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Should Landlords Rent By The Room Or By The Unit?

Should Landlords Rent By The Room Or By The Unit?

Every student housing market is a little different but one thing remains consistent - all rental property owners wish to maximize profits and keep vacancies low.

 

In order to accomplish this, some property owners have adopted the idea of renting by-the-room, instead of by-the-unit, especially in competitive rental markets. There are both benefits and drawbacks of both to consider.

In student housing, a landlord will often rent a property to multiple unrelated individuals. When the only option for students is to rent an entire unit, they must group together ahead of time. Many students don’t have groups of friends or know other students who are searching for housing as well, especially if they are first-year students.  As a result, they often prefer to rent a place individually. If these students cannot afford an entire unit on their own, then their rental options can be limited. This is why many students prefer to rent by-the-room.  In addition, it saves them time and the situation of trying to find a reliable group of peers to share a unit with.

Renting by-the-room also absolves students of the concern and potential expense of a roommate not paying rent or causing damage to the unit. When renting by-the-unit, the lease typically requires all roommates to be responsible for the rent and condition of the unit. This is generally known as the Joint and Several Liability clause, where in the event one roommate stops paying rent, the others will have to cover the amount.

 

A factor to consider with renting by-the-unit is the possibility of sticker shock. Sticker shock can happen when students are searching for accommodations online and see a by-the-unit rental which is $1500/month next to an advertisement with a by-the-room rental for $450/month. While $1500/month divided by 3 roommates equals $500/month, it could still cause sticker shock, by appearing that the rental would be out of their price range (when in reality, it’s only $50 more than the other property being advertised).

The benefits of by-the-room rentals are very apparent for students, but what about the property owners?


The first benefit for landlords is the possibility of increased profitability when renting by-the-room. If a property owner has a 4-bedroom house that they would normally rent out for $1,700/month, the owner could rent by-the-room and easily charge $500/month per room instead. Each month, this could create an additional $300 in revenue. In addition, renting by-the-room allows a landlord to charge more for different bedrooms, based on size or amenities. For example, the master bedroom with an en-suite would have a premium price in comparison to a smaller bedroom.

Secondly, a great benefit for property owners is the increased probability of generating more tenant leads. A landlord can increase the amount of leads they receive by offering both by-the-room and by-the-unit rental rates. By offering either option, the property owner will have groups of students inquiring, as well as individual students. This would undoubtedly help property owners to rent their rooms and units quicker.

 

Believe it or not, in some highly competitive markets, landlords even offer by-the-bed rental rates. This is usually in areas where doubles are more common (where a student shares a room with another student). In these markets, only offering by-the-unit rentals can be a costly oversight, when students have grown accustomed to by-the-bed or by-the-room rates.

 

Perhaps the most important benefit is decreasing the risk of not securing tenants at all. The task of finding the perfect group of students to rent a multiple-bedroom home can be a challenge. It can be considerably easier to find suitable individual tenants that meet the necessary criteria laid out by the property owner instead. Also, in the case where one tenant decides to leave a by-the-room rental, it’s not as drastic to find one tenant to replace that person.  As well, the landlord will still be collecting income from the other tenants in the unit. On the other hand, if an entire group of renters decide to leave a by-the-unit rental, this would put the landlord in a much different situation.

The decision to rent by-the-room or by-the-unit (or even by-the-bed) is up to each individual property owner, but it’s certainly recommended to consider all options available.

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I truly agree with this post. If you are looking to invest in real estate but don't know how to analyze properties or screening tenants then hire a certified property management company. They allow you to reap huge benefits from your rental property without any headache of dealing with property issues and tenants.

  Tony Cavalli

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