What is a Share House or a Rooming House
A share house is a residential property where multiple people live together, sharing common areas like the kitchen, living room, and outdoor areas, while having their own private bedrooms. In this setup, tenants typically rent out individual rooms under their own lease agreement
Share houses are especially popular among students, young professionals, retirees or people who want to reduce living costs by sharing expenses. They offer a flexible living arrangement that encourages social interaction, affordability, and community living.
A Share House or Group Home is a home in the suburbs that has several bedrooms, rented out to individual tenants on an individual basis.
Renting it out this way offers investors a higher yield, than they would have gotten renting the whole house under one lease. Investors love this as it could mean that their investment is Cash Flow Positive in their hands.
Rise in Popularity on the back of affordability
Share houses are a popular alternative to traditional home ownership, especially as rents rise and homes become harder to find. In January 2024, the share accommodation platform Flatmates.com.au, saw a record number of people looking for share homes.
The increasing popularity and demand for share houses can be attributed to a combination of affordability, flexibility, social factors, and lifestyle trends. With rising living costs, greater mobility among younger generations, and a growing student and single-retirement population, share houses provide a practical solution to housing challenges in urban areas. Additionally, their appeal to both tenants and landlords, due to the affordability and potential for higher rental yields, ensures that the trend will continue to thrive in the coming years.
As cities become more densely populated and expensive, share houses will likely remain a key option for individuals seeking a cost-effective and social living environment.
“House-sharing is becoming increasingly popular, especially among Older Adults, Young Professionals and even University Students as more and more Australians embrace this growth concept.”
Offering a valuable solution for lower rent, companionship, financial relief, social support and more.
What compromises a Share House?
Share houses come in various types, from traditional houses to apartments or units, and they can be found in cities, suburbs, or near university campuses. The concept is simple: reduce individual rent payments by sharing space and living costs with others.
The Benefits of a Share House for Residents
- Affordability: The main advantage of a share house / rooming house and Co-Living is cost savings. Rent is divided between multiple tenants, which makes it a more affordable living option, particularly in expensive cities or high-demand areas.
- Social Connection: Living in a share house / rooming house can offer a sense of community, particularly for people who are new to a city or seeking social connections. It’s a great way to meet new people and potentially build long-lasting friendships.
- Flexibility: Share houses, Rooming houses and CoLiving properties often provide more flexible lease arrangements, making them appealing to students, travelers, or those who aren’t looking for a long-term commitment. Some share houses even offer fully furnished rooms, making the transition easier.
- Location: Rooming homes and Share houses are typically located in central or desirable areas, such as near universities, transport hubs, or business districts, which provides tenants with easy access to work, study, and social life.
Economic Climate Fueling the Acceleration of Shared Accommodations
Higher cost of living, shortage of rental accommodations, higher rentals and other economic pressures caused by inflation is driving the popularity and shift of many Australians into a Shared Living arrangement. This is a very strong growth trend, witnessed by the likes of online platforms such as Flatmates.com.au and others.
Many Australians do not want to live in an apartment, nor do they want to live in communes which provide basic accommodations all under one lease. Where remaining tenants land up footing bills for wayward tenants.
Australians are a friendly bunch and prefer to avoid being isolated. If they are challenged on top of this in struggling to find suited rental accommodation, once they discover Group Homes, CoLiving Property or Shared Houses, they never look back.
Why Share Houses Are a Sound Investment for Property Investors
Investing in a share house can be a highly profitable and effective strategy for property investors, especially in urban areas with high rental demand. Here’s why:
1. Higher Rental Yield
One of the key advantages of owning a share house / rooming house or CoLiving is the potential for higher rental yields. Instead of renting the property to a single tenant or family, investors can rent out individual rooms, often at a higher rate per room than renting the entire house to one tenant. This setup significantly increases the overall rental income, leading to a more attractive return on investment.
For example, a four-bedroom share house may generate the same or more rental income than renting out the whole property to one family. The increased rental income can offset initial property purchase costs and provide steady cash flow.
2. Reduced Vacancy Risk
Vacancy risk is a common concern for property investors. However, share houses can help mitigate this risk. With multiple tenants occupying the property, even if one or two rooms become vacant, the remaining tenants continue paying rent, ensuring a consistent income stream. In contrast, a traditional rental property might experience a total loss of income if the sole tenant moves out.
