Q - What is a Rooming House?

A - A ‘Rooming House’ is essentially a residential house where the rooms are rented separately and the residents share facilities such as kitchen, laundry and other possible common areas. An occupant of a rooming house is technically a ‘resident’, and has a right to occupy one or more rooms on the premises, but does not have a right to occupy the whole of the premise or does not occupy a self-contained unit, but may have limited facilities for private use.

Q - Is a Rooming House a good investment?

A - Well designed, legally modified to (Class1b) and managed Rooming Houses can be the best residential investment available, often exceeding returns on commercial property. There are several reasons why smart investors are turning to Brisbane Rooming Houses rather than stand alone (Class 1a) houses and Commercial properties: 1. Multiple Rents – Due to the separate room rents, Rooming Houses provide multiple streams of income from one house. 2. Vacancy Mitigation – Say on a 5 bedrm property, if one resident vacates without notice , only 20% of income is lost, with 80% of income continuing to fund an investment loan. This means the property remains cash flow positive. However, with a single income dwelling, 100% of income is lost when a tenant vacates or breaks a lease, until a new lease is signed. 3. Higher Yields – Separate room rents mean yields are at least double a Class 1a house with the same floor area and room numbers in a neighbouring house. This means your Rooming House value exceeds a similar build in the same street. 4. High Demand – Renters love modern interior decorated Rooming Houses with the comfort and convenience of a house with furnishings, utilities and internet included in the rent, when compared to the value of renting an apartment or normal house (Class 1a), where they need to add the extra costs of furnishings and services.

Q - Is a Rooming House the same as a Boarding House?

A - Class A. When referring to Brisbane Rooming Houses, the short answer is no, although people can be confused. There is a difference. A Rooming House is classified under the Building Code of Australia (BCA) and the National Construction Code (NCC under licence from the BCA) as a Class 1b dwelling. While Class 1b classification does refer to ‘Boarding Houses’ up to 12 occupants, in Brisbane the distinction is made by the number of allowed occupants by the Brisbane City Council (BCC). Class 1b Brisbane Rooming Houses are limited to 300m2 in floor space, located usually in Lower Density Residential zones with no more than 5 occupants. Brisbane Boarding Houses are usually found in higher density zones allowing more than 5 occupants. Outside the Brisbane Local Government Area (LGA), depending on State and Local Councils, a Rooming House can be regulated for as few as three rooms or occupants and as many as nine rooms or 12 occupants. Allowances vary greatly across State and Local Council borders. Boarding Houses may hold more occupants, usually with an onsite manager. Brisbane Rooming Houses do not usually have an onsite manager. Boarding Houses typically have smaller, cheaper rooms, often catering to lower socio-economic occupants. Rooming Houses generally cater for employed, middle income single adults.

Q - How much do Rooms rent for?

A - Across Australia, room rents vary depending on multiple factors including regions, council areas, neighbourhoods, proximity to amenities and infrastructure. In Brisbane, a Rooming House room can rent from $200 per room per week to $400 per room per week depending on various factors including size and included amenities. Room rents in the same street in separate houses can vary by $50 or more per room, simply by the quality of the dwelling, inclusions and room sizes. It is critical for Rooming House success that an experience and knowledge is gained from completing the Multi-Let-Homes Australia property course and taking care of your renters to ensure your best possible yield.ld.A - Across Australia, room rents vary depending on multiple factors including regions, council areas, neighbourhoods, proximity to amenities and infrastructure. In Brisbane, a Rooming House room can rent from $200 per room per week to $400 per room per week depending on various factors including size and included amenities. Room rents in the same street in separate houses can vary by $50 or more per room, simply by the quality of the dwelling, inclusions and room sizes. It is critical for Rooming House success that an experience and knowledge is gained from completing the Multi-Let-Homes Australia property course and taking care of your renters to ensure your best possible yield.

Q - Who Lives in Rooming Houses?

A - People like you and me. Rooming residents are no different to people who live in non-Rooming House dwellings. Rooming Houses appeal to employed, middle income single adults. This demographic is growing and needs good quality, convenient, comfortable accommodation. Australian government statistics (ABS) show the proportion of family households has been declining while single adults are increasing. In 1986, families made up 77% of Australia’s households; in 2016 it was 71%. Over this same period, the number of single-person households increased from 19% to 24%. Rooming House residents come from all walks of life, from nurses, police officers, truck drivers, front line workers, retail, commercial and industrial workers, building workers, office workers, sales reps, IT consultants, developers etc. They are sisters, mothers, brothers, aunties, uncles, nephews, nieces…

Q. Why would I want to live in a Rooming House instead of an apartment?

A. Two good reasons – convenience and savings.  Rooming house rents are often less than a one bedroom apartment.  However, in addition with a Rooming House, you get your power, water and internet included in your rent, nothing more to pay, while enjoying the space of a larger house with your own room, often with your own ensuite. With an apartment or house, your rent includes only the space you rent. You’ll need to add up costs of buying and moving furnishings and appliances, then back out when you leave, which can add thousands of extra dollars. Additionally, there are the costs of setting up electricity accounts, water and internet connections.  Well-managed Rooming Houses also include maintenance and cleaning every 2 weeks (common areas only).  More renters are choosing the value adds, ease and convenience of high quality, modern interior decorated Rooming House Rooms.

Q - Should I build new or convert an existing house to a Rooming House?

A. This decision will be based on your financial circumstances.  Generally speaking, it’s best to build a ‘fit for purpose’ Rooming House to provide residents with the best possible living experience, attracting residents happy to pay more rent. Better quality attracts a better price.   Existing older homes often require more conversion works than homes up to 10 years of age. Certainly these homes after you have converted them to Class 1b compliancy, still tend to earn less rents than purpose built rooms with sound insulation etc.  With recent property price increases, buying and converting an existing house can be as much or more than building new. Yet the new will provide better rent.  If you have an existing older house you’re considering converting to a Rooming House, weigh up the cost of conversion. 

Q - How do I value a Rooming House?

A - Valuing a Rooming House is much the same as valuing a Commercial property. The banks and informed valuers consider Rooming Houses to be ‘commercial’ properties, regardless of them being a residential dwelling. Rooming House valuations are based on yield or more specifically the cap rate (rent less outgoings), not comparable houses in the area. To accurately value a Rooming House:
1. First add up the property’s total weekly rent.
2. Then multiply weeks in a year.
3. This will give you the total annual rent (gross income pa.).
4. Look online for the area residential rental yield (search for the suburb + yield). Investors like to earn much more than the area average yield, so double the yield to appeal to investors (this is a thumb-rule, as each investor has their own tolerance).
5. Deduct the cost of outgoings (depending on the house, around $15,000 – $18,000 pa.
6. Divide the net income pa. by the average commercial cap rate. The cap rate (i.e. capitaliation rate) is the commercial property return, which can be found on most commercial property listings web sites.
E.g. Rent : $400 per room per week x 5 rooms = 2,000/week Annualised: $2,000 x 52 weeks =$104,000 gross pa. Deduct outgoings. Let’s use $15,000 = $89,000 This is your net income. Research existing up-to-date cap rate. At time of writing, this ranged from 3.5%– 5.5% in a large metro Eastern suburb capital city. We’ll use 5.5%. Net income ($69,000) divided by the cap rate (5.5%) = $1.618m

Interested in Rent-2-Rent Australia high-yield Brisbane Rooming / Share House?