3- Family/4 Bedrooms Each - Renting Individual Rooms Vs. Renting Entire Apartment
Hi Group,
Quick question for the group. I've come across a deal. It grosses about $6,000+ per month. Monthly expenses go between $3,000 - $3,500. The asking price is $430,000 - However, it's very negotiable, possibly down to $390,000.
It all looks great however, I'm debating the pros and cons of the following. The house is leased on a month to month verbal agreement, for each independent room. Thus, this 3-family now becomes a 15-room individual sublet unit. Obviously this factor contributes to the difference in monthly gross income. If you rent out to 3 individual families, you will only receive about $5,000/month gross. The individual room factor @ $130/week each. Adds an additional $1,000 every month. Is this legal? This deal came through a bird/dog - broker I'm dealing with. I'm assuming it's legal since he's selling it to me. Any comments on the legality of renting individual rooms over a full 3-bedroom apartment unit?
Thanks,
Angel
Sounds like they're running a mini hotel? Do they provide room service also?
The legality should be in the paperwork. I would check the town's zoning office to see how the property is zoned.
That will tell you if they are using the building in the way it has been zoned.
I've seen places where people have rented a room or two in their house, but never 15 rooms.
Keep in mind, you can always apply for rezoning after you purchase, though that can be a long wait.
Find out how it's zoned. Find out if there are parking requirements (one parking space per person for example).
If you find out it IS illegal it's best to know now. Plus it gives you another card to play when negotiating.
DO NOT Assume that it's legal because he's doing and because he's selling it that way.
What are the comps like in the area (for similar properties, not income). Go off of those figures and you'll probably get a better deal.