Roommate Tenants and Why We Don’t Prefer Them

At first glance, renting to roommates seems like a great idea for landlords. Two tenants splitting the rent should make larger units easier to fill and potentially increase your rental income.

But after years of managing rental properties, Kevin and I have learned that roommate situations can bring a unique set of challenges.

In this episode of the Your Landlord Resource Podcast, we share our real-world experience renting to roommates and explain why we personally prefer not to. While many roommate households start with the best intentions, they often represent a temporary life stage for renters. 

We also discuss the operational issues landlords may face with roommate households, including lease modifications, deposit disputes, personality conflicts, and increased turnover.

However, roommates can also be a great option in certain markets and property types.

Listen in as we break down the pros, cons, and landlord strategies for managing roommate rentals.

WHAT YOU’LL LEARN IN THIS EPISODE

• Why roommate households often lead to shorter tenancy periods
 • Common landlord challenges when renting to unrelated tenants
 • How roommate turnover can create qualification issues
 • Why deposit disputes are more common with shared housing
 • Situations where renting to roommates actually works well
 • Why “joint and several liability” is critical in your lease
 • How clear replacement and guest policies protect landlords
 • Why landlords should align tenant types with their long-term strategy

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Transcript

Stacie 0:00

Roommate households tend to consist of renters who are in their early life stage, so think twenties to mid thirties. Which is exactly the range for most of our tenants in Sacramento. We have doctors, nurses, early career professionals, and often people who are relocating to the area for their work. Now, these younger tenants tend to change jobs more frequently, relocate more often, and experience major life transitions like getting married. This doesn't mean that they're irresponsible in the least, but they tend to move more frequently and have evolving household needs. Welcome to Your Landlord Resource podcast. Many moons ago when I started as a landlord, I was as green as it gets. I may have had my real estate license, but I lack confidence and the hands-on experience needed when it came to dealing with tenants, leases, maintenance, and bookkeeping after many failed attempts. Fast forward to today, Kevin and I have doubled our doors and created an organized. Professionally operated rental property business. Want to go from overwhelm to confident if you're an ambitious landlord or maybe one in the making. Join us as we provide strategies and teach actionable steps to help you reach your goals and the lifestyle you desire, all well building is streamlined and profitable rental property business. This is Your Landlord Resource Podcast. Hello there landlords, and welcome back to the Your Landlord Resource Podcast. I'm your host, Stacie Casella. I'm here with my co-host and all around favorite person, Kevin Kilroy.

Kevin 1:47

Hi everyone. Thanks for taking time outta your day to listen to both of us.

Stacie 1:53

So today we're hoping to give you another shorty podcast and honestly, we haven't been great at getting that timing under 20 minutes. I think the last one was like 30 minutes.

Kevin 2:03

Yeah, but, but I guess it's better than an hour. Right?

Stacie 2:06

Oh well, we do our best. Anyway, today's episode is more of a point of view or a POV format mixed in with some do's and don'ts. And that is that we prefer not to rent to roommates. You know, if we had our druthers, we would only have one bed, one bath units, because those are the size that we seem to have the best luck the most stay longevity with. In Sacramento, we have two units that are two bedroom and two bathrooms, and those seem to be really attractive to roommates because they can each have their own bathroom space.

Kevin 2:47

And let me jump in here and define roommates before we get too deep into this episode. So for us, roommates are two unrelated adults on the same lease, sharing a unit. You'd think that as landlords, we'd love to have roommates, and in theory it should make the two bedroom easier to rent. And that potentially these units would be able to fetch a higher rental rate because it's shared between two or more tenants, you know, so they can afford the rent easier. But after years of owning these two bedroom, two bath units, we've noticed that renting to roommates has its challenges. So why don't we love renting to roommates as much as many landlords do? Well, that's what today's episode is all about.

