Renting rooms individually - considerations and pitfalls?

I read a post from a year ago about letting rooms individually. I’m not in a position to have an office or presence in the house I am hoping to rent separate rooms in, though my son might be able to live there later as it’s close to his uni and he may move.
I was wondering if you had suggestions for me as I plan for this? I’m happy for any advice.

I was thinking of renting individual rooms for my 4 bed Wollongong property (near the hospital) which has an internal bedsit with kitchen and bathroom, a master with en-suite, 2 regular bedrooms and a rumpus with spare toilet which I thought could suit as a fifth bedroom. If I list on something like flatmates.com and screen tenants, I liked the idea of having a 2nd level of screening where existing tenants could meet potential tenants and give their feedback. I also wondered about tenants finding other potential tenants themselves and giving an incentive to them to do this. Obviously any new tenants would still need to pass my criteria.

A member shared that he provided toilet paper, soap and washing powder. I wondered where this would end as someone has to provide the fridge, washing machine etc (did you do that?). Or heaters, wash up detergent etc etc. Would it be expected to furnish the common areas at all?

I like the idea of sending a cleaner through as I think the rent would be higher overall than having a family in the house and I have had mixed results with tenants and how well they clean my lovely bathrooms, with one tenant failing to clean it for more than a year and it was brand new so I was not happy with the property manager at all.

I wondered about lease paperwork - can you have individual agreements? How could this be done?

It does sound like more management as people may come and go, but I like the idea of self managing and knowing my tenants, and hopefully having them on-side by offering them the chance to get friends and colleagues that they like living there. I do like people contact and don’t shy away from this, though I hope to have reasonable tenants to deal with, hopefully professionals and students who are not party animals.

I wondered too how it’s best to set the rents, or would it just be by checking other websites for room rentals? I would think a cohesive group might just organise themselves to move and lease an entire property if they think I’m charging well over market rent for the whole property.

Love to hear your thoughts

 

Would it be legal?

 

Yes, rooming accommodation of the respective state's Act, however if its your PPOR and you live there too, unlikely to get any Landlords Insurance cover, unless the type Air BnB use. In that regard, it's risky. It's even more risky when you have zero idea about what you're doing and think the tenants are going to be your friends, that's a fast way to go broke lest they manipulate and take advantage of your good nature and naiveness until its too late and you realise you've been done over. @Girl from Oz, I don't mean to be all doom and gloom but the rental accommodation sector is regulated and penalties apply for breaching parts of the Act. Property Management is a professional service, if you don't even know the basics you may want to consider using a PM to handle it for you. As with most things, it's all fine until it goes wrong and then you end up on ACA with squatters occupying your premise, no lease in place, unable to get them out, and your place getting trashed, and you getting smashed by Police for trespassing lol

 

When you describe it as my lovely bathrooms, it smells like trouble.

 

It really sounds like you have rose coloured glasses on when it comes to tenants and share accommodation.

Many years ago I personally had a property I let to separate tenants - I had tenants complaining of noise, couldn't share fridge space, bed bugs, theft, one went to jail, everyone contacts you over any and every disagreement - its really not how you imagine it to be unless you either live there or manage it with an 'iron fist' and a strong set of documentation.

You would also have to at least furnish common areas and appliances and pay all bills.

 

Wouldn't this become an issue?!

 

Not to mention they leave the air cons running 24/7, forget to turn the taps off, leave the property doors unlocked and open - just zero responsibility for the common areas of the house.

 

It's all about control with this type of arrangement.

You can exploit illegal immigrants and make money but you have to control them. You got to be fair but tough. Otherwise they will just walk over you.

It would be easier having students as most are not trouble makers. However, any sign of a troublesome tenant and you got to deal with it straight away ie kick them out.

You got to be choosy with the tenants and have a strict policy of no alcohol, drugs or tobacco. Also no partners or friends on the premises. Rules are laid down from the start.

Me, personally, would choose a group of female uni students. Don't get me wrong, strictly business and no hanky panky. I just think they'd be easier to manage.

 

All good advice here, from my perspective I sometimes hear of councils sending notices to owners that they are running a boarding house which they do not have approval for. Gets very technical from there in as each council has different interpretations.

 

If it's your main residence now there are painful tax consequences if you share the house. Mainly that you lose part of your primary residence capital gains tax exemption

 

Does the 6 yr CGT exemption not apply if you convert to boarding house/rent rooms out?

 

It's not that simple, need to talk to your accountant...

 

That might work. The complication I'm referring is when you rent out a room or two in your PPR while you're still living there.

 

Hi @Girl from Oz I have done this in the past. What works as @datto said was lay down rules at the start, dont compromise on it. I found overseas students to be better tenants then locals as they have a lot more at stake and are too busy to cause trouble (personal experience, others could disagree). I also only ever rented out to females and i lived there myself so i made it my painful duty to keep reminding people nicely but firmly on what needed to be done. i had a wattsapp group for that

I also had it furnished, put in tvs in each room to avoid rush in common areas, kept 2 fridges, dedicated pantry space and draws clearly and put in a clear roster for things like dishwasher emptying (they all stack it with their mess but someones gotta empty it ), garbage bag change (i used to be stuck doing it until i dedicated days on who does it when!), once a week clean of common areas - one person dedicated to each area (i had the lounge!), laundry days for each person so no one complains of someone hogging it etc. Basically any and every issue you hear of has to be pulled into a process/structure. Then you enforce it enough times that they all get used to doing it.

I also tried to be fair, whatever they had to do, i had to do myself and do it better than them to set an example. I also put locks in each room for them and every now and then would allow for them to have friends over free of charge as a goodwill gesture and if their parents visited, i allowed that free too. It wasnt ever a given though, they were required to ask me if anyone could come and once i had a person not ask me, and i made sure i called her out on it.

I travel a lot for work and i have to say, those tenants took excellent care of my place even my cats while i was away (for months at times). The bills would remain the same. So in summary, my experience has taught me, you need to live there to set a basic standard OR you need to find people who like keeping their place clean and tidy and perhaps even be very choosy in your first tenant who you can keep as a "head". For instance one of my tenants was a 60+ lady and she reminded everyone if they left a mess (which means i never had to be the bad guy.. infact she told me off once or twice too when i was in a hurry!)

 

RE " A member shared that he provided toilet paper, soap and washing powder. I wondered where this would end as someone has to provide the fridge, washing machine etc (did you do that?). Or heaters, wash up detergent " get them to buy these items themselves.... Give them their own lockable kitchen cupboards. You or some one else needs to be able to visit at short notice and maybe often to fix problems"

 

Don't, there's a reason why real estate agents don't do this work. If you do make sure you have plenty of reinforcements. International student market is dead and the only reason I could see anyone doing it anyway