Renting by the room near a university

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Renting by the room near a university

Thomas Brady
Corporate Auditor · Charlotte, NC · Member since 2015 · 30 posts · 7 votes

Hello Bigger pockets! 

I have a question regarding renting to students. There is a really nice duplex near the University of North Carolina at Charlotte that I am interested in. it currently rents for $2,500/month. $1,250 per side. Which isn't bad because after I calculated all the expenses, it came out to a conservative $200 cash flow per month. not great, but not bad. 

I recently listened to the BP podcast "The riches are in the niches" and was very impressed with the concept of renting by the room in student areas. This duplex is literally 3 miles down the road from the university and is currently being rented by college students. 

I checked Craig's list and looked up renting by the room rates; I found that most rooms are renting anywhere from $350-500/month. This duplex is a 4200 square foot 4/3 duplex (4/3 on each side) 3 of the bedrooms have their own bathrooms. I figure I could conservatively rent each bedroom at $350-375/month which would bring my monthly rent up to      $2,800-2900/month. 

Does anyone have any experience renting a property by the room? are there any downfalls to this, because from my math it would give me an extra $300 in cash flow per month. 

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Al Wilson
Investor · Daphne, AL · Member since 2014 · 1k+ posts · 242 votes
11y
Go for it. This is the new trend in student housing, so ride the wave as long as you can. Good luck.
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  • Al Wilson
    Investor · Daphne, AL · Member since 2014 · 1k+ posts · 242 votes
    11y
    Go for it. This is the new trend in student housing, so ride the wave as long as you can. Good luck.
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  • DJ S.
    Investor · Concord, NC · Member since 2014 · 56 posts · 17 votes
    11y

    I would go for it @Thomas Brady .   As a former college student, I (we) don't mind sharing and saving on rent. Students also welcome the comradrie as long as the roomies are cool - so really screen well (without breaking discrimination laws) and draft a simple but strict lease :-) .  You may have to send(text) reminders to the students that need more but usually if you show enough presence on the property things will go well.  Also make it all inclusive (water/heat/ac/internet) - you can add cable since its not much extra.  I think some parents will even co-sign to be held responsible for issues - this deters unruly students because you can contact the parents.

    I currently rent by the room in MN but unfortunately not close enough to campus where I can command more rent but I've done ok.   You may see more turnover which most likely will follow the semester/quarter system.  One of the roomies gets a discount to be my eyes/ears and to show the place for me during turnovers.

    The only other thing is to make sure you follow the NC City or County law of the number of "unrelated individuals" living under the same roof - I don't know what it is here.

    Good luck.

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  • Josue Guerrero
    Full-Time Real Estate Investor · Raleigh, NC · Member since 2014 · 57 posts · 9 votes
    11y

    Hey Thomas, it sounds to me like it could be a worthwhile investment. There definitely seems to be a big trend in renting rooms to college students nowadays. I don't have experience renting out to college students, though, but the only piece of advice I can offer is to make sure you set a high security deposit. The last thing you'd want is for somebody to do some serious damage to one of the rooms or bathrooms. The high security deposit would help motivate them to keep everything relatively orderly.

    Best of luck to you Thomas! I'm curious to know about how your investment plays out, so I'll send you a colleague request!

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  • Gregory Walter
    Charlotte, NC · Member since 2014 · 101 posts · 40 votes
    11y

    Its a great way to get started but not really sustainable after you start to grow your profile.  I'm moving away from it: 

    Here are the issues: 

    1) Accountability - People renting a room aren't going to want to be not the same lease with someone unless they know them, and then maybe not even.  If you have separate leases per room and there is damage in the common area its a grey area.  Garbage collection, who's responsible, and who do you penalize when you get violations from the city for carts not being taken in, trash in front of the house on the wrong days etc.  Common area cleaning - who's responsible and how do you enforce it.  Who do you go after when your appliances walk off and every tenant in the house claims to know nothing about it, and demand new appliances?

    2) Utilities - how to split.  If you use net leases, tenants will ultimately fight over the split, the tenant who has the utilities in his name, might get taken advantage of by slow paying tenants.  If you have a gross lease, util costs may be high because the tenants don't see it as their expense.  What happens when the tenant who has the utilities in their name splits 

    3) Leasing - lot of appointments and no shows vs. more traditional housing, harder to advertise on MLS. Harder to advertising in general without risking code enforcement inquiring further. Lot higher turnover.

    4) Zoning - Read the code and your see this is a grey area.  I was in compliance and a code enforcement official launched an investigation into my house.  In the end, I was found to be in compliance, but the burden of proof was on me to avoid further issues.  When I asked and mentioned specific code from the zoning ordinance, the code enforcer told me the code was open to his interpretation even though based on the code, I was in compliance.  

    5) Financing - lenders often have a hard time with multiple leases on the same single family property or multiple leases on the same unit.  If you do gross lease, having higher expenses probably hurt your debt to income ratio vs. having slightly lower rent and no expenses on a net lease.

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  • Elizabeth Colegrove
    Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
    11y

    I would try it what do you have to lose it. Just check the local laws to make sure you don't violate any housing regulations. I would also be ready for them to be much harder on the house and not clean, or have trouble with roommates not liking each other. My key for my regular rentals is my lease and in this case i think it would be even more important. 

    Oh are these rates with or without utilities etc. I would think about doing 500 and than offering utilities and make housekeeping service including. My brother room  room rentals company had everything inclusive and than also a housekeeper for the common areas.

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