Stacie 3:36

Yeah. So you guys, we have seen every combo of roommates that you can imagine. Like couples, childhood friends, people who work together. The ones we detest the most people who have never met before. Yeah, you heard that correctly. Not once, not twice, but three times now we have had actual tenants move in who have never met one another. Well, I mean, they might have met one or twice, but certainly not for long enough to determine if they could actually live with one another. So now these are people who I've met on Facebook Marketplace under local housing or rental pages. Or they were gonna be working together like in the government, and then maybe they've met on a forum. We had one person who was renting a room and a house, but had been asked to leave because the owners were having a baby. And that renter was referred to another person that they knew who was looking for a place that had lower rent thinking that they could rent a place together to save money. The thing with roommates is that it is a temporary life stage, or season is what they call it nowadays. So think of recent college grads or young professionals relocating. Or a young couple who is saving money to buy a home.

Kevin 5:03

Yeah, and being in the state capital, we get a lot of people that work in some form of government or even a company that serves the government, you know, like a water resources management or a lobbying firm or management consultants. And don't get me wrong, these are great jobs, especially for younger people who are trying to get their careers started.

Stacie 5:26

Right. And you know, the medical field is another one. We have two large teaching hospitals right near us, so we got a lot of new doctors coming in for the residencies. But the issue is together two people will qualify to rent from us. Individually they do not. And unfortunately, it always seems to happen that after that one year lease is up, one roommate takes a job in another city. Or they decide that they wanna move in by themselves after getting a raise, or maybe they wanna move in with their romantic partner that they've met now.

Kevin 6:04

Or decides they want a pet, which we do not allow.

Stacie 6:09

Yeah, that one sucked. You guys, we've seen it all, if not all, most. And the issue is if one roommate does want to stay, they usually do not qualify to rent from us, and then are put in a position to find another roommate to replace the one who's leaving. And in our experience, that rarely happens. And sometimes what happens is the one that wants to stay on, they're gonna ask us for time to find a new roommate, right? And usually we will do our best to accommodate them so we can avoid having to do a full turnover procedure. But the other roommate moves out and they want their deposit back. So then we have to go in and do a move out inspection of their living space only. And that is always interesting because we usually have the remaining tenant there pointing out issues in the quote unquote common space that they did not do. Because eventually they don't want to be stuck with getting their portion of the security deposit ding for say, a TV that was mounted on the wall with big holes now and it's gone. So it, it does get kind of tricky. One other option that you have is for that roommate to pay the outgoing roommate for their deposit, and then they take over the whole thing. But again, that can get really tricky. And nine times outta 10, the remaining tenants cannot find a replacement who qualifies. And then we're left having to deal with one, only getting half the rent while they search. Two, having to do a full turnover anyway. And three, it means double the work on move out inspections and security deposit distributions.

Kevin 8:08

And we do find that roommate disputes can easily become landlord problems. Regardless of who lives together and where, common roommate conflicts come up, like cleanliness issues, noise levels, guests or partners staying over, sharing expenses and of course lifestyle differences. And here's the thing. We experience all these things even with people who we love and have known our entire lives like our kids.

Stacie 8:40

Yeah, definitely.

Kevin 8:41

Right? So think about throwing two or more people into a unit who barely know each other. You are bound to have some issues going on. And even though landlords are not mediators, disputes can often be pushed onto us for help. We have heard, everything from, can you remove my roommate from the lease to, I don't feel safe living with them. Which is what we dealt with with these last tenants. We had an alleged issue of bullying going on. I won't go into the details. Well, one, because we can't, but we also are planning on doing an episode discussing domestic violence laws and how they pertain to landlords pretty soon here.

Stacie 9:27

I think it's the next one.

Kevin 9:28

Okay, well, there you go. And where we can't discuss in detail what happened, we can discuss what we did and how we dealt with it.

