Breaking an apartment into rooms for rent can greatly increase your cash flow. However, it may be illegal depending on the zoning laws in your area. In many areas rooming houses are not allowed. Check with your local zoning department first.
Wanted to know if anyone has any experience converting a sfh into a rooming house. I have located a property that someone is practically giving away, but it seems the only way I can break even on it is to convert it into sleeping rooms, or possibly sell on a lease-option. Can anyone advise?
Thanks to all three of you for your responses. I’ll shed a bit more light on this particular situation. This is a property in a part of town (Indianapolis) that is on a tremendous upswing. The house has been renovated from the ground up, and is beautiful. The seller has an MAI appraisal for $160k and is asking $109k. He needs cash. I know on the surface, this screams deal, with $51k in potential equity, the catch is that this house is by far the nicest on the block. I don’t see any way that this can rent for $1400-1600, or sell for anywhere near $160k. Not in this neighborhood, not now. I have a lender who is interested in possibly lending me $120k on the house, but I don’t want a money pit. Any more suggestions? Thanks again in advance.
Andrew & GINO have good advice, a rooming house does best in a high density, low vacancy, less discriminating area (Big city). Not to say that it can’t work in other scenerios. But, managing a rooming house is time consumming and as Gino says a headache. Why not explore a lease option. Remember there is a large pool of individuals with less than desirable credit that are used to paying a hefty premium when applying for credit, this would also apply to a lease/Op.