Renting Individual Rooms for Increased Monthly Income?
In years past "rent-by-room" was a concept from the 1960s, but will history repeat itself while housing prices continue to increase exponentially? Let's take a look at this concept and break down why it could be financially beneficial and some things to consider before jumping into this.
First off, what is "rent-by-room"? Let's say you are a "Resident-Landlord" meaning you own the property and live in the property as well. Times are tough and you need some help paying off the monthly mortgage, insurance, tax, utility payments, etc. You realize you have a spare bedroom that is not being used, why not rent it out and get that extra money you need to help pay off some of your monthly payments? Better than picking up a second part-time job. There you have it, rent-by-room.
Okay, now let's say you are an investor-landlord. Here is a chance for you, Mr./Mrs. Landlord, to take advantage of the current market. People are flooding Las Vegas while housing inventory can't keep up with the demand. Increasing prices make it even harder to find affordable housing in good areas. Inevitably, people are going to have to start sharing homes, AKA rent-by-room.
The good part first:
More income per month for the same property.
Hypothetically, lets pretend your property is a 3bed/2bath home renting for an even $1000/month. But, if you were to use the rent-by-room technique, you could possibly get between $600-$1000/month/room.
(i.e., $600 (spare bedroom) + $600 (spare bedroom) + $700(master)= $1900/month) You just increased your monthly rent by almost double.
Another way to look at this technique is that you will likely not ever have 100% vacancy. Any landlord that has gone through a turnover knows it can take weeks to months to get their property re-rented wasting time and money while the property sits vacant. But, if you have one or even two people move out, you will still have a monthly income of at least $600/month. Which is better than $0/month during a turnover.
It gives tenants a chance.
As Las Vegas continues to expand in population due to new job opportunities, bigger employers moving into town, and people being able to work from home, some may not be able to find a place to buy or rent for themselves in this market. This means you could have a continuous demand of tenants coming to your property, ensuring you do not have 100% vacancy.
Things to consider:
Higher traffic through the property.
With people moving in and out possibly month by month, you could have higher levels of wear and tear on the property.
Partially furnishing the property.
Some tenants may need a bedroom furnished for them while they try to find their own place to move. You might also want to add some amenities to the property like a tv and couch in the living room, some kitchen ware/appliances, and a dining room table. Some decorations and warm touches to the house would not hurt either. Still have to do your due diligence to attract tenants to your property.
Including utilities in the rent.
With tenants all on their own lease for their specific room, who pays for the utilities? You, the landlord would. Constantly transferring utilities from tenant to tenant and keeping track of each bill would be near impossible. On top of that, what if they don't pay their utility bills and you get a lien on your property? To cancel all of that headache out, it would just be easier to keep utilities in your name and calculate the cost into their rents. It might be a nice amenity for your tenants to have WiFi as well.
Fortunately, as this room rental concept develops, there are several of websites advertising the rates of rooms for rent, such as Hotpads.com, Spareroom.com, Cirtru.com, Craigslist.org and Zumper.com. If you are a current landlord and are interested in this concept and would like to have a management company help increase your monthly income, call Resys Real Estate and we would be happy to help!
Resys Real Estate
6910 Edna Ave. Las Vegas, NV. 89117