Property Management

What You Need to Know About Renting Your Single-Family Home to Multiple Residents

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Belong on Sep 21, 2022

A photo of three adults with moving boxes, preparing to move into a sharehouse arrangement where you rent your home to multiple residents rather than a single lease agreement

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While renting a single-family home to multiple residents can increase your rental income, there are several legal considerations, downsides, and additional costs that you should consider. 

How does renting your single-family home to multiple residents work?

When renting a single-family home to multiple residents, each resident has their own private space, and they share access to common areas like the kitchen, bathrooms, and living spaces. When you rent a single-family home to multiple residents, you reduce the costs of rent for each individual resident. Where a single person may not be able to afford a rental home that costs $2,400 each month, they may be able to rent a room in the house for $600/month. Residents may choose to share additional expenses like wifi, and the utilities may be split equally or proportionally between residents. 

Remember that renting a single-family home to multiple residents differs from subletting a property. When you sublet a property, you rent a place you do not own while still being responsible for the rent to the landlord.

How “house-hacking” is related to renting a single-family home to multiple residents

The term “house hacking” refers to renting out a portion of your primary residence to pay the mortgage on a property. It can also refer to purchasing a multi-family property, living in one of the units onsite while renting the other unit(s) to a secondary party. It can also relate to renting out a guest house on your property. If you plan on renting your primary residence to another resident, you may want to consider many of these same benefits and challenges as renting a single family home to multiple residents.  

Legal considerations of renting to multiple residents

While there are clear benefits to renting your single-family home to more than one resident, there are several legal considerations you need to familiarize yourself with before moving forward. You may need special permission to rent a single-family home to multiple residents. You may also need to change the zoning of your rental property from single-family to multi-family to rent your property to several residents. Further, your HOA may prohibit or limit how you can rent homes in the community. In some cities and counties, you will need a special license or permit to rent your single-family home to multiple residents. In other locations, you may need to have your property inspected before renting it to multiple people.

You may be at more risk if you don’t navigate the legal implications of renting your single-family home to multiple residents. Imagine what might happen if a neighbor complains to the HOA and you are not renting the property in a way that is consistent with their regulations. Similarly, consider what might happen if you evict a resident and they file a lawsuit. These types of situations can have significant implications, including financial consequences. 

Finally, as with renting any property, you’ll need to familiarize yourself with Fair Housing Laws to avoid any inadvertent violations. 

Lease agreement for renting your single-family home to multiple residents 

If your residents don’t know one another, they are unlikely to sign a single lease together. In this case, you will need each resident to sign a co-tenancy agreement that includes additional guidelines around their individual financial obligations. It’s also helpful to ensure that the lease agreement contains guidelines for pets and visitors. You may also want to consider adding policies around shared space usage. These policies may prevent potential conflicts. A peaceful, cooperative living environment will help retain residents for extended periods. 

Benefits of renting your single-family home to multiple residents 

Potential to increase rental revenue

If you can control your costs and expenses, renting your multi-family home to multiple residents can increase your rental income. Renting your single family home to more than one residents might be right for you if cash flow and increased rental income is your primary motivation. In that case, you should still carefully calculate any expenses, including the annual costs of maintenance. Your potential rental income will also depend on your location, the size of your rental property, and the number of people you plan on renting the home to. Consider researching rental pricing factors in your area as you determine how much rent to charge.

Renting to multiple residents reduces vacancies

If you rent your single-family home to multiple residents, you may also find that vacancies have less impact on your cash flow. When renting your single-family home to multiple residents, your rental income is split between several residents. If you have a vacancy, you may only lose 25% or 30% of your rental income rather than 100%. When you reduce vacancies, you can maintain a positive cash flow or limit the effect of a cash flow reduction. 

Downsides of renting your single-family home to multiple residents 

High resident turnover

While you may be able to avoid 100% vacancies for your single-family home, you may find that you have more vacancies overall. You may find that most people will only rent a room in a single-family home as a temporary arrangement. As such, they may be more likely to stay for only a limited period. When they can rent a home on their own, they likely will. Similarly, their circumstances may be more likely to change. As a result, you may need to list your rental property and screen residents more frequently. 

You’ll need to manage several residents

If you rent your property to more than one resident, you will likely spend more time and energy managing your rental property. Adding additional residents can significantly increase your work if you self-manage your rental property. You will need to collect rent for each resident and create and manage multiple lease agreements. You will also need to establish guidelines for the property unique to cohabitating residents. 

Utilities pose a unique challenge 

In some states, you cannot charge tenants separately for utilities unless the usage is accurately and individually metered. You’ll need to account for the cost of utilities when you price each room in the multi-family home. Unfortunately, you won’t know exactly how much electricity or water all the residents will use, and any additional costs will be an added expense. Charging a flat rate for utilities will not incentivize residents to conserve water or energy because they know they will not pay those expenses directly. 

Damages, disputes, and potential evictions  

When you rent a home to multiple residents, you will likely receive more complaints from the individuals in your single-family home. Communal living can be very challenging. You may find yourself moderating disputes or needing to regulate or set norms around residents' behavior. If there’s not a strong culture of caring for the rental property, you will likely experience more frequent damages. As a result, the property will also need more regular maintenance. A high resident turnover rate can quickly increase your costs if things need to be replaced with each new resident.

Skip the hassles of renting to multiple residents and consider a strategy that prioritizes positive cash flow 

At Belong, we help you find residents who appreciate your single-family home as much as you do. Our unique proprietary algorithm tells you exactly how much to charge for rent. We use real-time data, expertise, and insights about your unique home to price your rental property so you can maximize the value of your real estate investment.  

Belong markets and show your property to potential residents. When we find a resident who loves your home, we conduct a credit, identity, and criminal background check and personally interview each potential resident. Best of all, we offer Guaranteed Rent, which means you’ll always get paid.

Learn more and see if your single-family home qualifies.