Selling a Rooming House

No, both a residential or commercial agent can sell a Rooming House. Keep in mind that residential agents are typically unused to selling going concerns, and unless they are very familiar with the amenity and build specification, tax, accounting, property management, insurance, compliance, finance and valuation of Rooming Houses (both finished, and 'to-be built' packages), they will not be able to property disclose sufficient information to prospective buyers during the campaign. Ill-informed buyers or buyers who are given incorrect information have grounds to terminate a contract. Buyers in this space are typically more sophisticated investors with financial and legal advisors who need to be won over. While a Rooming House is a residential property, it has the complexity of a commercial property, and we highly recommend engaging a specialist Rooming House sales agent to effectively sell your asset for the highest price with a straight forward contract, and a keen buyer who will also act property to ensure settlement and all its parts (due diligence, finance valuation, schedule disclosures etc.) are effected.

Both a residential or commercial agent can sell a Rooming House. Keep in mind that residential agents are typically unused to selling going concerns, and unless they are very familiar with the amenity and build specification, tax, accounting, property management, insurance, compliance, finance and valuation of Rooming Houses (both finished, and 'to-be built' packages), they will not be able to property disclose sufficient information to prospective buyers during the campaign. Ill-informed buyers or buyers who are given incorrect information have grounds to terminate a contract. Buyers in this space are typically more sophisticated investors with financial and legal advisors who need to be won over. While a Rooming House is a residential property, it has the complexity of a commercial property, and we highly recommend engaging a specialist Rooming House sales agent to effectively sell your asset for the highest price with a straight forward contract, and a keen buyer who will also act property to ensure settlement and all its parts (due diligence, finance valuation, schedule disclosures etc.) are effected.

We recommend using a specialist Rooming House sales agent who has sold many Rooming Houses before. An effective agent will be very familiar with the amenity and build specification, tax, accounting, property management, insurance, compliance, finance and valuation of Rooming Houses, both finished and 'to-be-built' packages, and will be able to property disclose sufficient information to prospective buyers during the campaign. This is important, as well -informed buyers verify all facts with their advisors and any discrepancy will have buyers leaving to pursue other assets.

We find that an effective database of active buyers is the most important campaign tool. Only the most experienced Rooming House agents will have such a database. We also recommend all properties to be advertised in a premium capacity to increase its exposure, which brings on new, fresh buyers, and most importantly creates pressure and competition among buyers, increasing the perceived value and desirability in favour of the Seller.

Yes, a Rooming House can be sold off-market if the agent has an effective database of active buyers. However, we recommend all properties be advertised in a premium capacity to increase its exposure, which brings on new, fresh buyers and most importantly creates pressure and competition, increasing the perceived value and desirability in favour of the Seller.

Yes, you can sell a Rooming House yourself. Owners in QLD can sell their own properties, however it is more involved than you may imagine. As an agent, you will need to prepare a sufficient disclosure or Information Memorandum (IM) including a rental schedule, an inventory schedule, an annexure of outgoings, compliance documents, and produce a draft contract with sufficient special conditions, or an annexure to cover the interest of the seller, their GST and liabilities. For a small percentage of the sale price, an effective specialist agent can do all of this, and most likely achieve a higher sale price than an independent owner-seller.

A new and well-presented Rooming House with all the documentation ready for buyer review should sell in 4 to 8 weeks. Older or poorly presented Rooming Houses, or houses with insufficient documentation will take longer to sell, or have delays based on buyers needing sufficient time to conduct due diligence.

Yes, you can absolutely sell a Rooming House that is not brand new. It is the same as selling new, with some minor amendments to the contract and disclosure that a skilled a professional agent can manage well.

We recommend an Expression of Interest campaign. Buyers typically require finance to purchase, and while they typically use residential mortgages with a commercial valuation, the bank valuation is required to secure the finance. Even buyers who have very large deposits and very solid serviceability will typically require a valuation to put this asset into their super or trust, thereby requiring a due diligence or finance clause in the contract. In the last 20 sales, there has not been one true cash buyer. For this reason, we do not recommend an auction, as buyers will only be able to bid below the valuation and a strong result can only be conditional upon bank valuation. The campaign must have a full disclosure of the property files and facts to inform buyers and their advisors and lenders.