Stacie 9:40

So like we mentioned before, roommate households tend to consist of renters who are in their early life stage, so think twenties to mid thirties. Which is exactly the range for most of our tenants in Sacramento. We have doctors, nurses, early career professionals, and often people who are relocating to the area for their work. Now, these younger tenants tend to change jobs more frequently, relocate more often, and experience major life transitions like getting married. This doesn't mean that they're irresponsible in the least but they tend to move more frequently and have evolving household needs. Right now we have a tenant who has been with us for three years, and she's not renewing her lease because she's going back to graduate school. So she has to go month to month until summer when she's gonna be moving out. So for us, we already see turnover for our individual tenants who live alone like every three to five years. And we're not complaining in the least about that. We really seem to have issues getting roommates to stay in our two bed, two bath units for longer than a year. And like we mentioned earlier, one roommate usually wants to stay and the other wants to move on. And this creates an issue trying to find another qualifying tenant because usually the roommates qualify to rent together. You know, each earns half the income requirement. More often than not when one roommate leaves the other no longer qualifies to rent from us, and that leaves us in a crappy position. On one hand, if we let them stay and try to find another qualified tenant, we essentially can avoid a full turnover, and get full rent coming in much faster. We also are usually allowing the remaining tenant to just pay half the rent during this time. So yes, we are getting some sort of money coming in. On the other hand, often these remaining tenants do not have someone in mind to move in, so that leaves them posting on social media or asking friends or putting a notice on the bulletin board at work. We also have to modify the lease, not once to remove the old tenant, but twice if they find a replacement. And we have to do background checks and tenant screening. And honestly, it's a real hassle.

Kevin 12:13

We have one two bedroom unit we call our jinx unit. In the time I've been around in helping Stacie manage the Sacramento property, the longest tenant we have had is two years, I believe. So that unit sees turnover once a year, 95% of the time. So can you imagine, and this is one of our bigger units, having to turn a unit every single year? This is also why we don't like owning student housing. The house in Chico we had for kid two during his college years was great, but he had one of his roommates changing every single school year. For us, it's just too much work renting out to these younger people. And I don't wanna get into the fact that many of them, not all, but many of them have no idea how to maintain a home. They're messy and dirty, and do not pay attention to things like running toilets or leaky faucets, or how to properly use a garbage disposal.

Stacie 13:16

Or to clean the lint catcher in the dryer. Remember that one guy that texted us, he was getting an air message on the dryer, and I, I kid you not, I googled the make and model of the dryer and the words error message. It said that likely the lint trap was full. So I texted him the link and he responded back with saying, oh, I didn't know that was a thing.

Kevin 13:41

And remember that was a doctor.

Stacie 13:44

Right? So how frightening is that? You know, they can handle if someone has a heart attack, but they didn't know to remove the lint from the lint trap ayyy.

Kevin 13:54

And it's not just maintenance. I don't think that when these roommates sign the lease that they don't realize that they have a joint and several liability clause in our lease. Which means they are both individually responsible for the full rent, not just their share. So when the lease is up, well 60 days prior to that, we contact them to inquire about renewing their lease. And as we've just mentioned, very rarely do both want to renew. Which leaves us in a position to either not renew the one who wants to stay or let them stay on and find a replacement. And if we do do this, we know they likely will only be able to pay half the rent that is due at least until they find the replacement or move out. Now I will say that we have only had one issue where the roommates did not get along and had to end the lease early. For the most part, all of them finish out the lease and one or both of them move on.

Stacie 14:59

Right, and we've been very lucky in that we have not had issues with one roommate refusing to pay their share of the rent. And please don't get us wrong, there are many great scenarios where roommates work really well. Like in super expensive cities. You know, think about San Francisco or New York, Seattle and Boston. Now Sacramento is still expensive, but nowhere near the rents of those cities. In those situations, tenants who share housing can actually increase the qualified tenant pool. And I will say we don't have any issues with renting this unit.

Kevin 15:39

Yeah. Well, we are very lucky to have a layout where each bedroom has its own bathroom, and that's really attractive to roommates.

Stacie 15:49

Right, and they both have an en suite, as they say in the real estate world. But we sure would be happy if we could get applicants that have known each other for years or have previously lived together. You know,'cause then maybe they would be able to stay longer than a year.

