Rent by the room as a couple

[Joe Paul]

As a support to house hacking, my wife and I are considering renting by the room (no kids, two dogs). Right now our market supports this strategy and gives us a more skin in the real estate game versus chasing down MFH. We plan on starting with the bonus room of our current SFH then purchasing another SFH in the next 6 months with 5-6 beds to continue this strategy.

What are the biggest considerations would you take with renting by room? Has anyone started with rent by room then shifted to another strategy? What's the best way to legally outline boundaries? Something I also haven't been able to get clear on is what renting by the room looks like after we (primary residents) leave. 

Thanks for your thoughts!

[Jeff White]

@Joe Paul Already great advice given in this thread, Dan especially!

I've done rent by room strategy for my rentals since 2018, and it is a very good strategy when done correctly with proper screening and fit. 

Additionally, with rent by room, sometimes it is all about fit, and you can't screen for fit really since every prospective tenant will tell you what you want to hear when you meet them for a showing or property tour, and they might pass all your background, credit and income requirements.  

With fit for rent by room, you have to start with 2-4 month leases, that is huge because you aren't locked into a long-term lease with any one roommate tenant, and you can stagger a few tenants if you want a little more stability. After they pass the 60 day mark and show their habits - good and bad, you will have a good idea if they are a good fit by how they pay rent, how they get along with others, how they respect your house, how they throw the trash out, etc. 

If they pass that test, then you can renew them for a 6-12 month renewal since you know they are a good fit for the house, with others, and with you and your wife. 

By this small change, you avoid the majority of roommate to roommate issues, and with less conflict, you have more stability and long-term tenants and less vacancy. 

Also, after moving out, the screening and tenant placement doesn't change, you have the same methods as before except now, you are renting out the room you are vacating.

Rent by room is a fantastic strategy, but you can't cut corners, and don't rent to friends or family. Strangers aren't danger if you screen them correctly and start off with short leases. That's the difference.