Wednesday, September 28, 2022

Rental Roomies & Higher-End Homes a Win-Win?

 


 

 “Many hands make light work.”

(Old English Proverb)

 

I remember back to my college days in sunny Arizona when I had to figure out where I was going to live my sophomore year.  Most of my friends were thinking of staying in the student housing in the dormitories for Year 2.  I had virtually no experience with rental properties and wasn’t sure what to do.

 

I talked to my Dad about it (I learned early it was always smart to run my plans by my financial backer first).  He didn’t really have any input on where I lived; I was the third child and he was much more pragmatic.  “I’m paying XX dollars for your housing- just let me know in what bank account it should go.  So, in that brief exchange, I had my financial backing and freedom to choose where to live.

 

Some of my friends got similar commitments from their parents and we were house hunting!  Of course we were all-in on finding a house with a pool (common in hot Phoenix) and hot tub (more rare, but not insurmountable).  We found a 4 bedroom house with both, plus lemon and lime trees in the backyard to boot.  It came to $1,200.00/month (which was high back then for Phoenix and definitely over market rate).

 

But… split between 4 guys it was $300.00/month which was a third of my Dad-provided housing budget.  I now had extra funds to play with.  We, as a group, were overpaying, but I was psyched!  I was paying much less than if I was living on my own or with one other roommate.

 

I’m seeing a similar play in the rental market as prices continue to rise.  Some of our higher-end rentals are (smartly) getting taken by groups of young professionals. 

 

First, as a point of reference (according to Rent.com), the average one-bedroom apartment in Charlotte in April 2022 costs $1,513.00/month and the average two-bedroom is $1,730.00/month. 

 

If we chop that into per person, we can calculate roughly $850 - $1,500 per person.  When that is multiplied into a 4 or 5 bedroom home or townhome, you can equate that to a $3,400.00 (low end) to a $7,500.00 (upper end) rent spend- and that’s going off of averages.  Obviously, some people spend more than that on their housing.

 

As good of a strategy it is for tenants to decrease their rental costs, it is also a good one for landlords.  Purchasing lower-priced housing in Charlotte has been very competitive for years, but most investors typically avoid higher-end housing.  However, by buying higher-end housing and marketing to roommate situations, it could allow for good cash flow.  Relatively-speaking, there is just not that much higher-end housing available for rent in the Charlotte market.  Really nice, feature-rich houses could go fast and for top dollar.

 

For now, it’s a good deal for all, much like my college housing.  Tenants get better housing at a lower price and investors get less buying competition and the ability to charge higher rents.  It could be a rare win-win in the current investment housing market.

 

Happy Landlording!

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