Kevin 16:05

Now I know that this is our situation and many of you still should and do like renting your units to roommates. So with all that said, I want to go over some things that are important to remember when you do. First of all, your lease needs to include proper verbiage. Most state leases do nowadays, but you should review your lease to make sure that it has that joint and several liability. This means that all tenants are collectively and individually responsible for the entire rent and any damages that may occur. If a roommate fails to pay or causes damages, the landlord can legally force any single tenant to pay the full amount due. It treats the tenants as a single entity rather than separate individuals. Your lease should also set clear replacement policies, meaning if one tenant needs to get out of the lease or someone does not want to renew, you need to define how it's handled. And for that honestly, you should treat that just like any new applicant. They need to meet your stated criteria, they need to be fully screened and a new lease needs to be drawn up with the new names of the occupants. Your lease should also clarify guest policies because many roommate conflicts arise when partners stay over all the time or a long-term guest comes to stay. For us, depending on the size of the unit, we allow guests to say five to seven nights, and all guests cannot exceed 21 days over the one year lease. If they stay longer, they will need to apply and be added to the lease as an occupant. We did a three-part masterclass on leases where we go over our lease paragraph by paragraph. It starts with episode 32. So you can go to your landlord resource.com/episode 32, or you can click the link in our show notes.

Stacie 18:11

Yeah, your lease is the backbone of your rental property business, you guys. I would say that it falls into the top three things that landlords need to get right, because it can save you if things go south with a tenant. And one more thing that you could recommend, you can't demand or enforce it, but think about suggesting that your roommate tenants use a roommate agreement. There's several samples of them out there online, you just Google it, and they basically lay out a set of rules for the tenants to abide by. Things like having a guest over, or cleanliness, not eating the other person's food, and who pays for what bills. Again, you can't enforce this, but we've suggested before when we had tenants moving in with each other who had never met before. No idea if they even used it, but if not, hopefully it sparked a conversation on subjects that could be issues over the course of a lease. So I want to say that this issue we have with roommates is not for all properties. I think that because we are in a fairly big city that has a huge government base, we tend to get roommates who are coming to live in Sacramento for a short period of time. Maybe they are just trying to get job experience or not sure if the city's right for them. Because we have had several tenants who moved out of the area when they changed jobs. But I will say that for us, let me be clear here this is specifically for us. We prefer couples or families in this two bedroom unit. The one time we had a husband and wife, we had less drama and they stayed for two years.

Kevin 19:56

And remember it would've been three, but unfortunately his father passed away and left his single family home for them to move into.

Stacie 20:05

Right. So they had renewed and then he passed a couple months later.

Kevin 20:10

And we work with them to get out of the lease. I mean, we're not total jerks.

Stacie 20:15

Right. You know, and while it's disappointing, I do believe in karma. And I do treat people with the respect that I would want to be treated, most of the time anyway. This dislike for roommates has created a position for us and where that, as we look for our next property, we do know we don't want any two bedroom units. Yes, we get more rent, but they are more work. But just like I said, that's just us. Not all roommate rentals are inheritantly bad. But they do create unique management challenges. And every landlord should decide what fits their risk tolerance and their management style. For us, the instability of our unit based on its location is not worth it. So much so that we have begun to talk about what options we have with possibly changing those units up. You see, we have two units on the top level that are two bedroom, two bath, right next to each other. We're looking into, see if we can separate them to make four one bedroom units. Now we would lose some living space by doing that, and the kitchens would be smaller than the other units, but we think it can be done. Of course, you know, this is a later thing. We have one tenant in the back bedroom who's been there for, what, 13 years?

Kevin 21:46

I believe that's what we figured out recently. I mean, it could be longer as he was there when I came on the scene about 12 years ago.

Stacie 21:55

Yeah. But anyway, if and when he moves out, his unit needs a lot of work, so that might be a good time to start that layout change. But hey, you guys always be thinking about how you can make changes to suit your goals better. So that's our show for the day and I want to thank everyone for being here. You know, we love when you engage with us and it seems like everyone is really enjoying the content that we put out. So if you do like what we're talking about and you know another landlord who might also enjoy the podcast, would you mind sharing us with them? And if you have it in you, please leave a kind review so that we can continue to move up those charts. As always, subscribe on your favorite podcast platform so that each week our episodes are automatically there and ready for you to listen to. And I know none of these things really seem like a big deal, but ultimately it is a big deal to us because it lets us know that you want us to keep making more episodes to share our knowledge and experiences with you. So hit like, hit subscribe, tune in each week. Also check out our show notes for any links to any products, or other episodes that we mentioned today. Thanks again for listening, and until next time, you've got this landlords.