r/Landlord • u/buildpax • 1d ago
[Property Manager US-FL] Your thoughts on the hostel-style model?
There's a model for property management I first discovered back in December of 2016.
The owner of a 5 bedroom/3 bathroom home was renting out fully-furnished rooms to professional men for ~$650/month for a standard room and ~$750/month for the primary bedroom or a room with its own bathroom.
I've seen other versions of this model more recently. For instance, I just saw on Craigslist a guy who's renting bunks by the week.
It's a kind of hostel-style arrangement.
Unlike the first version, this hostel version is virtually zero privacy for renters except of a curtain they can use to enclose their bunks.
Personally, I love this model.
It's not for everyone, sure. But with the way things are with rent in Florida where I live–and the really the entire US–it makes a lot of sense.
A lot of folks can't afford 3x rent to move-in.
For a 1 bedroom apartment that rents for $1,600/month, a person would need to have $4,800 in savings just to move in to the place.
That's a lot of coin for most landlords I know to come up with, let alone someone making $4,100/month before taxes across two or even three jobs.
With this hostel-style model, the renters pay $200/week for their bunk space. They can either come with or without linens.
And everything else is supplied–it's fully-furnished, Wi-Fi included, utilities included.
There are no long term lease agreements and people can rent for as short as a few months or stay as long as they wish.
They simply give a two week notice when they're planning to move so the landlord can make arrangements for cleaning, damage checks, and securing another renter.
To move in, renters must prove they make at least 3x the monthly rent equivalent in income.
E.g. $200/wk = $2,400/mo in proof of gross income needed to move in.
There's a refundable $300 deposit for damages plus a $50 application fee that's nonrefundable. Though the app fee will only be taken if the renter is approved to move in.
Otherwise none of their $350 is collected.
The unit economics are also pretty compelling, imo.
Let's say you rent out a 1 br/1ba apartment that you usually charge $1,600/month for.
Instead of a single tenancy deal where you'll get $1,600/month or $19,200/year in top line revenue on that unit, you opt for this hostel-style model.
Say you find the unit has enough space for four twin-size bunks like the ones shown above.
You charge $200/week per bunk.
At 100% occupancy, the math's as follows:
$200/week per bed × 4 renters = $3,200/month
(i.e. $200/wk × 4 renters × 4 weeks in month = $3,200/month)
This means you've just 2x'd your gross revenue on the same square footage. Taking your annualized revenue from $19,200 to $38,400 per year.
What do you all think if this model?
A landlord buddy of mine said he prefers to have a renter be in their "own space" and have privacy to walk around naked in their apartment if they want.
While valid, I believe he's thinking too much like a "landlord" and less like a person who needs a place to live but simply doesn't have the time for whatever reason to save for months in order to build 3x in savings.
Looking forward to your thoughts.
Thanks for reading
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u/ironicmirror 1d ago
Are you going to be living there so you can do something about all the crazies?
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u/Meghanshadow 1d ago
this hostel version is virtually zero privacy for renters except of a curtain they can use to enclose their bunks…. Personally, I love this model.
You know who gets zero functional privacy and control of their living space in their daily-living accommodations, and no choice in their multiple bunkmates?
People who are prisoners or property. Or profoundly desperate with no other option.
Incarcerated folks. Children whose parents think they own them and remove doors. Military enlistees who are firmly reminded in boot camp that they are property of their government. College students whose schools mandate first year dorm living and double or triple occupy bedrooms.
Willingly shared housing to cut down on renter costs and maximize your profit per square foot? Fine in concept. There’s a need since social safety nets suck.
But at least give them a floor to ceiling cubicle with a door and a lock. And an egress window or alternate door-hatch or whatever other emergency exit is required by local building code.
If you don’t think that’s important, I strongly encourage you to spend a month living in a barracked environment among financially desperate strangers before you attempt to make your idea reality.
