Rent Rooms?

Real Estate Investing Course

Should you rent rooms in your own home, or run a boarding house as a real estate investing strategy? Maybe, and then again, maybe not. When I was younger, I enjoyed having people living in my house. Most of them even became friends. On the other hand, you might not like that arrangement.

Each of us is different. I hated being a landlord when I owned rentals that were not my home.

Consider Your Options

Of course, you don't necessarily have to live with the room-renters, so consider all the options available. You could do any of the following:

1. Buy a house just to rent it out by the room. In other words, make it a boarding house. This can be an excellent way to get cash flow out of homes that might not otherwise be such good investments.

2. Rent rooms in your own home and share common space with the renters. This is what I did for several years when I was young and single, and it worked fine for me.

3. Partition your home so you can rent rooms without sharing common space.You'll need at least two bathrooms, and separate entrances to make this work.

4. Add an efficiency apartment for yourself, so you can have privacy, perhaps still sharing a laundry room with the renters. This is what we did when I married. It also opened up my previous bedroom, increasing the rental income enough to pay for the new apartment in less than a year.

5. Sublet a room in the apartment you rent. If this is okay with the landlord, it can be a way to afford a nicer apartment, or to get past financial hard times.

6. Use room rentals as a way to afford a house payment. If you are having trouble buying a home because you can't afford the payments, you can buy a home with extra rooms and rent them out.

7. Buy a house for son or daughter who is going to college, and have them rent out the other rooms in order to pay for the house. I know one investor who did this and even had enough cash flow to help pay for his daughters tuition.

Consider The Money

The amount you can charge for rent will vary greatly in different parts of the country. Here is what I charged renting rooms in a mobile home in a small town in northern Michigan (in the 1990s):

Small Bedroom: $65 per week times 52 weeks equals $3380 per year.

Medium Bedroom : $75 per week times 52 weeks equals $3900 per year.

Large Bedroom : $85 per week times 52 weeks equals $4420 per year.

Annual Potential Income (But I did have a couple weeks vacancy now and then): $11,700 per year.

This was a home that I lived in, remember. I included all utilities in the rent, and I tracked my expenses closely. Including repairs to the heating system, the refrigerator and roof, as well as utilities, garbage collection, cable television, local phone service, property taxes and insurance, my costs the last year I had the house were $3,900 (I had paid off the $253/month mortgage).

How do you figure profit when you live in the home? In reality having others in the home probably only added $300 or so to the annual costs of running the home. Heating was almost the same cost, as was garbage collection, taxes, insurance, cable television, and phone service. A little more wear and tear and a bit more electricity were the only real additional costs.

In other words, almost all the extra income was profit. Or if you want to consider ALL the expenses (even though I would have had most of them anyhow), I lived for free and had $7800 income from the home I lived in. Either way it was a good deal, and helps explain how I traveled often and rarely worked a full time job.

At the time I was renting rooms in my mobile home, nicer homes closer to the center of town could easily get $100 to $125 per week. You can do the math to figure what that is annually. You can also imagine the profit potential if you had one of the old five bedroom homes in the better parts of town.

Do you want to have thousands of dollars of extra income every year? What would you do with that money? Think about that, and you have the answer to why you should rent rooms.

By the way, this was an excerpt from my e-book Boarding House Profits - How To Make Big Money With Room Rentals. For a book based on real experience, which can make you thousands and keep you from making expensive and time-consuming mistakes, it is ridiculously cheap. You can get more information or buy the book here: http://99reports.com/boarding-house.html

Steve

=================================

Note: If you haven't subscribed to this course, and you want the other lessons, you can still sign up for free here:
Online Real Estate Investing Course.

Houses Under Fifty Thousand | Rent Rooms?