Hi There
Until recently, we had 5 porperties that we room rented. All in all we found it to be a good way to reduce our shortfall, however it took us some time to install a system that worked.
We found that it was not profitable unless there was at least 5 rooms in a house because we paid all out goings such as electricity and water. We also found that although some of the properties were within walking distance to a uni, we never attracted any uni students. Each room was fitted out with a bed, side table and cubboard. The kitched was fitted out with fridge, cooking utensils, cuttlery, microwave etc. The laundrey we supplied with a washing machine. Each room door was fitted out with a key locked handle which the tenant had a key as we did. If they lost their key, then out their own cost, they had to replace it. No telephone lines were supplied for obvious reasons.
Because no agent would take on room rentals, we had to do the managing and as a result, we "had" to come up with a system which was time effective as well as easy to manage.
We would first look for properties that would achieve good capital growth and that were well located to major shops, train line and transport. Because we needed 5 bedrooms to be profitable, we would source minimum 3 B/R houses and then convert the lounge room into a bedroom as well as the garage. All tenants were on 1 month leases (for insurance reasons) and we would role each lease over continually for as long as they stayed. We found that the unemployed were the main tenant we attracted and also the easiest to manage. In fact the worst payers were those with jobs. With the unemployed, we set up a connection to centrelink via the computer whereas their payments were directly deposited into our account and if for some reason they cancelled their payment, we would get notice at least a day before payment was due which gave us time to approach the tenant for an explanation. The other good thing about the unemployed was that because of their situation, the department of housing would supply them with at least 4 weeks bond and in our case they would give us 6 weeks bond because the rooms were furnished. The system worked so well that centrelink, DOH, council services etc would refer people to us.
Over a period of some 5 years, we have only had a handfull of major problems, however nothing that was more than a headache.
In our situation and with the type of tenants we attracted, we are very strict on the way we "manage" the tenants. There are no excuses, no late payments, no drugs, no violence or abuse and most of all, no emotion. Having said all that, we are not the evil landlord, we are strict but fair.
In closing, I would suggest that anyone considering this avenue be prepared for alot of problems at first and more importantly, be very particular in where and what type of property you choose to convert to a room rental and what type of tenant you think you wiil or want to attract. Having said all that, the rewards are there if you can get it right.
Best of luck
