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I stated that one of my goals for 2014 is to do a bit of long-term travel and see the world. Besides leaving my job to take on this goal, I need to replace myself in my house so that my real estate asset can literally pay for itself.

To replace myself, I could have gone about it two ways: rent out the entire house or rent out each individual rooms separately.

I went with the latter for several reasons.  One, I already had two roommates and finding a third roommate would have been more affable than kicking out my current roommates to rent the entire place.

I think it’s harder to find someone willing to commit to a full-year long lease if I decided to rent out the entire house.  Additionally, in the time it takes to find a tenant to rent my entire place, there’s a chance that it could be several months before there are any takers so I’m fronting the entire mortgage payment while it’s 100% unoccupied.

Whereas when I rent out the individual rooms, having any of the three rooms rented out will partially cover the mortgage.  Ideally, it’s best to have all three rooms rented to cover 100% of the expenses.

However, this approach is three times the amount of work because you’re essentially trying to keep the three bedrooms occupied versus finding that one tenant to rent your entire place.

I think it’s a matter of preference, do you invest all your time to finding that one tenant to rent your entire house and forgot about it for a year, or take the easier route and rent out the individual rooms and work constantly to keep it occupied.

Given that I had two of the three rooms rented, the choice to rent out the individual rooms was the easier path for me to go down.

DOES IT EARN MORE MONEY TO RENT OUT EACH ROOM?

Had I rented out the entire house on a yearly lease, I would have not included utilities and moved all billing responsibilities from my name to the leasers name.

When you’re renting out the individual rooms, you want all the amenities such as cable and internet so that you can include them in the fixed monthly rent.

The convenience of having a fixed monthly rent and a month-to-month term makes it attractive to those that do not want to be committed to a yearly lease and because of this preference, you could charge a premium for this, thus I think it’s a safe assumption to make more money by renting out the individual rooms.

FINAL THOUGHTS

Renting out the individual rooms is more work, but the trade off is that any room that goes unoccupied is only a fraction of the entire place going unoccupied.  This was the main driver to rent out the individual rooms when I wanted to replace myself in my house and travel.  I much rather be in a situation where I’m dealing with a 33% or 40% unoccupancy rather than 100% occupancy.

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