Room for One More? Multiple Families Living Under the One Roof.

It seems an unlikely trend, but it’s one on the rise. The number of families inhabiting one dwelling remains relatively low in the grand scheme, but it’s jumped from 1% to nearly 2% in a very short period of time according to the latest census data. Younger generations are getting onto the property ladder later in life than their forebears, and baby boomers are more receptive to having their children live home for longer, or even return to live at home later in life. Immigrant families also have a higher tendency to share property when first arriving, often with friends or family who are already settled. It’s also a popular choice among short term visa holders and students looking for quick and easy lodgings.

What does this mean for the market though?

This trend has lead to the spike in interest in more adaptive homes and living spaces. Properties that feature separate buildings, or are more easily compartmentalised, have seen growing interest in line with this trend of multiple occupants that need their own space. A large garage can easily, and cheaply, be made into a spacious and secluded living space with a few amenities. Even new constructions are being designed around separate, multi-occupancy living, or in such a way that they can be easily converted at a later date.

Multiple-occupancy living is primarily a cost saving affair. Whilst the trend has seen steady growth, it comes about most prominently during falls in the market. It’s a lot cheaper to split up a home than buy a whole new one. With the right property it can even be possible to make the spaces completely distinct, with their own entrances and exits to make interaction with other tenants an option rather than a necessity. Even with migrant families, for which the decision to share homes can be more culturally informed, finances are often the deciding factor. A shared home is a strong safety net for someone arriving from a foreign country, perhaps without a large amount of capital and limited language skills.

For those renting out to multiple occupants, issues can arise. A larger number of occupants leads to more wear and tear and that means greater and more frequent repair costs. Particularly with student houses or families with large numbers of children. Even if your tenants are the neat and tidy type, the cost of utilities will inevitably be going up.

More worrying perhaps, especially with large houses let on a single contract, is keeping track of all of your tenants. Landlords can set limits to the number of residents in any given property, but don’t think this will stop people. When it comes time for inspections, evidence of an overstuffing of occupants can be easily disguised. A sofa sleeper might be introduced as a friend over for the weekend, a family of four occupying a spare bedroom explained away as cousins from out of town. Subletting comes in all shapes and sorts. Your property manager should be on a sharp look out for this particular brand of misuse, and the tenancy agreement should outline firmly the repercussions for those flouting their terms. Becoming more and more common, and costly to investors, is tenants using spare bedrooms to house airbnb customers. Estimates suggest that as much as 35% of the properties on the site are listed by tenants who don’t own the property. This illegal act can be especially difficult to track, as it allows for subletting with a high turnover of occupants, and can be quickly covered up to ward off suspicions. It can spell disaster, especially in large units, where damages and the coming and going of strangers can leave owners in the dark and out of pocket. It’s become such an issue that a Sydney based startup, BnbGuard, was founded this year to track troublesome subletting tenants through publicly available information. Any investor who’s letting a property should be on the look out for this, even if you’re only renting to a small number of occupants.

With all that said, multiple occupants do have the potential to make for greater profits. Larger properties will always see interest from larger households, and in turn greater rent yields. But you also don’t have to rent the property as a whole unit, on a single contract. If you see interest from multiple, or larger, groups that encompass smaller subgroups (such as multiple families, or inter-generational households), perhaps consider letting the property room-by-room.  There’s a few legalities to the process; such as establishing if your occupants will be classed as tenants, boarders or lodgers. Each entails different rights and responsibilities of the tenant and owner alike, so you’ll need to find what suits your needs and the market at hand. Are you after students or young professionals? The main thing is to avoid sitting on the fence; find a market and stick to it, it’ll give you a greater foothold and allow you to focus and grow around that particular demographic. If you’re converting a larger property to suit this market it’s also important to stay abreast of relevant construction and inhabitation laws. Such as minimum height restriction on ground floor dwellings and acquiring the proper planning permissions.

Whilst the rise in homes occupied by multiple generations is unlikely to have a dramatic effect on investment strategies and development, it is one to watch. It’s growth has helped draw attention to the potential benefits and pitfalls of multi-occupancy tenancy and emerging market forces. Especially with regards to subletting and the ever growing online bnb economy. If the popularity of multi-generational or more general multi-occupant tenancies continues, we may even see a niche, but highly profitable area of investment emerge in the form of conversions and a propensity for room-by-room contracts in more traditionally structured single properties.