Pitfalls in renting by the room

Renting homes by the room can be profitable – but it’s a legal and property management minefield.

Most property managers don’t take on properties leased by the room. And those who do manage such properties charge substantial fees.

General manager RentCover, Sharon Fox-Slater, said any property manager considering leasing by the room should check both council and state laws to see that the property complies.

“Several of the States, including Victoria and NSW, are currently changing the rules on boarding houses,” she said.

“Anyone considering going down this route should also call their insurer as sub-letting is usually excluded from standard policies so you’d need a different type of cover,” she said.

“New migrant families are among those forced to live in these conditions because they can’t get a rental in the normal market without a reference.

“While references are important, property managers can use alternative strategies to judge reliability such as work references. Good character judgment and common sense can also go a long way,” she said.

There are about 70,000 people living in rooming houses across Australia, according to estimates from RMIT University’s Professor Chris Chamberlain.

He believes the number of rooming houses in Melbourne has increased almost fourfold in the last five years to about 1,450.