texas, most cities have lax rules and let each neighborhood decide what's best for themselves.
Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
5y
Normally you want to find properties that don't have HOA. But I know of a good company call PadSplit. It's like student living but without students, they require a certain home layout to become a host. Check them out and if you have any other questions feel free to message me. https://www.padsplit.com/
Hampton, VA · Member since 2017 · 24 posts · 16 votes
5y
I own 4 such rentals where I rent by the room and in one city the rule is 4 unrelated persons and in another it drops down to 3. Apparently, way back in the day landlords would have 12 people in a 3 bedroom house so they cracked down. I think they went overboard but you did the right thing in checking codes first. I found out about the 3 bedroom rule when a city inspector came knocking on the door and my PM got a phone call. Fortunately I was still able to cash flow but I had planned on 5 based on word of mouth from other investors. I went from a cash cow to a marginal investment.
You are doing the right thing by doing your homework. I was fortunate because I almost learned the hard way. That said, the model only works if the law allows it and ever locality is different.
Hi, I am very puzzled. I am researching on how I can rent out single family houses by the room but it seems like every single HOA rules and regulations prohibits this. I'm in Houston TX area.
As far as I can tell every HOA document has something like this one form or another:
The term "single family residential purposes" also shall be defined as: (1) one or more persons related by blood, marriage or adoption, which may include only parents and their dependent children, siblings, parents or grandparents; or (2) by no more than two unrelated persons living together as a single housekeeping unit and their dependent children, siblings, parents or grandparents.
Based on that HOA description, I would say do not rent by the room in that community. Your best bet is to find a home without an HOA. I personally buy all of my homes in HOA communities not because I want to, but because every community in my area has them. They are real pain in the asses sometimes.
Find an HOA with a low fee and read the documents to make sure its allowed. The definition of Single family home in my state of Florida literally means "one dwelling unit" and is not as descriptive as you have in Texas. HOA members have approached me and told me what I am doing is illegal per the county and HOA documents.... And they are lying. HOA documents are pretty vague sometimes so use that to your advantage. County, city, and state laws are much more specific so a call to your building division or code enforcement will give you a clear answer.
Real Estate Investor · Madison, WI · Member since 2013 · 18 posts · 5 votes
5y
@Alex Bush Adult Family home. There are several destinations that local municipalities have that allow for the exceptions. They are usually granted fairly easily but need to be renewed, that's how they manage you. No complaints from neighbors or 5 O, you get a renewal.
Normally you want to find properties that don't have HOA. But I know of a good company call PadSplit. It's like student living but without students, they require a certain home layout to become a host. Check them out and if you have any other questions feel free to message me. https://www.padsplit.com/
Wale, old post but great mention of Padsplit! I've never heard of them and spent a couple minutes looking at their site. Thanks!
