Pros of renting to multiple tenants:
- Faster to find tenants. It’s generally faster to find tenants when renting out individual rooms, than to find a family unit that wants to rent your whole property. Important to note, if you urgently need some way to offset the rent.
- Cost effective for tenants. It’s cheaper for, say, six individuals to split the Wi-Fi and power bill, than for a single tenant to pay the whole amount.
- The overall rental income may be higher. You may find that your five-room condo generates $3,000 a month when rented to a single family. On the other hand, you could rent out four rooms for $600 a month each, and then rent out the master bedroom for $1,000 a month (that comes to $3,400 a month)
- Tenants tend to be less fussy. Most tenants who rent out rooms are students, or expatriates working on projects that only last a few years. They tend to be less fussy, when compared to families. They might tolerate the lack of a functioning oven, for example, whereas a family might not.
- You can selectively kick out troublesome tenants. If the tenants are a family, eviction is usually all-or-nothing; you either kick the whole troublesome family out, or you tolerate them. If they’re individual tenants though, you can selectively kick out the bad ones.
- Rooms tend to be cleared out faster, when it’s time for the next tenant. In general, individual tenants will only have a single room full of their stuff. The are usually quick to pack up and go, when the time comes. A whole family, however, can take a while to move all their household belongings; there’s a higher risk of delay when the next tenant wants to move in.
Downsides of renting to multiple tenants:
- Cap on number of tenants: For non- families, there can be a maximum of six unrelated tenants in your property. But this restriction doesn’t apply if the tenants are a single-family unit.
- High turnover. Tenants who rent by the room don’t stay for long, so you’re always having to look for more tenants.
- You can end up having to mediate, if the tenants get into a dispute. For example, if a communal toilet breaks and each tenant blames another, you’ll have to play both detective and counsellor.
- The accounting is harder to handle. You might have to chase multiple tenants for individual rent payment. If many or all of them are fickle with payments, this can become a time-consuming process. *
- Tenants tend to be rougher with the property, and may not disclose issues. These tenants often aren’t staying long, so they tend to be a bit less careful. Doors are slammed harder, floors are less often mopped, and so forth. They’re less inclined to disclose problems, such as a cockroach infestation, because they’re leaving soon and don’t want to risk their security deposit.
*Bonus 99.co tip: if the tenants are students, ask if they’re paying the rent themselves, or if their parents are paying. Usually, the rent will be on time if their parents are paying.
Pros of renting to families:
- Rental income is more reliable. As most tenants don’t want to see their family without a home (especially if they have children), they tend to be more reliable when paying rent.
- Lower turnover. Most of these tenants intend to stay for longer periods, and many families will sign a lease of at least two years. This saves you the hassle of finding new tenants all the time. It also means less paperwork with the condo authorities, as you don’t need to keep switching passes.
- Accounting is simpler. You won’t have to keep track of whether multiple people have paid their rent on time. You also won’t have to chase individual tenants for payment.
- It’s easier to rent unfurnished properties to families. This is because most families intend to “do up” the place to their own needs anyway. They’d rather not have your study desk take up room for their baby’s cot, for example. Conversely, unfurnished units may not appeal to individual tenants who rent by the room (they’re staying for a short period, and don’t want the hassle of buying furniture).
Downsides of renting to families
- These tenants tend to be more demanding. Families often plan to stay for longer periods, and expect a level of convenience that short-term tenants don’t. They’re more likely to complain about your yellowing wallpaper, or your washing machine that needs to be kicked twice before it starts working. Expect to spend more on maintenance and upgrades.
- When this one tenant leaves, the entirety of the rental income vanishes. They’re the only tenants. If they do leave, you’re going to generate zero rental income until someone new comes along. With multiple unrelated tenants, you’re at least getting some income from other tenants, if one leaves.
- More demands on the kitchen. As these often cook, expect more wear and tear in the kitchen. Short-term tenants, such as students, often don’t use more than a microwave oven, or a few pots to boil noodles. But families will prepare full meals, especially on events like Christmas and the New Year.
- Their domestic helpers matter too. Sometimes, family tenants come into conflict with the condo’s management council. A common point of contention is the domestic helper, and whether she’s allowed to use facilities like the pool and sauna. Make sure you know your own condo’s rules, and that prospective tenants know what to expect.
Check out other rental related articles here: 5 under the radar HDB housing and rental schemes and 5 condos for rent that will help you reach your housing goal of being more independent
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