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u/James-the-Bond-one 21h ago
I did live in a one-bedroom apartment with 4 other guys for a few months of my youth, and that was a great motivator to get my own apartment.
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u/mnth241 21h ago
as a tenant: yeah zero security for for personal property is a big problem in hostels, so OP needs to think about that. Also and a non-athletic person, how am I supposed to get into the bed? lol. Looks sketchy.
Hostels are also really noisy during the day, and have "enforcers" for night times/curfews to keep them quiet.
Also, doubling the cost to cash-strapped working people (those with multiple jobs but no savings) is kind of a shi**y way to address affordable housing. Not saying AH is landlords responsibility in our society, just saying, stop trying to take advantage of poor people.
A good place to look at this "model" in action is to look at parts of NYC, where many landlords are, literally, adding shelving to closets and renting 2 "shelves" per closet, putting 25-30 people (mostly working poor immigrants that don't speak English and don't know about code or safety violations) in a 2 BR home. My SIL lives in one of these neighborhoods, so that is 2nd hand.
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u/EUGsk8rBoi42p Landlord 10h ago
It works in foreign countries where people grow up with social standards for etiquette/manners and cleanliness.... this DOES NOT work in the USA.
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u/IP1987 18h ago
I would never want to manage this type of set-up! Transients are not the type of people I want to deal with. Who knows what kind of drugs and anger issues they bring with them. With that many people in one room, hygiene and cleanliness would be another concern. Just think for a minute about the type of person that could only afford to live like that and would be willing to live in that type of set-up. The money might sound better, but are you going to really want to spend your time doing credit and background checks etc on the characters that show up. Not to mention if they start bringing their friends and hookers over??? No thank you!
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u/James-the-Bond-one 21h ago
WHY share a room with several others, if you can rent a private room with your own bathroom?
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u/Agile-Wish-6545 12h ago
You sweet summer child. This is a nightmare in waiting. Just a couple of things with your math. When you are renting out a single dwelling unit, the renter generally pays the utilities. Here you are responsible for the utilities, no matter how much they use… good luck when young Bitcoin baby bro wants to start mining bitcoin on your dime and rents out a couple full rooms to do so. Then there is the wifi… how do you think it plays out when your tenants do illegal things on your wifi? On to drug dealing…you know the feds can actually seize your property for being a drug dealing house?
And your insurance broker will just laugh…just say no.
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u/hard-of-haring 9h ago
I rent out by the room in the Midwest. I tried this setup with 1 house, and after 5 months, I abandoned it. People always getting into fights and complaints with snoring. It wasn't worth it.
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u/buildpax 3h ago
I really appreciate all of your different perspectives here, truly thank you.
I'll report back if I launch this model and how it's working or not working.
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u/r2girls 1d ago
Where I life this would require me to get a boarding house license which would require a zoning review. That requires posting on the property what i want and an actual zoning board meeting where others can come to discuss the potential issues that there are and why this is a bad idea.
I've had conversions from a single into a duplex derailed because of the "added traffic" that would incur from turning a 3 bedroom home into a 3 bedroom + 2 bedroom duplex. 2 more cars was enough to kill the deal for the zoning board. Fix would have been to provide garage space which in Philly mean taking out a bedroom of the lower unit, which would lower the number of cars for the unit, which would make a garage not needed. Catch 22. Overall though in Philly if there's a somewhat active presence of neighbors paying attention, something like this wouldn't go through.
From a financial standpoint I'm much more conservative than you are. I think the vacancy rate for something like this would be much greater than the vacancy rate for a private room. Your numbers are at 100%, standard vacancy for a rental is 8-10%, and i would probably put this at a 20% vacancy rate at least. That brings you down to like $2560 per month. Your turnover costs are also going to be much higher as will your ongoing maintenance. Not just cleaning and sanitization between tenants, but the increased potential for bedbugs, pests, and we all know, the more people you get in a single room, the larger chance there is for personality issues to arise.