In this high interest rate environment, investors are looking for ways to get better cashflow from their property investments, ideally getting a commercial yield from a residential asset. For those of you who want to combine subdivision with high cashflow property investment, this strategy could be for you.
In this article, we discuss what Rooming Houses are and how they may fit into your property portfolio.
What is a Rooming House?
Investing in rooming houses presents an excellent opportunity to generate high yields by leasing out each individual space separately. Depending on the location, returns of 10% or more may be achievable. However, in order to meet rooming house legislation requirements, there must be a common area, which includes a shared laundry, kitchen, and living space. This common area contributes to the higher returns that can be achieved, although the specific requirements may vary depending on the council.
How do you manage 5 tenants?
Property managers with experience in managing rooming houses are responsible for overseeing the property. Each tenant signs a separate lease for their self-contained living area, which includes an ensuite, small living area, and a kitchenette. Some units may also have external access. The property owner is responsible for maintaining the shared areas and covering the costs of utilities such as water, electricity, and internet.
What does the Brisbane City Council say?
A rooming house is classified as a Class 1B residential dwelling that is specifically designed for separate tenancies. In the Brisbane City Council area, a rooming house can have a maximum of 5 lettable areas, with a maximum of 5 unrelated parties, and a total floor area no larger than 300m2. Compared to renting out a single house in the same location, the rents achieved from a rooming house are typically much higher. Photo below shows a typical floor plan of a two story design:
Where do I find one of these?
It is very rare to find a Rooming House for sale, as investors typically don’t sell the golden goose! Most investors will custom build a Rooming House on a vacant block of land, ideally in a location close to amenities and transport. If you want to know more about combining strategies of subdivision & building a rooming house, please reach out to us!
Call Steve on 0405 050 942 or click Contact Us
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