Yes, a Rooming House can be auctioned. However, we do not recommend a property like this be auctioned. All buyers, even cash buyers, will require a valuation, to set up a trust or super fund, and carry out due diligence on the land, house, leases and chattels, register for GST and carry out a depreciation report. An expression of interest campaign gives serious buyers the opportunity to make an offer subject to terms to carry out these preparations prior to settlement.

While you can sell your property yourself, we recommend you use a licensed agent to sell your Rooming House. Keep in mind that residential agents are typically unused to selling going concerns, and unless they are very familiar with the amenity and build specification, tax, accounting, property management, insurance, compliance, finance and valuation of Rooming Houses (both finished, and 'to-be built' packages), they will not be able to property disclose sufficient information to prospective buyers during the campaign. Ill-informed buyers or buyers who are given incorrect information have grounds to terminate a contract. Buyers in this space are typically more sophisticated investors with financial and legal advisors who need to be won over. While a Rooming House is a residential property, it has the complexity of a commercial property, and we highly recommend engaging a specialist Rooming House sales agent to effectively sell your asset for the highest price with a straight forward contract, and a keen buyer who will also act property to ensure settlement and all its parts (due diligence, finance valuation, schedule disclosures etc.) are effected.

Yes! You can ask your agent how many Rooming Houses they have listed and sold, and the prices they sold for. You should also ask your agent to give you a copy of some previous Information Memorandum (IM) documents to see how effectively they communicate with prospective buyers.

A number of factors can influence how buyers perceive the value of a cash flow asset - the relationship between the gross and net income; the replacement value of the Rooming House, and comparable sales of similar performing properties all matter. Older Rooming Houses may not have a full builder's warranty (6.5 years), and may have used the best part of tax depreciation (5 years) or may be in a state requiring some refreshment, or not achieving peak market rent. If a Rooming House is older than 5 years but in great condition and earning market rent consistent with new Rooming Houses, then it will only be marginally less in price than similar brand new Rooming Houses in the same area. Rooming Houses in 2024 are typically selling for $1.35m for a low-set home, and $1.45m for a high-set home, on a standard block in an average blue collar suburb. Outer city locations near the fringe can see values fall slightly by $50k to $100k, and inner city locations will be boosted by the value of land increasing.

As of July 2024, low-set Rooming Houses on a standard block in an average blue collar suburb are selling for approximately $1.35m. Outer city locations near the fringe can see values fall slightly by $50k to $100k, while inner city locations will be boosted by increasing land values.

As of July 2024, high-set Rooming Houses on a standard block in an average blue collar suburb are selling for approximately $1.45m. Outer city locations near the fringe can see values fall slightly by $50k to $100k, while inner city locations will be boosted by increasing land values.

Very few Rooming Houses have been built in the inner city, as land tax comes into play, and land prices are prohibitively expensive. We have seen valuations as high as $1.9m in inner city locations, and sales as high as $1.6m in Seven Hills, for example. Premium inner city locations from our accounts have very few Rooming Houses and rarely change hands.

Outer city locations near the fringes of Brisbane can see values fall slightly by $50k - $100k. On the city fringe of Brisbane, 82 Aldebaran Street in Inala, a low-set Rooming House sold for $1.25m in July 2024. By contrast, in the suburban heartland of Brisbane, 55A Elliott Road in Banyo, a low-set Rooming House, sold for $1.29m.

No, Rooming Houses can not be strata titled. A Rooming House is a Class 1 dwelling house.

Yes, it is not simple, however it can be done. Properties can be owned by multiple parties under a tenants-in-common structure, a corporate directorship, as shareholders in a company or trust, or through a custom, legally drafted agreement, or body corporate.

Yes they can, and many couples and family members do. Unrelated parties do, from time to time. As both parties are jointly and severally liable, it is harder to achieve finance on such an acquisition, however it has been done many times.

An REIQ or Queensland Law Society contract are both ideal for selling residential investment property. A Rooming House is a residential property.

