Should I rent out separate rooms?
Should you rent out each room individually, or rent the entire house to one family?
You are going to see a lot of YouTube videos out there saying how profitable it is to rent out the rooms in your rental property to individual renters, instead of renting the property to one party or family. Doing it this way can make you more money, but you should be informed about what you’re getting into.
What does it mean to rent out separate rooms? Some people call this “house-hacking” or renting to roommates. When you rent out separate rooms, you have separate lease agreements for each bedroom. The tenants of each bedroom are typically on a month-to-month lease and each pays more or less rent based on the size of the bedroom. The property owner usually pays for the utilities.
The tenants end up sharing the kitchen, backyard, and oftentimes the bathroom. Because the renters don’t know each other prior to moving in, you must have pre-arranged house rules to avoid problems.
The house rules must explain the expectations for how the occupants will share the shared areas. Enforcing the house rules isn’t really possible, so you have to expect a certain level of complaints and customer service.
The total amount of rent will be higher doing it this way. The two biggest problems with renting the individual rooms is vacancy and the extra management time.
There is higher turnover with room rentals because the tenant is just more mobile. Typically these kinds of tenants are younger with less roots in the area, often time students or tenants with transient jobs that need flexibility.
The higher level of vacancy requires more work finding new tenants. More oversight is required when managing because you will have more tenant disputes. You also need to consider the additional wear and tear on the home. Each tenant will pay a security deposit, but it will only cover damage to the places in the home where that specific tenant has full control.
At TrueDoor Property Management, we advise our clients not to do this. Our experience has taught us that the long term results of renting individual rooms doesn’t match what our clients are looking for. The unpredictability of high turnover and the extra wear on the property can quickly outweigh the benefits.
Most management companies will not take on a client that wants to rent out separate rooms. You’ll likely be on your own should you decide to try this.