How to MAXIMISE your rental income

[Marten]

Greetings,

i like to find out the opinions of Property Investors...

let's say you have a rental property with 4 bedrooms...

which of the following 2 options would you choose taking in the consideration of the rental income & the problems or headaches that come with it:

----------

1. rent the property to a family of 4

OR

2. rent the property as a shared accommodation by renting the 4 bedrooms, individually, to 4 different tenants

----------

would option no. 2 generate a higher rental income than no. 1???

& would option no. 2 create more problems & headaches than no. 1, considering that you'll have to deal with 4 tenants separately???

Curious,

Marten

 

[capitalist]

Hi Marten,
When a lease is signed the person/s on the lease are reponsible for the paying the rent as well as all the other conditions/clauses that are included in the lease.
Option 2 would get a better return if you were living there and renting out the rooms seperately at a premium with all utilities included (except phone) in the rent.
However someone could lease the property and sublet the other rooms out seperately, though this is usually frowned upon by the owner and property manager.
Whatever the case, you wouldn't have more "problems & headaches" with 4 tenants because only the person/s listed on the lease are responsible for the property and making sure the rent is paid and the property is looked after.

I think the ideal situation would be to have a young couple (both working) renting the property.

 

[XBenX]

Originally posted by Marten

would option no. 2 generate a higher rental income than no. 1???

& would option no. 2 create more problems & headaches than no. 1, considering that you'll have to deal with 4 tenants separately???

Curious,

Marten

yes

yes

what you depend on how much time you want to spend with the property

 

[mitch]

Gday Martin, having lived in shared accomadation as a young bloke, the person who owned/had the lease was the boss,so in times of dispute the buck stopped with them.In the one house,four seperate people looking to establish a pecking order with no moderator would cause no end of trouble for yourself,l think.One person or a couple on a lease would remove you as the moderator should there be problems in a sublet situation.Perhaps in the case of a 4 bedroom home with a bit of space a family of two adults and four kids would be ideal.Where l live in central Vic propertys like that are in great demand and prices are at a premium,just look for the stable couple not Axle and Storm (two made up people)and there combined families looking to shack up together after a whirlwind romance of three weeks.A little less money but lot less problems than four seperate rents, good luck. MITCH

 

[geoffw]

What Mitch says is important.

Most shares (at least when I was sharing) were taken by one person, who then took the risk (and perhaps a little rent relief) by sharing the house.

The landlord rarely had to deal with sublets. It was all up to the leaseholder.

It's probably only in student sublets that the landlord takes control. Things like electricity, phone, rent- and even sahred food costs- can lead to problems.

Option 3 may be a possibilty- depending on the house.

Split the house into two. Build a kitchen for one half. And let them out as two new lets (not shared)

 

[TheBacon]

I had an interesting discussion with a R/E agent today....

He told me to never let out a 3 bedroom house to more than 3 people or a 4 bed to more than 4.

For example (by his thinking) its ok to rent out a 3br house to couple plus 1 adult or a couple plus 1 child but not a couple plus 2 adults or kids. His reasoning is that extra people in the house just puts too much strain on the house and fittings start breaking, holes appear in walls, lawns look like parking lots etc., etc., etc.

However, if the extra rent you might get from letting to 4 people covers this then go for it. If the numbers are right then the numbers are right.

Good Luck

TheBacon

 

[D.T.]

Bacon: I dont see the logic in that at all. The average family imo is a 2 adult 2 child family. I'm assuming the 2 adults sleep together and the 2 children dont

That equates to 4 ppl and 3 bedrooms, if you ask me. This is unless of course you're referring to letting to a group of ppl who are not a family, in which case i agree with the agent.

 

[Simon]

Sitiuation here

Renting by the room is very common in this area for uni students.

With 4+ rooms it raises the income level substantially. At $100 per room a home worth $250 pw suddenly generates $400 pw. Much better for a 5 or 6 bedroom home.

When letting by the room the landlord assumes responsibility for the utilities, but they usually have an agreement to pay whats fair and anything above a specified level is topped up by the tenants - this stops the aircon being left on 24/7!

I have inspected plenty of places. They are usually older, larger unrenovated homes which show wear and tear but not enough to worry the students.

Another bonus is usually the students have enough contacts that they will find another student to take up the lease if needed. A 6 week bond is paid which helps offset the loss caused when students finish in Nov and decide to compete for something new the following Feb. About half stay on over christmas, the figures are higher for OS students.

Cheerio!

 

[Glenn]

Hi Simon,

Funny you mention the 5 or 6 bedroom situation, that is something I am interested in at the moment.

In the area I am looking, if you accomodate MORE than 6 people per household you are considered to be operating a boarding house and then must meet some additional regulations in regard to council and fire control.

One of my long-range strategies is to find a semi-detached pair of properties in a run down condition with enough room to extend both to 6 bedrooms, put a bed, desk, chair, cupboard and bar fridge in each room. Once this occurs, I want to quit my day job and continue working my part time night job just to cover the bills at home and use the spare time to manage the props.

Glenn

 

[INVESTRON]

one person or ten people - if the referances are good thats all that matters.

check referances, make sure they arn't from family or friends.

 

[Glenn]

Hi Investron,

Welcome to the forum and thanks for your reply.

As far as references go, I have never heard a bad one so always take them with a grain of salt.

When appraising a tenant, I check the things that they have stated when applying for the lease. Such as, if they work I call their workplace and ask to speak with them. If they study I would ask for their student id. As other situations crop up I deal with it as I see fit.

On the subjective side of things, I look at the way they present themselves and if they have driven a car, the state of it inside and out. A dirty car with papers and empty vb cans rolling around everywhere is a pretty good indication of how your property will be treated.

Glenn

 

[Lotana]

Glenn,

You have not seen my car - it is so messy and dirty that every time I bring it to a car wash they ask me to pay extra $5 in addition to their standard $20 charge!

Nevertheless, I am pedantic in paying my bills and looking after other people's property if it happens to be in my care.

I guess it's a market thing - if your IP had been vacant for a couple of months you would become less of a psychologist and more of a capitalist

Cheers.

Lotana

 

[sctpc]

I have rooming houses in semi outer melbourne and thay take an average of 1- 1.5 hours per week to manage each house. I have them fully furnished inc a tv for every room and dvd video in lounge queen beds when fit depends on room size ect. I charge buy the room + furniture hire and utilitys total rent from 100 to 130 for own bathroom and I clean the main areas weekly when i pickup the rent from th safe and mow as neaded. Yes they are more work but its still very good money and in vic under Clause 52.23 of the planing scheme it only matters if you have more than 10 habitable rooms not inc the bathroom toilet laundry ect just bed kitchen and living.