Even for our best buyers with strong serviceability, high deposits require a valuation to put assets into trust or their superfund. For this reason, there are very small numbers of buyers offering cash unconditional contracts to purchase investment properties. Our most solid buyers typically have 20% - 35% deposits and are pre-approved, with their loan serviceability confirmed by their finance broker. A buyer with higher deposit simply indicates that the buyer is gearing themselves to do an equity redraw and revaluation after acquisition to purchase or build their next Rooming House.

Due Diligence - buyers need to confirm compliance, approvals, certifications, leases, and inventory. Building & Pest - the buyer will want to confirm the property is in peak operating condition. Finance Clause - A finance clause ensures the buyer's lender can issue a valuation at or above the sale price so there is no shortfall between the sale price and the buyer's finance to be covered.

Only a very small percentage of buyers are unable to satisfy finance. Your agent's role is to ensure the buyer has a suitably experienced finance broker, that the buyer is qualified to service, and has a deposit to complete the loan.

It is the role of the agent to ensure the buyer has a suitably experienced finance broker, that the buyer is qualified to service, and has a deposit to complete the loan.

Lenders offer 20% deposit and 80% lend with a reasonable investigation into a buyer's ability to service the mortgage. 10% deposit and 90% lend will require a more invasive serviceability check and a higher interest rate. At 35% deposit, the asset and its income will satisfy the lender. These loans are only available with specialist Rooming House lenders such as Granite, Liberty, Mortgage Mart, and now Columbus Capital. Buyers seeking loans with deposits of less than 20% often cannot satisfy finance requirements. Buyers seeking finance with the Big 4 banks (ANZ, CBA, NAB, Westpac) and other tier 2 lenders will discover they only offer commercial loans on Rooming Houses and boarding houses, which have much higher LVR requirements such as 30% - 35% deposits and much higher interest rates, which buyers will not favour and hence fail finance clauses. Your agent's role is to ensure buyers have a suitably experienced finance broker and suitable lender so they are qualified to service and have a deposit to complete the loan.

Brisbane is a favourable location for Rooming House investor-buyers. A large capital city with growing population of approximately 2.5 million, and strong employment, opportunities for growth and development, and low rental vacancy compared to regional centres, Brisbane offers the best value for money in Rooming House investments, as other Local Governments require expensive DAs and infrastructure charges per room for Rooming House developments.

Properties adjacent train stations provide tenants with convenient access to public transport, however proximity to train lines mean the property is in a noise corridor and can decrease the market value of the property. Properties which are opposite a train line with less direct exposure to noise have historically had okay sales.

Properties which are on busy main roads; on a train line; are flood impacted or in flood impacted areas; or are in industrial locations have lower valuations, and buyers perceive them to be of lower desirability as well.

Yes, a Rooming House can be sold before it is tenanted, and we encourage this. The best Rooming Houses are presented after practical completion, once furniture is installed but before tenants move in. The builder is typically waiting for the Certificate of Occupancy to be approved, and this is the ideal period to show to property to investor-buyers in an on-market campaign. With nearly 4000 leases on 1 bedroom Rooming suites signed per quarter, rental appraisals are highly accurate for prospective buyers, valuers and lenders.

Yes, we strongly encourage you you to be charging market rent for your Rooming House when selling. A good Property Manager with experience in Rooming Houses should have no issue achieving market rent for your property and should be actively monitoring the market to ensure any leases are renewed at market rent. As demand for these units seriously exceeds supply in Brisbane, you should seriously consider appointing a new and more effective Property Manager if your existing one is struggling to do so. For new build Rooming Houses which are yet to be tenanted, your agent, prospective buyers, valuers and lenders should be able to determine the property's rental appraisal based on the near 4000 1 bedroom leases signed per quarter. With only 3% of the property market being 1 bedroom units, and a large portion of the population comprised of singles who rent, there is plenty of demand for new, well-presented 1 bedroom units in Brisbane.

The best Rooming House is presented after practical completion, when furniture has been installed and before tenants move in. The builder is waiting for a Certificate of Occupancy to be approved, and this is the ideal time to show the property to investor-buyers in an on-market campaign. We encourage high-quality furniture including a study desk or table with chairs, a small couch, large wall-mounted TVs, large fridges, and a Queen-sized bed.

