Mark Baker says investors need to carefully consider the legislation, compliances and design of ‘Rooming Houses’ before executing their strategy.
Rooming Houses, also known as boarding and sharehouses, are an alternative form of rental housing that can provide multiple income streams with up to 330% more cash and positive super cash flow, Mark told Bushy Martin on the Get Invested podcast.
But there are many considerations for investors to address before adopting this strategy.
Today, Mark is one of Australia’s most knowledgeable experts on rooming and boarding house properties, being a full time investor and owner of Rooming House Expert and Super Cash Flow Developments alongside his son.
Rooming House consideration 1: Minimum standards
Mark outlined some of the minimum standards required with rooming houses.
“There are requirements around minimum room sizes, number of bathrooms, and facilities that have to be provided under health regulations as well as the residential tenancy regulations. There’s also licensing too that was brought into Victoria in 2016. Sometimes there might appear to be contradictions between what planning says or what other regulation says, so it’s a matter of trying to figure out how it all sits together,” he said.
“The building class is a different class of building, so even if you’re taking a standard house, it’s not just a matter of going and saying I’m just going to rent the rooms out. There’s upgrades you’ve got to do in terms of fire safety because it’s a different class under the building code. So your standard dwelling is Class 1A of the building code, rooming houses are Class 1b, or you can go to Class 3 which is the same as hotels and stuff. So the requirements once you get to the hotel level are even more significant again. So it’s about knowing what you’re getting yourself into and not blundering and then suddenly finding out you’re getting penalized and hit and then having to spend major dollars.”
Rooming House consideration 2: disability access
Disability access requirements require serious consideration, especially when investors are converting a property to a rooming house, as opposed to building brand new.
“This is really important, because a lot of people are going to go, oh this is fantastic, I’m just going to grab this house and carve it up. But disability access probably means stepless entries, it probably means metre wide passageways and doorways for ease of access, and the egress distances from the room to the exit of the property. A retrofit is going to be much more challenging and expensive now,” Bushy said.
Mark added: “Typically yes this is something you would want to consider and look at what you want to do. If you’re adding a bathroom, you need to look at the fact that you’re probably adding a disability access to the bathroom which is six and a half square metres. This is a massive amount of space you’re taking up in the house, and then you’ve also got all those access paths. So you need to look and consider, what work do I want to do on this property, and if I’m doing that, what does that mean I have to do to comply with the building requirements”.
Rooming House consideration 3: design and amenities
The design, layout and location of a rooming house will largely influence the success of the investment.
“They’re all really important things. You’re saying a rooming house, and people think oh it’s just a house you’re renting by the room. And I think part of the problem with the name is that word ‘house’, because it’s nothing like a standard house. So if you’re designing something purposely for a rooming house, it is completely different to what you would do for a house,” Mark said.
“Sometimes I get people coming and saying, I want to do something that I can convert back to a house later to sell it. And it’s like, well really what you’re designing is not going to be good at either, so pick one and commit to it. And that’s where converting a house is always going to be a compromised product.”
Due to regulations, investors also need to find the right balance with amenities.
“It’s something that’s coming up a lot at the moment – how much is too much amenity provided in the room? So when does it become a self-contained apartment or unit? So we’re looking through definitions because like the regulations say, you can build a bathroom, you can provide cooking facilities and all that sort of stuff, but then planning goes, no if you provide all that then it’s a separate dwelling and it doesn’t make the planning exemption to be a rooming house anymore. So there are a whole lot of crossovers and arguments about interpretation,” Mark said.
Listen to the full interview here.
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