Rooming Houses
Otherwise known as Group Homes or Share Houses make for sound investment opportunities for investors wanting high yield and *cash flow positive investment properties.
What are Rooming Houses
Driving past the home, from the street it looks just like the house next door, however unlike a standard home, a Rooming House could have 5 or 6 ‘Private Studios’, all under the same roof.
Meaning for each tenant, you have a separate rental agreement so if one leaves you still receive rent from the others. Each tenant is responsible for their studio and thus any damage they may cause, as per normal Residential Tenancies Act.
Depending on Location, tenants tend to pay between $380 pw to $450 pw for their studio on a minimum 6 month lease. Leases are inclusive of all outgoings such as power, water, electricity and internet.
Tenant Benefit
- Cost Effective
- Convenient living arrangement
- Simply bring their clothing and linen and move straight in
- Privacy
- And also common areas
- Designed for tenants not wanting to rent an apartment, who want to in the suburbs and have outdoor areas
Investor Benefits
- Superior Rental yields
- Enhanced Income Stability and Risk Mitigation
- Probably cash flow positive in your hands
- Low vacancy risk as they are attractive to tenants
- Capital Growth potential
- Higher equity creation once tenanted, as banks value them on a commercial basis
- Meaning *easier to borrow for your next investment property based on improved equity plus stronger cash flow
- Separate rental agreements with each tenant
- Market resilient investment with high resale value
- Tax advantages in higher depreciation benefits
- Quality Tenants include :
- Young Professionals
- Blue Collar workers
- Age Groups
- Singles, Couples and or Divorcees
- Essential Workers
Financials
may look like this :
- Property Investment $1.050m
- Average rent per room per week $450 x 5 studios with 95% occupancy
- Average rent per year $111.000
- Gross yield could thus be 10.5%
- Net yield estimated 7.8% (including all outgoings)
(*by way of example only for demonstration purposes)
Internal Perspective
- Innovative Floor plans
- Each tenant has their own ‘studio’ under the same roof
- Highly functional and desirable living spaces
- Each studio includes
- Bedroom
- Living area
- Bathroom
- Kitchenette
- More often than not, also a outdoor patio area
Locations
Australia wide has a need for shared accommodations / group homes / rooming houses and or co-living property.
It makes investment sense to be closer to employment nodes, shopping, and infrastructure to support your tenants needs.
The closer into required infrastructure to attract tenants, the higher the land value. On the flip side, the higher the rental yield should be. Also the attractiveness of securing tenants improves.
FLOOR PLAN EXAMPLE