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How NOT to lose money on unit rental – real story from Mr. Lim

Did you know what kind of problems you may actually face when you rent your whole unit to the tenants instead of renting rooms only? This article will tell you more about the possible problems that you might encounter while renting out your unit. 

Source: MoneySavingExpert.com
Source: MoneySavingExpert com

With that, we have conducted an interview with one of our HostelHunting.com landlords, Mr. Lim, to know his personal experience in his unit rental:

Q: Good morning, Mr. Lim! How was your personal experience regarding your unit rental to the tenants?

Mr.Lim : Well, I’m sort of upset. My another tenant just checked out today…. It was already the 3rd tenant who moved out from my invested condo at Taman Desa in the past 12 months. The rental has been reduced from Rm3000 to Rm2700 until the last tenant Rm2400. This true story happened 1 year ago in late 2015.

Q: Really? I feel sad for you, Mr.Lim…. Mind sharing with us the experiences that you have faced when you rented your unit to different tenants?

Mr.Lim: Yes, definitely. I had 3 horror tenant experience that gave me a headache and until today, I still can’t forget this awful experience. The first tenant was actually a young Chinese couple. I believe the lady was a mistress – and they moved out within 3 months. I felt quite sad for the tenant, as when I went to the condo to pick up the key, he was just sitting there alone, looking miserable.

Second tenant was a AxxAxxx stewardess who looking for short term tenancy – 3 months. I’m so surprised how a cute little girl could live her life in a ghost house. I’ve deducted Rm1000 (not enough to cover also) for the cleaning fee as the house was smell like sh*t, rubbished left everywhere (believe more than 2 months) & there are maggots in the dustbin as well! Really freak me out!

Last tenants were an Australian couple. They worked as lecturers in a Famous International School at Seri Kembangan  and they rented the place for 4 months. This was the worst experience that I had with my tenants – ever! They left with no notice, with 2 months unpaid rent & left the house extremely messy!

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Source: Norton Museum of Art Website

Q: Oh dear, how could you tolerate such issues? Didn’t you think of alternative ways to combat this problem?

Mr.Lim: I did……..but nothing works well from there. I have even tried analysing the tenants everytime before i rent out my unit to them to ensure they are good and responsible tenants but… it fails every single time. *exhales*

Q: Then what about seeking help from accommodation agency? As i know, they provide services like giving advice on how to rent your unit effectively. They can be of a big help!

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Mr.Lim: Um…..yes! I knew it! When i went to the education fair last month, I met a business development team in HostelHunting.com who advise me to turn the place into room’s rental instead of renting out the entire place. She brought up a few benefits which I never thought of:

1) 20% increase in rental – Cash Flow Positive

By doing room rental, I could rent out my Master Room – Rm1200, Middle Room – Rm900, Small Room – Rm750 = Total Rm 2850

She even advised me to convert 1 part of my living area into a extra rooms which can eventually rent out at Rm700 = Total Rm3550

2) Resolving Vacant Issue

By renting out rooms to several tenants, it would minimize the risk of vacancy issue as room rental has much more demand comparing to entire unit due to the low rental & less commitment burden from the tenant. Eventually, it also help owner like us who has financial pressure towards installment!

3) Property in Control

Main difference on renting rooms instead of entire unit is as a landlord, I’m still able to gain control of my premises. I could have entered the place occasionally to inspect my condo. I could also impose house rule to ensure that my tenants are taking my place well care too!

Source: DepositPhotos.com

Mr.Lim: Well, the condo was bought at mid 2014 with the price of Rm600,000. Monthly installment + Maintenance fee was about 3000. I furnished & touched up the place with spend no more than 25k. I spend not longer than 2 months to get my first tenant. Everything was so well planned as what it written from those “real estate guru guidebook” – Buy a house, Renovate, then Rent it out until you see my experience that I just share above.

Q: Wow…that’s a one large sum of money! But it’s okay right since you will now start to rent your rooms instead of renting one whole unit. It’s time to earn back more profits from those you have lost last time!

Mr.Lim: Yes! I am so thankful to have met HostelHunting.com! They gave me so much new ideas and I did not regret listing my rooms with them. However, honestly speaking is not everything all good by doing room rental. There are few issues I encountered.. Well, it is something that I couldn’t help it anyway.

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Q: Seriously? I thought that was already the best option! What did you feel not happy about this room renting then?

Mr. Lim: Rental collection! This is giving me headache cos I now need to check my rental collection with 4 different tenants instead of collecting rental from 1 tenant. It increased much hassle. Also, another thing is maintenance. As a responsible landlord, I always want to ensure that my tenant live in a peace of mind.

Hence, I need to be responsive to my tenant complaints regards on any maintenance issue happen in the house. These are going to be stressful when they calling up sometimes middle of the night to seek for your help.

Source: IrishTimes.Com

Q: Right….of course there will be some problems in everything. But do you actually prefer unit rental or room rental? Will you continue with the room rental strategy?

Mr.Lim: Comparing my 12 months horror experience in renting out entire place & 7 months room rental experience, there is definitely a yes for me to continue my room rental strategy. It’s allowed me to have positive cash flow for now, not worrying of tenant moving out (1 move out, I still have 3 more to pay) & i do know I will not have surprise mess when I collect back my house in the future!

That concludes our interview with Mr. Lim.

From this interview, we can deduce that room rental can yield a higher rental return as well as more control over the property that you’re renting out. Although room rental may need some extra effort as compared to entire unit, it will definitely be worth it in the end.