Rent to a group??? Furnished or unfurnished

Caught with unlawful development, is renting to a group the way to go ???

Hi everyone. I have a house in Melbournes eastern suburbs which I have turned into two x 2 bedroom flats without Council approval. Council caught me and required me to turn it back into a single dwelling ( no problem, I just need to open the dividing door between the two halves of the house, they are fine with two kitchens etc). However, this will drop the rent from $340 per side per week to around $450 per week for the entire house.

On that basis, I'm thinking that a house let to a group might be the way to go. I would like to charge around $180 - $200 per room (includes gas and electric) but the agent would rather just put it up on the rental market and try to attract a group of 3 for around $600 and they pay their own utilities. It's probably a good idea if the separated services are in my name otherwise it will look like its being used as two flats again (Councils do check this and I'm aware they will be watching me).

Does anyone here have experience renting to groups? I also have enough furniture to furnish the entire house so would that be a good idea too and assist with getting tenants? I'm happy to hear any ideas anyone has and will consider all possibilities. I currently have a family in one of the flats but they declined to pay to rent the whole house so as soon as I decide what is the best option, I'll need to give them 4 months notice. Thanks in anticipation of your advice.

If the going rent for the whole 4 bedroom house is $450 a week, why would a group of 3 pay $600?
Marg

marg4000 said:

If the going rent for the whole 4 bedroom house is $450 a week, why would a group of 3 pay $600?
Marg

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It happens all the time around universities. The key is that you move to rooming agreements where there is a separate lease for each room. Tenants are responsible individually for their own rent, not jointly and severally for the whole lot. That is worth something to them.

How did you get caught?

Morbius said:

It happens all the time around universities. The key is that you move to rooming agreements where there is a separate lease for each room. Tenants are responsible individually for their own rent, not jointly and severally for the whole lot. That is worth something to them.

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Yes, I understand renting to individuals. It's the "group of 3" that seems odd.
Marg

The "3" was suggested by my REA who is in favour of just putting it up and saying groups are welcome, he seems to think 3 people is an ideal number even though the house has 4 (and potentially 5) bedrooms, 2 kitchens, 2 laundry ( one is a small euro-laundry, in a cupboard) and 3 bathrooms (includes 1 ensuite).

The agent wants everyone on a single lease (yes, he doesn't want to do anything out of the ordinary, he doesn't usually manage rentals with groups in them.

I got caught cos I put up a second letterbox, that's all it took.
Other options could include continuing with my current tenants in the front of the house and Airbnb in the rear unit but I would have to have both lots of services in my name because Council checks utilities and probably Airbnb too.

My preference would be 4-5 people, $200 a week and I pay utilities. I'm studying my options using flat mates.com.au the way to get the most money seems to rent "per room" than "whole house"

I'm really open to suggestions about how to handle this.

Savanna100 said:

The "3" was suggested by my REA who is in favour of just putting it up and saying groups are welcome, he seems to think 3 people is an ideal number even though the house has 4 (and potentially 5) bedrooms, 2 kitchens, 2 laundry ( one is a small euro-laundry, in a cupboard) and 3 bathrooms (includes 1 ensuite).

The agent wants everyone on a single lease (yes, he doesn't want to do anything out of the ordinary, he doesn't usually manage rentals with groups in them.

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If it is a single lease, then I don't see how a group is any different from a family except that the potential for it to self-destruct is greater. (but I have also had cases where things were very stable because the group evolved over time but kept leasing continuously.) I've never heard of there being any premium for unused dividing doors or having tenants who aren't related to each other.

I just need to maximize the return on the house as I no longer work and the rent needs to cover all costs so I'm presuming that renting by the room ($200 x 4) will get me more return than renting at the local market rate (approx $450).

Letting a room at a time ? Is this the way to go?

Savanna100 said:

Letting a room at a time ? Is this the way to go?

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Isn't that what you got in trouble for?

These situations are fine as long as things are going perfectly.
If there is a dispute over water rates or tenants going in arrears or a claim for compensation for something to be broken, you will have a lot of difficulties.

Landlords insurance will not cover you and also you will not to have the support of the tribunal and claiming for any kind of condensation because too many people have been allowed to reside in the property.

Also vacancy rates tend to be higher these types of situations.
I personally am not in favour of these!

Savanna100 said:

I just need to maximize the return on the house as I no longer work and the rent needs to cover all costs so I'm presuming that renting by the room ($200 x 4) will get me more return than renting at the local market rate (approx $450).

Letting a room at a time ? Is this the way to go?

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If you are renting by the room, then it is a rooming house situation and there will be one lease per room. To capture the premium you need to add the value.

Note that there are requirements for rooming houses over and above standard residential tenancies and they differ by state. (for example you may need firewalls, and there will be stipulations about things like the size of washing machine you must provide.)

thatbum said:

Isn't that what you got in trouble for?

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No, I got into trouble for having the house divided into 2 flats of 2 bedrooms each.

You have all given me something to think about and you all rightly point out that there are many dangers and pitfalls. I wonder if some of those would disappear if I lived in the house and simply rented the rest of the rooms out in an informal boarding situation like is often done via flat mates.com ?

Failing this, I'll go back to renting the whole house a one under a normal letting situation.

Thank you all for your input.