I purchased a house that had previously been used as a rooming house. We have since renovated it ready for new tenants since we settled. Council came out today to inspect the property as the previous owner is being fined for being non compliant and not licensed to run a rooming house. This inspection was nothing to do with us, and I did have the right to refuse entry, however this inspection was nothing at all to do with us, it was only inspected as today was the date the previous owner had to comply by. Council were basically checking that the house was no longer used as a rooming house as they are going to court on Monday to try to prosecute the previous owner and the agency he was working with. House is currently not longer set up as a rooming house (eg no locks on doors etc). We are planning to just have regular tenants go in in the next few weeks (our PM will start advertising this week). However, after my chat with council, I was astonished at the amount of money the previous owner was raking in. Our expected rent will be $340 per week. Previous owner was renting out on a per person basis, and was charging $250 per person, and had 5 people ($1250) per week. The tenants were being fed to him from local charity/housing support services and the rents were coming from centrelink payments. After researching online, it really doesnt seem difficult to be compliant and to become licensed. Fees are only $250-$500 to become licensed. Obviously tenant turnover would be high, wear and tear also high, as would insurance, however seems like a fair trade off for that type of return. Has anyone got a rooming house they are running at the moment in Melb? Would be interested to hear more of the cons. Also would like to know if there are property managers that deal solely with this or if regular pms take these on?
We did rooming houses for a while, but struggled to get tenants against illegal operators. Cash flow can be very good, but things like having to lodge the bond (tenants don't want to pay bond - especially if they are only staying short term, short of cash, etc) was just hell. Utilities costs were very high, as well as wear and tear on furniture. The Y-man
Wear and tear on the house we just bought was pretty shocking. Thankfully it had concrete walls so they were about the only things we didn’t have to replace!
@The Y-man ehat was the issue competing with the illegal providers? I wouldn’t have thought that the legal ones would receive more tenant referrals and better tenants? Are the illegals cheaper?
Illegals were a lot cheaper (about 30% less) at the time we were in the market (this was circa 2003, so things may have changed....maybe.....) The Y-man
@The Y-man do u think it’s worth looking further into? The issue I have this property is in one of the poorest roughest suburbs in Melbourne and I am expecting poor quality tenants either way, (obviously rooming would be even poorer quality). We are 6 minutes walk from the train station and have a bus stop out front.
I am getting lots of requests to do DAs for boarding houses here in Sydney so the numbers must add up for sure. The economics for Sydney and Melbourne would be similar I think for this type of residential usage.
I think the answer lies with @Trainee post above - talk to the prop manager(s). Things like leasing fees could kill the project (again this is what makes legal vs illegal different - you have to issue a tenancy guide to each new client, do a bond lodgement, do entry and exit inspections, etc etc) We self managed and it just took too much time and effort. The Y-man
I had a look online I thought there would be PMs specialising in this but cant seem to find any. No way I could self manage as I live on opposite side of the city. I don’t think my PM would want to manage one of these. I’ll look into insurance today.
We tend to avoid Rooming Accommodation where possible, it's a lot of work. That said, I can't say I've ever come across a situation where the return on rooming is quite that much higher than the return as a single house.
This company specialises in rooming accommodation education for investors. About Us – Small Is The New Big It is my understanding that you need to convert the property from a 1A to a 1B building which usually means interconnecting smoke alarms in all rooms, emergency exit lighting and signs and disabled access to at least one room. Utilities can only be charged legally if they are individually metered. I feel the success would depend on a good location and quality of tenants especially if you want a relatively stress free investment.
You might want to read this propertychat thread before getting into rooming houses: Rooming House Help [VIC]
