Traditionally, the choice to rent individual rooms in a property rather than renting the whole property has been about finding a balance between regulatory guidelines and profit maximisation. At face value, renting out individual rooms is far more profitable for the landlord. However, there are several factors that can influence such a decision:
Assured Single Income or Sustainable Hedging
To a landlord, renting out an entire property represents an assured income for that rental period. However, it comes with the risk of a lack of occupancy without the right tenant. Similarly, the benefits of distributed income and a higher rent-per-room tend to be offset by the need to retain multiple tenants. In the United Kingdom, rent-by-room can generate up to an 18% increase in rent compared to single rental units.
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Maintenance and Repairs
A single tenant for an entire property may permit a landlord the luxury of a generous co-maintenance clause in the contract. Renting individual rooms may cost more in maintenance and repairs that are insular or restricted to a few rooms. However, this can be offset by higher rental rates or different rates according to the condition of each room.
A landlord’s logical choice is to rent individual rooms when working with short-term tenants or students. However, the success of this depends on the location of the property and regional demographics. In many cases, local housing codes or laws regulate the nature and scope of rent-by-room based on several factors, including the Houses in Multiple Occupation (HMO) status and whether or not the landlord lives in the property.
Property Management and Safety
Letting to multiple tenants requires a landlord to receive permissions from the local housing authority. You may need to invest in individual fire doors and additional access to a fire escape in a rent-by-room scenario. While renting the whole property entails compliance with a wide range of regulations at the unit level, the higher financial return on HMOs requires a landlord to ensure the legal and diligent management of the property as a whole, and of the rental agreements of each room.
Consequently, renting the whole property or rent-by-room both entail risks and rewards.