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Rooming Houses-Is the cash flow worth the hassle?

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ahmadbelfon

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For our next property we are considering converting a six bedroom dwelling in Oshawa, Ontario to a rooming house to maximize our cash flow. We understand that rooming houses attract lower income, more transient tenants and therefore more hassle. However, our strategy is to diversify our real estate portfolio with a good mix of equity growth properties and higher cash flowing properties. My basic question to anyone that has done rooming houses before is whether or not the hassle is worth the tremendous cash flow rewards. Any other tips on what to do and what to avoid when setting up a rooming house would be greatly appreciated.
Many thanks,
Ahmad
 
Rooming houses are very common in Europe, and I lived in one when I lived in Scotland. The best suggestions I can give are (1) to screen your tenants with respect to substance abuse and possible violent tendancies, and (2) to find someone to be a resident manager or `house Mom`. Pick someone good, pay them well and reward them often.
 
Caution: before you buy a rooming house, ask your insurance agent about getting insurance on it. Don`t be surprised if this becomes a show stopper!
 
QUOTE (BobHudson @ Feb 19 2008, 10:45 PM) Caution: before you buy a rooming house, ask your insurance agent about getting insurance on it. Don`t be surprised if this becomes a show stopper!


Thanks for the advice Bob.
Ahmad
 
QUOTE (ChrisDavies @ Feb 19 2008, 10:25 PM) Rooming houses are very common in Europe, and I lived in one when I lived in Scotland. The best suggestions I can give are (1) to screen your tenants with respect to substance abuse and possible violent tendancies, and (2) to find someone to be a resident manager or `house Mom`. Pick someone good, pay them well and reward them often.


Thanks Chris!
Ahmad
 
QUOTE (ahmadbelfon @ Feb 19 2008, 09:59 PM) For our next property we are considering converting a six bedroom dwelling in Oshawa, Ontario to a rooming house to maximize our cash flow. We understand that rooming houses attract lower income, more transient tenants and therefore more hassle. However, our strategy is to diversify our real estate portfolio with a good mix of equity growth properties and higher cash flowing properties. My basic question to anyone that has done rooming houses before is whether or not the hassle is worth the tremendous cash flow rewards. Any other tips on what to do and what to avoid when setting up a rooming house would be greatly appreciated.
Many thanks,
Ahmad


My reno partner is doing that with his house currently. He has had his share of hassles as well, but overall enjoys the freedom of being able to work out of town and his house related bills are getting paid from his rooming house venture. He treats his room mates to some fancy cooking at different stat holidays. Overall, he is pleased. Another coworker that i met some years ago had gone through a divorce and does rooming houses. He offers a laundry service and if he has trouble with anyone, he tells them that it is not working out and he wants no trouble and even offers to help them move out. It worked so well, that he had purchased a second home and is doing the same thing as well. I think a new room mate in his case also had to be approved by the other room mates to make sure that he would fit in okay. I knew of another lady who had bought a house much bigger than she could afford and used room mates to make the payments. She had some who didn`t pay and caused her grief. Typically, a renter of that type are there because they cannot afford their own apartment and sometimes they will move on as soon as the can afford one or they find someone to share the expenses for an apt. I remember reading about a guy in NW Calgary who rented rooms to university students at a mere $200 a month... and had over 20 students!!! His neighbours said that the kids were good and had no problem with him doing that!
 
QUOTE (ahmadbelfon @ Feb 19 2008, 09:59 PM) For our next property we are considering converting a six bedroom dwelling in Oshawa, Ontario to a rooming house to maximize our cash flow. We understand that rooming houses attract lower income, more transient tenants and therefore more hassle. However, our strategy is to diversify our real estate portfolio with a good mix of equity growth properties and higher cash flowing properties. My basic question to anyone that has done rooming houses before is whether or not the hassle is worth the tremendous cash flow rewards. Any other tips on what to do and what to avoid when setting up a rooming house would be greatly appreciated.
Many thanks,
Ahmad

Hi

I owned a couple of rooming houses a few years ago here in Vancouver, both with nice, quiet tenants almost all the time. There are many nice lower income people. If they`re happy in your room, they may stay a few years, or they may move on. I had a mix. About half were long term tenants.

Some suggestions:

1. Some tenants` personal problems can make them more demanding. Get a good property manager -- don`t manage it yourself.
2. Screen tenants very carefully, check references. If they`re on government assistance, get their rent cheques made out to you.
3. Keep the property immaculate and very clean to attract the quieter tenants who for one reason or another, don`t have a lot of cash right now. Maybe they`re students, are on welfare, or have low paying jobs.
4. Be kind. Things like a Christmas cake at Christmas for each tenant will be much appreciated and creates good will. Put up a Christmas tree in the common area since many tenants won`t have one in their rooms.
5. Make sure the rooming house use is legal so if a neighbour is nasty, the city won`t shut you down.
6. Pick a property in a pleasant, quiet area that will attract quieter tenants. Don`t buy in a war zone or a drug zone.

Do all this and your extra cash flow may be worth it.

Any other questions, feel free to email me at [email protected]
Cheers, Margaret
 
QUOTE (margaretcowan @ Feb 22 2008, 11:41 PM) Hi

I owned a couple of rooming houses a few years ago here in Vancouver, both with nice, quiet tenants almost all the time. There are many nice lower income people. If they`re happy in your room, they may stay a few years, or they may move on. I had a mix. About half were long term tenants.

Some suggestions:

1. Some tenants` personal problems can make them more demanding. Get a good property manager -- don`t manage it yourself.
2. Screen tenants very carefully, check references. If they`re on government assistance, get their rent cheques made out to you.
3. Keep the property immaculate and very clean to attract the quieter tenants who for one reason or another, don`t have a lot of cash right now. Maybe they`re students, are on welfare, or have low paying jobs.
4. Be kind. Things like a Christmas cake at Christmas for each tenant will be much appreciated and creates good will. Put up a Christmas tree in the common area since many tenants won`t have one in their rooms.
5. Make sure the rooming house use is legal so if a neighbour is nasty, the city won`t shut you down.
6. Pick a property in a pleasant, quiet area that will attract quieter tenants. Don`t buy in a war zone or a drug zone.

Do all this and your extra cash flow may be worth it.

Any other questions, feel free to email me at [email protected]
Cheers, Margaret

Great post Margaret, Thanks for you input.
 
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