Additionally, the growing trend of students and young professionals seeking affordable living arrangements in city centers increases the demand for share houses, which further reduces vacancy rates.
3. Flexibility and Market Demand
Share houses and Rooming Houses cater to a wide range of tenants, including students, international workers, and transient professionals. With urban areas seeing an influx of young, mobile workers and students, the demand for share house accommodations is often high, especially in locations near universities, business hubs, or transport links.
This broad market demand allows investors to appeal to a variety of tenant groups, increasing the chances of attracting tenants even in competitive rental markets.
4. Lower Maintenance Costs
Typically, in share houses, tenants are responsible for maintaining their own rooms, while landlords generally handle the upkeep of shared spaces. This can reduce the overall maintenance burden on the investor. Additionally, because tenants in a share house are likely to treat common areas with greater respect, the need for frequent repairs or cleaning in these areas can be lower than in traditional rental properties.
Share houses often benefit from regular turnover, which can keep the property in good condition as tenants tend to take better care of individual spaces. However, it’s important for investors to ensure that clear guidelines and expectations are set for the tenants when it comes to shared responsibilities.
5. Capital Growth Potential
In many cases, share houses are located in high-demand areas, such as near universities, business districts, or transportation hubs. These locations often experience strong capital growth, which can increase the value of the property over time. This allows investors to potentially benefit from both rental income and property value appreciation.
Additionally, due to the nature of share houses, properties that can accommodate multiple tenants are often more attractive to future buyers, especially investors looking for rental properties. Thus, a share house can be a valuable asset that retains its appeal in the long term.
6. Tax Benefits and Deductions
Investing in a share house can also offer certain tax benefits. Investors may be able to claim deductions for costs related to the property, including mortgage interest, property management fees, repairs and maintenance, insurance, and even utilities. This can result in significant tax savings, improving the profitability of the investment.
Additionally, if the property includes more finishes and fittings than the house next door and is furnished, investors may also be eligible for higher Depreciation Deductions on items like furniture and appliances, fittings and fixtures and the construction itself … further increasing the financial returns.
Considerations for Investors
While share houses offer numerous advantages, there are some considerations to keep in mind:
- Management Complexity: We refer you to a specialised rental management team because managing a share house can be more complex than managing a traditional rental property. Issues such as tenant disputes, different living habits, and the need for regular turnover can add to the management workload. Investors would want to hire a property manager who specialises in share houses to handle these tasks.
- Legal and Compliance Requirements: Share houses are subject to local rental laws and regulations, which can vary from region to region. Investors need to ensure that their property meets all safety, health, and zoning requirements and that they comply with tenancy laws regarding shared living spaces. At properT network, we ensure our industry partners offer full compliance on your behalf.
- Furnishing and Maintenance: Share houses typically need to be furnished with adequate shared amenities to attract and hold onto tenants, and can be subject to higher wear and tear. Investors budget for the upkeep of both shared spaces and individual rooms, which may require future renovations or upgrades.
What is the difference between …
Share House : Fewer bedrooms, usually have own bathroom, living area, kitchenette and bedroom. Larger floor space for each tenant offering higher level of privacy and higher rental income potential. Probably 4 to 6 bedrooms.
Rooming House : Has more bedrooms, bedrooms tend to be smaller, most rooming houses will provide communal cooking, living, entertaining and bathroom spaces. Reliant on higher occupancy, lower rents to be financially viable. Probably 7 to 9 bedrooms.
Co-Living Property : Usually offers 3 and sometimes 4 bedrooms, each should have their own bathrooms ensuite and own lockable pantry, storage and bedroom facilities. Shared common areas internally and outdoors. Shared kitchen. Floor plan designed to attract improved social demographic tenants and thus higher rent per room. Also has a wider resale audience, the day you want to sell the property. Meaning suited to both an owner occupier or an investor. CoLiving should also attract higher capital growth.
Conclusion
For property investors looking to maximise rental income and reduce vacancy risks, investing in a share house can be a highly rewarding strategy.
The combination of higher rental yields, reduced vacancy rates, and the flexibility to cater to a diverse group of tenants makes share houses a sound investment option. With careful management, understanding of market demand, and attention to property maintenance, a share house can provide an investor with consistent cash flow, long-term capital growth, and strong financial returns.
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