If you have a large investment property, renting the rooms out individually may initially look like a good strategy to get a higher return. For instance, a four-bedroom house can rent out for around $400 per week. Some investors may think they can increase their income by renting out the rooms individually for say, $125 per week, resulting in an additional $100 week income.

However, you’ll need to find four tenants instead of one, and each one of these tenants will need a separate contract. This can be time consuming, and dealing with four different tenant needs can be stressful.

There are a lot more costs associated with renting a property by the room, such as an increase in landlord insurance and costs associated with more wear and tear.

In our experience, these additional costs often result in a loss for the investor, and renting by the room in most cases simply isn’t worth the additional time and stress.

Here are our reasons why we advise not to rent by the room.

Increase in Wear and Tear

This is probably the number one reason why you shouldn’t rent by the room. Tenants who are renting by the room very often have little respect for the property. Furthermore, each tenant will have their own circle of friends meaning more visitors to the property. This results in more wear and tear on the property, and an increase in maintenance costs.

Moreover, tenants are unlikely to admit to any damage in shared areas, so it will be difficult to recover costs from them – meaning more expense for you.

More Cleaning and Garden Maintenance Costs

With unrelated tenants, cleaning and maintaining the garden is always an issue. You can pay a professional cleaner to ensure the common areas are respectable, and for a gardener to tidy the place up, but both of these are additional costs. While they may be a tax-deductible expense, they are both decreasing your profit.

Extra Property Modifications

Your property will need to be modified for room rental. Each room will need a lock on it and you will probably need to install lockable cupboards in the kitchen to avoid arguments over food ‘going missing’.

You may also need additional modifications to adhere to fire safety regulations.

Additional Furnishings

The common areas will need to be furnished and generally, you’ll need to supply white goods such as a small fridge for each room and a washing machine in the shared laundry. You may even find you need to furnish each bedroom too. Not only are these additional setup costs, these furnishings will all suffer from wear and tear – another cost for you.

Increase in Utility Bills

It’s very difficult to charge tenants individually for electricity and water, so these costs are usually factored into the weekly rental. However, because tenants aren’t accountable for the water or electricity they use, they tend to be less mindful of the amount they use. Lights are left on overnight, extended showers are taken and washing machines are used for just a couple of items – and it’s you footing the utility bill.

High Tenant Turnover

The type of people who rent by the room, such as students, tend to be transient and with several unrelated people with different characteristics living together, there does tend to be more disagreements. These two reasons alone generally mean you’ll have a higher turnover of tenants. Therefore, you’ll need to budget for periods when rooms become empty and you have to spend more time finding tenants.

Quite simply, renting a property as a whole means one contract, cheaper landlord insurance, less initial outlay, less maintenance costs, lower vacancy rates and ultimately less stress and hassle.

We’re always looking at ways in which to help you get the best out of your property investment. With over 40 years in real estate and property management, our talented team is constantly looking for new and innovative ways to ensure your property investment experience is exceptional. This is why we are one of Newcastle’s longest established property management companies, so give us a call on 02 4954 8833 or pop into our Cardiff office for a chat.