Often landlords are looking for ways to maximize the rental income from their investment properties. One common practice, especially in college towns, is to rent out individual rooms to single adults. The hope, is that the accumulation of individual rents would add up to more income than what you would get when renting out the whole home on one lease. Although this might sound like a great idea, there are several reasons this can cause you a lot of trouble. I’ll go over the top 7 problems you can run into when renting out individual rooms. You don’t want to miss the last two.
To examine, let’s imagine a fictional character named “Joe the landlord”. Joe the Landlord has a 5 bedroom home and rents it out to five individual female adults, with 5 individual contracts. Things start out great for Joe the Landlord but he quickly runs into some issues.
In order of smallest problem to biggest problem, here are Joe the Landlord’s top 7 problems that resulted from renting out individual rooms:
- Joe’s phone was always ringing because generally his tenants were young and inexperienced and in the middle of a lot of life changes. As a result, someone was always needing to move and sell their lease to someone else or swap rooms. Oftentimes parents of the tenants would call as well to discuss or negotiate something. The phone calls never seemed to end.
- To attract his target market Joe the Landlord had to furnish the home. Not only was this expensive but it exposed him to more maintenance and upkeep costs.
- During an inspection, Joe the Landlord discovered a broken cabinet in the kitchen, a rip in the couch, and a broken towel rack in the bathroom. When he asked about them, none of the tenants fessed up to the damage. With individual leases for each bedroom, the rest of the house was considered “common area” and without evidence or someone claiming responsibility, the repair costs fell on Joe. Had the tenants all been on the same lease, he could have held them all equally responsible.
- When a vacant room came up, Joe the Landlord started advertising that a woman’s contract was available because all of the other tenants were also women. Joe was soon contacted by an attorney that told Joe he was being sued because Joe’s advertisement discriminated against the attorney’s client that was a male.
- After changing his advertising so it didn’t specify the sex of the tenant, a 40-year old man applied. The applicant did not have any credit or background problems so Joe had to approve him. Joe the Landlord quickly had a lot of complaints from the four young women that were already living there and then his phone really blew up when the parents of those tenants started calling him.
- The city contacted Joe because neighbors were complaining about all the cars parked in the street. Joe discovered he was violating city zoning laws by allowing so many unrelated, single adults to live in his rental. He was now facing fines and legal action from the city.
- Joe the Landlord received a letter in the mail informing him that he was being investigated by Federal Fair Housing because the attorney suing him had reported him for discriminating against a protected class of people in the case of advertising a women’s only contract.
This may seem like an extreme scenario with Joe the Landlord, but every one of these problems are very real and really do happen. Had Joe watched our video about Federal Fair Housing Laws, see the shared link, or hired a competent property manager, he would have been able to save himself a lot of grief and expense. For your own property management needs, and to avoid the fate of Joe the Landlord, contact Kasteel Property Management today.
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