By Adam Frisch, Managing Principal, Lee & Associates Residential NYC
Roommate shares can be immensely beneficial for both tenants and property managers alike. Tenants are able to save money on rent by sharing the cost, while property managers are able to charge more for the same square footage when it’s divided into separate bedrooms with a living room in between. With that said, there are a few situations of which property managers need to be aware before filling up their empty apartments with roommate shares.
While it is true that property managers can often charge up to 20 percent more in rent for the same square footage that is split into two bedrooms versus kept as a one bedroom, there will often be higher turnover in roommate shares than in one-bedroom units. Tenants in roommate shares will typically stay approximately one to two years while those in one-bedrooms will often be there for anywhere from three to five years. In addition, with multiple people paying rent, there may be a higher risk of default. To help avoid this situation, it’s important that property managers screen each tenant in a roommate share very carefully and they should ensure that the names of all occupants of a particular apartment are on the lease. This means that if a new roommate comes in, the current lease shouldn’t be renewed with the new name added but rather an entirely new lease should be drafted that contains the names of all occupants. Property managers will often charge a processing fee of around $500 for this service.
Many people that enter into a roommate share are younger and therefore may make less money. Due to this fact, they will likely need a guarantor to sign on, in order to be able to rent an apartment. If a particular roommate share will require guarantors, the property manager should always attempt to secure one guarantor rather than multiple. With one guarantor, the property manager’s chances of actually getting paid in a timely fashion increase. When dividing an apartment for a roommate share, property managers are responsible for ensuring that the bedrooms are legally large enough and that they contain windows. But, if done right, the property manager will likely make much higher rent per square foot over a longer period of time. As long as property managers are well equipped to deal with the risks involved in roommate shares, there is certainly money to be made.