Rented the bedrooms separately, got a notice calling it a boarding house
First purchase, a five bedroom house in a working neighborhood, bought as a normal rental. The plan I talked myself into was renting bedrooms individually on separate leases, 525 each, five rooms, 2,625 a month against 1,700 if I rented the whole house to one family. I furnished the rooms out of a warehouse store for about 3,900 and had four of the five filled in three weeks.
Month five I got a notice from code enforcement. Someone complained about cars. The inspector's position was that five unrelated adults on five separate leases sharing a kitchen meets my city's definition of a rooming house, which needs a license and is not permitted in that zoning district. My city defines a family as up to three unrelated persons. Every city writes that line somewhere different and some states restrict how far a city can go, so please read your own ordinance instead of borrowing my number.
What it cost:
- 400 citation, abated when I complied
- I had to give two residents notice, which meant following my state's termination rules and giving them time, so about six weeks of awkwardness and one small relocation payment I offered because I felt responsible
- income dropped from 2,625 to 1,575 on three rooms
- the furniture from the two closed rooms is in my garage
- attorney, 1,150, to tell me what my options were
Running three rooms at 525 is 1,575, which is less than the 1,700 I'd have gotten renting the whole house to one household with one lease and one turnover a year instead of three. So the strategy that was supposed to add 900 a month put me 125 a month behind and cost me about 6,000 to learn.
What I'd do differently: read the definition of family and the definition of rooming house in my own zoning ordinance before I bought, not after the inspector explained them to me. And when the numbers on a plan look that much better than the ordinary version, assume there's a rule making up the difference and go find it.