The stars seem to be aligning for a surge in the number of roommates, with implications for property managers. According to the Insurance Information Institute,
One out of every eight homes in the U.S. is now inhabited by two or more people who are not related to each other—an increase of over 5 percent from 2000 to 2010, according to the U.S. Census Bureau. In other words, there has been a significant increase in the number of housemates/roommates, roomers or boarders, and unmarried partners living together.
Why is this happening? Look at the trends. First, there are a lot more home buyers than there are properties to buy (low inventory). This has had the effect in some markets of creating bidding wars, driving up home prices beyond what many can afford. The result is that more people are being forced to rent vs. buy.
This increase in the number of renters, combined with a shortage of rental space, is in turn driving up average rental prices (see what’s happening in a place like Manhattan, for example). Single people are thus less likely to be able to afford to pay the rent on their own, and that brings us to the solution of renting with a roommate. Or two. Or three. A 3-bedroom apartment that rents for $3,000 per month is certainly more affordable in today’s economic climate when split three ways.
As a property manager in the roommate rental business, it’s a good idea to use a roommate lease agreement (here’s an example). Having roommates as tenants can be a positive experience for all involved as long as some basic precautions are in place.
In terms of marketing to renters, there may be room for some innovation in advertising your prices. Rather than advertise a 2-bedroom unit for $2,000/month, why not consider offering it for $1,000 per person/month (assuming one roommate)? This pricing might appeal to cash-strapped renters who’d balk at carrying a a $2,000/month rent by themselves. Combine the roommate-friendly price with access on your website to online tools to find roommates, and you might be in a stronger position with a segment of the rental market that might not be in your sights at the moment.
As a property manager, do you prefer to rent to roommates as opposed to couples or single people? What advice would you give to other property managers considering renting to roommates?