Rooming House buyers are typically older or more mature adults, high earners, those with strong equity in their principal properties or other property assets, people who have large deposits, people who want to own cashflow positive properties in their superfund.

As the presentation of a semi-constructed property is not received well by buyers, and you are only able to settle once the property is certified for the buyer's bank valuation, there is no advantage in selling mid construction. Pre-sale properties typically sell for less, as buyers are taking a risk with their time and how the property will be finished. You'll find prudent investors will have conditions such as: conditional upon Building & Pest inspection post practical completion; and the finance clause will be 14 days after the form 21 so that their bank can value as it is complete.

If you are not the builder, developer or project manager, you will need to disclose the cost sums for the acquisition of the land, preliminary works on the land, and the building contract. Buyers will typically want to purchase an incomplete project for less than the sum of the aggregate cost. We do not recommend selling a Rooming House before commencing construction, as buyers can very easily procure a Rooming House and Land Package with less risk. If you are a builder or developer and want to sell a Rooming House and Land Package, then yes, you can definitely market each opportunity effectively, allowing for project management fees, commissions, and other exit costs and your builder's margin.

Yes. A more complete property that leases for more is of greater desirability to investors. Furnished rooms rent for more, and properties with higher rental incomes sell for more. As a general rule of thumb, Rooming Houses sell on a 7.7$ - 8.0% ROI of the gross income. A property with a rental income of $2000 per week, that is a gross income of $104,500 per annum. Dividing this by 7.7% - 8% means the property should be valued at approximately $1.3m - $1.35m. This is the typical sale price for a low-set Rooming House in Brisbane. The higher value would be for more premium locations, and the lower sum would be for city fringe locations. Inner city locations can achieve more due to higher land prices.

Yes, Rooming Houses with higher rent do sell for more. As a general rule of thumb, Rooming Houses sell on a 7.7% - 8.0% ROI of the gross income. A property with a rental income of $2000 per week, that is a gross income of $104,500 per annum. Dividing this by 7.7% - 8% means the property should be valued at approximately $1.3m - $1.35m. This is the typical sale price for a low-set Rooming House in Brisbane. The higher value would be for more premium locations, and the lower sum would be for city fringe locations. Inner city locations can achieve more due to higher land prices. A Rooming House earning $2100 per week would earn $109,725 per annum and would be valued at $1.37m - $1.425m.

Yes, generally larger Rooming Houses will have larger rooms. Larger rooms are more desirable and more desirable tenancies will lease for more. As of 2024, an average Rooming House earns $2000 per week, with larger Rooming Houses earning $2100 per week. The strongest Rooming House incomes we have seen earn up to $2200 per week. A property earning $2000 per week should sell for $1.3m - $1.35m. A property earning $2100 per week should sell for $1.37 - $1.425m. a property earning $2200 per week should sell for $1.4m - 1.45m. These values assume that outgoings are constant between each property.

Yes, better presented houses and tenancies perform better. As of 2024, an average Rooming House earns $2000 per week, with larger Rooming Houses earning $2100 per week. The strongest Rooming House incomes we have seen earn up to $2200 per week. A property earning $2000 per week should sell for $1.3m - $1.35m. A property earning $2100 per week should sell for $1.37 - $1.425m. a property earning $2200 per week should sell for $1.4m - 1.45m. These values assume that outgoings are constant between each property.

Land value is considered by investors. If the house is low-set and each room has a courtyard, and there are additional car parking spaces, then the rental income, and value of the property, will increase significantly. Rooming Houses with larger courtyards that are well presented and fenced off to provide complete privacy from neighbouring rooms can rent for $40 - $60 more per week compared to rooms with no courtyard, or very small and narrow courtyards. The larger courtyards and greater desirability can translate to an extra $200-$240 of income per week. This is to say that a larger lot of land, say 500m2, which is spaciously designed for income optimisation, could sell for approximately $100,000 more than a standard lot of land, say 400m2.

