William from Ottawa asked me the following question today:
Great site and great info.
I have more of a question than a comment. I only have experience in
renting the whole house/condo to an individual, but never dividing a
house up and renting it by the room. Being someone who have never had a
room mate, I will like to find out from your experience how difficult
is it to find tenants, making sure then tenants get along, keeping the
unit clean and tidy, etc.
Any help or suggestion will be much appreciated.
Thanks from a fellow 20 something investor in the National Capital.
First off, thanks for the great question. I've been needing a bit of inspiration lately, so this is just the ticket to get me off my lazy arse and writing a post that I hope you'll find helpful.
First, let me tread carefully here. There may be legalities in your municipality against student rental properties, or against having multiple people living in a single family zoning area. It would be a good idea to check into local by-laws before trying to rent to students. That being said, rules are often malleable, and in London it is highly common to have 5, 6, 7 and 8-bedroom student rental properties. Overall, it is difficult for a city to stop student rental homes. The zoning by-laws typically only prevent homes from being sub-divided. That being said, I know that London is currently investigating methods of controlling student rental homes.
2. Finding Tenants
Finding tenants has not been difficult for me thus far. I think I can attribute this to the fact that I am easy-going, and I am not trying to squeeze every penny out of my properties that I possibly can. I make a healthy profit off of the properties, and thus, I keep my rents low and am able to offer tenants different things to keep them interested. The arrangement is mutually beneficial with no party feeling sleighted.
Marketing is the key here. You need to find out what students really want. Guess what, its 2007 now… what do young people want? Super-blazing-fast highspeed internet. Offering free highspeed is a real draw. If you're not an expert in this arena, there are professionals who could wire up your home, or it is easy to get a wireless router and let the tenants worry about the rest. Again, a caveat, sharing one internet connection is usually against your service contract. Read it, understand it, and know that there is a chance you could be held liable for illegal actions carried out over a connection that you own.
Utilities included. I always rent my units all-inclusive. This can be billed as a benefit because tenants do not need to worry about varying utility costs or setup fees for switching utilities into their own name. Less hassle.
Discounts in the summer. Many students return home in the summer months and do not want to pay full price for a vacant bedroom. You would be surprised how much even a $50 discount in the summer will make a tenant feel better about signing a 12-month lease. Again, this is win win. The cost is minimal to the landlord, but the good will instilled in the tenant is priceless.
Some other things to consider that will motivate student renters: Dishwashers, In-house laundry, a security system, a signing bonus, etc. etc.
3. Policing Roomate Arguments
THIS IS NOT YOUR PROBLEM! Don't feel bad, this is the second time in the last month I've been asked this question. I just plain don't worry about it. Maybe I've just been lucky so-far and people have gotten along ok. I suppose you could have problems if you have one random person in the house who is there to cause trouble, but so far I've rented to decent, cooperative people. I guess it is always good advice to screen your prospective tenants for compatibility with you and the other tenants, and I have had to turn people down from time to time.
The other thing to do is to rent to a group of friends. They are much less likely to have the sort of arguments that require mediation. I'm hoping that I can fill my 2 5-bedroom places with groups of 5 this-year. The best thing is the amount of time you save from showing the property less. These are the groups you need to bargain with as well. People are extremely suceptible to the thought that they are getting a good deal. Only 3 easy installments of $19.95… but you not only get one knife sharpener, we'll throw in a bonus sharpener that you can keep in the garage, or your tackle box…. etc.
4. Cleanliness and Damage
Now… this can potentially be
an issue. So far, I've been lucky enough to rent mostly to women (who
are naturally more tidy), so I have not had any major issues. General housekeeping is the responsibility of the tenant. I try to go
into the house every couple of months just to address any major issues,
but it is impossible to control the situation entirely.
best thing you can do is hire a cleaning company to clean the house
when tenants change. The carpets may need steam cleaning, and the house
will likely require a top-to-bottom scrub.
This is also something
you can market to your prospective tenants along with some of the items
mentioned above. Even if you were already planning to paint a few
rooms in the house, you can use it as a bargaining chip to let the
tenants know that you care about their well-being, are willing to keep
the place in good order, and are giving them a fair deal. It is a show
of good faith.
Lastly, make sure you are using a comprehensive lease. There are inexpensive leases available online, at Staples, or through your local Property Management Association (e.g. London Property Management Association). They often have clauses regarding cleanliness and damage. It would also be a good idea to investigate adding a clause internet use. Many leases prohibit using the home for illegal activities or for running a business, however it would be useful to extend these clauses to internet use also (always CYA).
Thanks for the great comment William, you've hit on some of the major difficulties involved with renting to students. I hope I've touched on some potential solutions that you can employ to make renting to students a little easier, and a lot more profitable!