A six bed room rental conversion pencils at a 41 percent expense ratio, worth a second look

Your management line is the one to argue with first. Ten percent of collected is a whole-unit number. Co-living managers price per room or per lease, and their agreements commonly land somewhere between 12 and 15 percent of collected, sometimes as a flat amount per door per month instead. Read the leasing fee clause too. If they charge a placement fee per room and you turn six rooms a year, that fee is a recurring operating expense rather than a one-off, and it doesn't appear anywhere in your model.

Annualized turnover in room rentals commonly runs well above whole-unit leasing, and operators generally plan for a tenancy measured in months rather than years, which means the whole roster can cycle inside a couple of years. If you build to that instead of an assumed one turn per room per year, your six turns becomes eight or ten, and the arithmetic changes.

The cost of a room turn isn't 14% of gross for two weeks. It's the vacant room, plus the marketing and screening cycle, plus a share of common-area repair that gets triggered by movement rather than by any single tenant. Furnished rooms add replacement of mattresses, desks and chairs on a cycle no whole-unit lease has. If you're furnishing, put a per-room annual furniture reserve in the model separately from your 5% repairs number, because your 5% is sized against a property where the tenant owns the furniture.

The number your ratio is most sensitive to is utilities, not turnover. You have 480 all-in for six adults sharing one kitchen, one or two water heaters and a laundry pair. Utility consumption in shared housing scales with the number of people, and you have no submeters and no incentive for anyone to run a short shower. Operators who include utilities in room rent often set a monthly cap per room with overage billed back, and whether that's enforceable depends on state landlord-tenant rules on utility billing, so confirm it with a local attorney before it goes in a lease.

Separately, confirm your insurance carrier has been told six unrelated adults on separate leases. A policy written on the assumption of a single-family tenancy can be a problem at claim time.

Six leases on one roof is six chances a year for somebody to decide the kitchen is a group project they didn't sign up for. I'd want the common-area cleaning at 260 to be weekly, not biweekly, because that line is what keeps the other five from leaving.

Your downtime assumption is doing more work than the expense ratio. A room at 850 in a market where the whole house rents for 2,600 is priced above what a single tenant pays per bedroom, and that premium is the thing that goes away in a soft month. I'd run the same model at 780 and see whether 41 turns into 47, because that's the version you'll actually be operating in a slow winter.

Dumb question from the outside, but does the six-bed already have six legal bedrooms or are you making some of them? I ask because I looked at a listing described as 5 bed and two of the rooms had no window that opened.

Ember's point is the whole deal. Egress window and closet requirements come from local building code and they vary, and a room that does not meet them is not a bedroom that can be rented, even with a bed in it. Thicket, separately, one washer shared by six adults tends to fail inside a year, and that pattern shows up again and again in small buildings with shared laundry. Budget a second machine rather than a repair.

Anyone reading this thread hoping for income without a second job should notice that six leases is the second job. Genuine question though, thicket, at 41% versus your duplexes at 41%, why do the conversion at all? If the ratio matches, the room version just has more moving parts for the same margin.

Before any of the expense work matters, find out whether six unrelated adults are permitted at that address. Plenty of single family zones cap the number of unrelated occupants, the cap is often lower than six, and how a definition of family applies to your roster is a question for a local land use attorney rather than the planning counter. If the cap is four, your 5,100 is really 3,400 and the whole model moves.