Yes, generally main road locations see a 15% - 30% reduction in market value, as they are harder to tenant, and buyers and bank valuers perceive a lower value for them. They are also more expensive to insure and will require more frequent external cleaning to maintain visual appeal.

Yes, generally rail line locations see a 15% - 30% reduction in market value as they are harder to tenant, and buyers and bank valuers perceive a lower value for them. Insurance is also more expensive, as crime rates tend to be higher on rail lines.

Poorly presented properties and those near heavy industrial sites will be unattractive to tenants and occupiers for residential property. We do not recommend owning a Rooming House opposite commercial or industrial locations, unless it is near an attractive food retail and/or retail centre. In this case, the value of the location will be a premium and increase its desirability. We recommend buying a Rooming House which is in proximity to restaurants, cafes, corner shops and suburban shopping strips.

Yes, Rooming Houses with architectural facades will have higher values, achieve higher rent, and buyers will offer more for them.

Yes, Rooming Houses with more tenant car parks do sell for more. Properties with more tenant car parks typically have a larger land size so each tenancy will also have larger courtyards, resulting in higher rental income.

A builder, project manager or developer can sell a Rooming House off the plan.

Off the plan Rooming Houses typically sell for more than a finished Rooming house. This is because the developer has to buy the land, pay stamp duty and finance the land, and spend 5-9 months building at their own expense. They are likely to charge more when they sell as the process of building has costed them more upfront. Based on an interest rate of 7.8%over a 9 month construction period, this could mean an extra $93,600 plus stamp duty of approximately $20,000 - $25,000 for a finished Rooming House. The difference between a package price and a finished Rooming House can be from $100,000 to $150,000. For some investors, this could be a reasonable price to pay for the instant income, as 9 months of rental income at $2000 per week is approximately $80k.

Yes, SMSF buyers enjoy tax benefits. A high cash flow asset is ideal for placing in your superfund, as it pays itself off faster and earns great income once owned.

Yes, foreign investors do buy Rooming Houses, however because of FIRB costs, they require money to complete the deal and local buyers typically outcompete them.

Yes, absolutely. Investors from Melbourne and Sydney are seeing Brisbane as a more affordable option for high yield property acquisitions. Our growth and populate are supporting great rental returns, capital growth, and enviable rental occupancy.

Most buyers purchase in a trust or superfund for tax benefits, and benefits for if and when they decide to sell. A Rooming House will have a very high income and a high tax depreciation, which will most likely put you in the top tax bracket. A trust, Pty Ltd, or a superfund has a limit to the tax rate which buyers typically adopt.

Most buyers purchase in a trust or superfund for tax benefits, and benefits for if and when they decide to sell. A Rooming House will have a very high income and a high tax depreciation, which will most likely put you in the top tax bracket. A trust, Pty Ltd, or a superfund has a limit to the tax rate which buyers typically adopt.

Most serious buyers have done their research and sought financial and legal advice before investing in a rooming house. These buyers understand they have to establish a trust or a super fund to purchase their rooming house, have to work with a finance broker to establish their serviceability, and have the funds to complete the residential loan. They also are fully across all entry costs such as the loan establishment fees, valuation fees, stamp duty, insurances and property outgoings, and have a strong awareness of the property income and its tax depreciation benefits year on year.

Typical lenders in this space see loans established with 20% deposit. Higher deposits can see lower interest rates and less invasive checks into your personal serviceability for the loan.

About 50% of buyers end up choosing to build their own Rooming House because the stamp duty and deposit are lower. It is a more complex and time consuming process, but there are savings for the patience and effort.

In 2024, there are approximately 800 Rooming Houses in Brisbane. The demand for more is simply staggering - tens of thousands more could be built in Brisbane and the number of renters would still outnumber the available tenancies.

There is currently an undersupply of Rooming Houses in Brisbane. Only a very small percentage of rental properties are 1 bedroom units and villas, and there are no 1 bedroom townhouses or houses in Brisbane. With 30% of Brisbane's population comprised of singles, the majority of which are looking for 1 bedroom rentals, the demand for Rooming Houses is staggering and there is a huge need for plenty more Rooming Houses to be built.