Renting by the room: David Pickron shares his experience and some of the hard-fought wisdom he came away with trying to maximize rental income.
By David Pickron
I finally did it! After meeting with the experts, recording podcast episodes about it, and talking it over for months, I dipped my toe into the “rent-by-the-room” market.
Since you are reading this, you know I survived, but not without some lessons learned. Like any good person who lives to tale the tale, below I share my experience and some of the hard-fought wisdom I came away with… so buckle up.
Renting by the room
As a curious landlord and one who has tried just about every way to fill a vacancy, I entered the realm of renting out two of my properties by the room in an effort to maximize rental income in a local high-demand area.
By leasing individual bedrooms rather than the entire unit, I hoped to charge a higher combined rent, diversify my income streams, and minimize the financial impact of a single vacancy.
While appearing financially advantageous on the surface, I anticipated a host of challenges and risks that I knew I could not underestimate.
And so I began.
When the listings went live, I immediately had interest. Not having done this before, I was unprepared for exactly what came next.
I was marketing a three-bedroom unit and a two-bedroom unit, both in the same community. I’ll address each property separately.
The three-bedroom unit
Because the rent would be split three ways, the per-room fee was marginally less than that of the two-bedroom unit and immediately drew more interest.
For the sake of anonymity I will reference the applicants as A1, A2, and A3.
A1 came in first and was anxious to see the property. Immediately there were some red flags that went up, and I took notice.
This unit has a two-car garage and A1 wanted complete use and control of the entire space, of course with no additional cost. When I asked why, there was no good reason other than they wanted full control.
I expressed that that wasn’t possible with the parking restrictions in the community and A1 saw this as a deal breaker and withdrew interest.
A2, after seeing the unit, brought their own set of questions. They wanted to ensure that in every storage space, pantry, shelf, etc., that they would be guaranteed a one-third of use. While reasonable to me, I told them I couldn’t guarantee that and that it would need to be managed by the occupants.
A2 withdrew interest in the property at this point. With two strikes against me, I was losing hope.
A3 came along and you guessed it, I struck out. There were questions that could not be answered to A3’s satisfaction and they left the property in search of another option, and I left the property rethinking my strategy.
The two-bedroom unit
As only two occupants would share this space, the per-room rent was a few hundred dollars higher per room.
I had a totally different experience with this unit.
The first individual to come through was excited about the prospects of the property. They were happy with the garage, shared space, and cost. I offered a $200 one-time fee if they could find an individual to take the other room. And much to my surprise, they found a friend through social media to occupy the other room.
This was a successful strategy for me. My search was over almost before it began and I have my first-ever shared-room property occupied by two really satisfied tenants.
Renting by the room requires more management
Communal living adds one more complexity to your management style.
When you rent to one person, they become the “boss” of the property. When you rent to several individuals, you remain the boss and become responsible for helping resolve any issues that arise between the multiple individual tenants. If that doesn’t appeal to you, then this might be something you take a pass on.
In full disclosure, after a few weeks on the market, my three-bedroom unit finally rented out.
I had a single individual come to see it with the potential of sharing with two other tenants. But after considering everything, they decided they wanted the entire property to themselves.
So here I am again, back to the tried-and-true method of renting one property to one tenant.
I’m glad I ventured out, but there is something comfortable about using the model I’ve grown so accustomed to after 30- plus years of investing.
If you are considering renting by the room as an option, you can request my top recommendations to consider adding to your lease at info@rentperfect.com.
About the author:
David Pickron is president of Rent Perfect, a private investigator, and fellow landlord who manages several short- and long-term rentals. Subscribe to his weekly Rent Perfect Podcast to stay up to date on the latest industry news and for expert tips on how to manage your properties.