For some landlords, renting to one tenant at a time is ideal. It’s easier, to say the least, and it gives the investor more time to do other things that aren’t related to their rental investment. The tenant signs an agreement for a year-long lease, and the landlord partners with a property management company to deal with the day-to-day demands.
However, in certain areas, renting to multiple tenants is the more profitable option. This is true if your real estate investment is in an area where tenants can’t afford to rent an entire property on their own. Of course, renting to more tenants is more challenging (get ready to deal with disagreements among tenants), but it can be better than having a vacant unit for a long time.
Not sure if you should rent to multiple tenants at a time? Fortunately for you, the experts at Luxury Property Care are here to break down the risks, rewards, and more.
What are the benefits of renting to multiple tenants?
If you’ve invested in a single-family home, however, you’re having a hard time renting it out, you should consider renting to more than one tenant at a time. In other words, you should allow your tenants to rent a room. Let’s take a look at why this may be the better option for your South Florida rental property:
- Find tenants fast. Is your property in a college town? Is your market more likely to rent a room than to rent an entire home? If you answer “yes”, it would be better to allow tenants to rent out rooms instead. You’ll be able to find tenants a lot faster.
- Attractive to tenants that want to save. It’s substantially more affordable for tenants to split the bill than to pay for Wi-Fi, water, and other utilities on their own. This is true if your tenant pool includes student tenants.
- Earn more rental income. Say you’re renting out a four-bedroom home to one family for $2,000 a month. However, if you rent it out per bedroom at $600 a month, you’ll be able to make more money because that totals $2,400 a month.
- Easier to evict troublesome tenants. If you evict an entire family, you lose your rental income. However, if you evict one tenant, you lose merely a fraction of the rental income and you can replace the tenant in no time, too.
- Tenants are rarely around. There’s a good chance that your tenants are young professionals who like to go out, order take out, and the like. In other words, they likely won’t be at home most of the time, but if they are, they won’t be that nitpicky.
- Faster move-out. When tenants move out, they’ll only have to clean out their individual rooms. The rest of the property can be thoroughly cleaned by a property management company. This will speed up the move-out process so that the replacement tenants can move in sooner.
What are the drawbacks of renting to multiple tenants?
Allowing multiple tenants to rent your single-family home at a time comes with certain challenges. As a property management firm that’s been overseeing single-family homes for a long time, we’ve put together a few of the cons you need to consider:
- Turnover rate. Don’t expect your tenants to stay for an extended period. If you’re renting to students, they’ll be gone by the end of the term. Partner with a property management company to make sure that you can find replacement tenants fast.
- Disagreements among tenants. You’ll have to play the role of the mediator because disputes are inevitable. Your tenants will begin to blame one another for minor things, such as a clogged toilet.
- Tenants are less likely to take care of the unit. They’re there temporarily, so they likely won’t take care of it well.
- Common areas won’t be cleaned because, in their minds, they’re only responsible for their room, so why should they care about areas that aren’t in their contract, right?
- Late rent. If you haven’t partnered with a South Florida property management firm, you’ll have to personally follow up with multiple tenants to remind them to pay up.
How can you manage multiple tenants in a single-family home?
The good news is that, with the right strategy, you can mitigate the risks that come with renting to multiple tenants. Here’s how you can manage multiple tenants in a single-family property:
- Ask tenants to make a “pact”. You shouldn’t have to get involved, but you can encourage your tenants to come to an agreement. That way, you can make sure that each tenant knows what they can and can’t do, as well as what they’re supposed to do. Can food in the fridge be shared? Can tenants have guests overnight? Who’s in charge of cleaning? They can take turns or agree to a plan that works for them.
- One tenant’s violation is everyone’s violation. Make it clear that if one tenant violates the rules, everyone has to face a certain penalty. Your tenants will be more careful when they’re aware that they’re responsible for each person’s actions.
- Do not allow tenants to sublet. Subleasing is a bad idea. If your tenant’s “subtenant” fails to pay rent, you can’t force the subtenant to pay up since they aren’t your tenant. In short, it can get complicated, so don’t agree to it.
- Get your tenants to sign a liability clause. In general, a liability clause is an agreement that states that all of the tenants are responsible for rent as a group. In other words, if one tenant can’t pay their rent, the rest of the tenants have to find a way to cover the entire amount of that individual’s rent.
Need help managing multiple tenants?
Renting a single-family home to multiple tenants isn’t easy. You’ll have to deal with more complaints, more concerns, and more disputes. Basically, you’ll have to assume more responsibilities.
To lend you a hand, we provide full-spectrum property management services to South Florida investors. At Luxury Property Care, our experts are ready to help you manage your tenants, maintain your accounts, and more. We’ll keep your tenants in check, and make sure that they know their responsibilities.