Should I lease my property as a share house?

Monday, 4th May 2015

share houseThe thought of a share house immediately invokes images of neglectful and problematic tenants, so is it ever a good idea to pursue?

Share houses are usually the domain of university students or young professionals that might not be ready, financially or otherwise, to purchase their own home, and are prepared to rent out a property on a room by room basis.

There can be specific suburbs or locations that may be suitable for share houses.

In the case of university students, for example, properties located near a university campus and in an affordable area are typically sought after.

Young professionals, on the other hand, might be willing to pay a little bit extra and therefore demand a more modern property that is in a better area but close to transport links.

The benefit of leasing your property as a share house is that you can receive higher rental returns as tenants in share houses may be willing to pay slightly higher rents.

Higher rents are not guaranteed, though, and leasing your property as a share house usually presents more disadvantages than benefits.

A share house, for example, is inclined to experience more wear and tear because there is generally higher foot traffic.

This means you may have to replace carpets, window treatments and fixtures and fittings more often.

When leasing to university students, you may also face a higher turnover of tenants and longer vacancy period. This is because students may only want to lease a property during the university semester, which could leave you without a tenant over the summer holidays.

Share houses may also attract neglectful tenants that don’t maintain or care for the property as well as older tenants or a young family. If it’s the first time they have lived out of the family home, university students and young professionals may not be aware of the level of upkeep required to maintain the property to an acceptable standard.

Also, if you are renting the property out on a room-by-room basis, there may be disputes as to who is responsible for any damages to common areas, such as kitchens and bathrooms.

Generally, while the extra cash flow looks appealing on the surface, for the vast majority of investment properties it makes more sense to rent the whole premises to a family or group who are all on the lease and responsible for the whole property.