Boarding house or multi-room rental property?

[SuperDad]

Hi All,

I am currently looking at a large, high-yield property. Does anyone know what determines whether a large house (6+ bedrooms) constitutes a boarding house as opposed to simply a large multi-room rental property?

I have searched this forum (using several keywords), and have found some useful information about boarding houses. From what I have found,

A boarding house is defined as residential premises containing one or more boarding rooms along with facilities for communal use, and occupied or intended by the landlord to be occupied by at least 6 tenants at any one time.

Now, what is a "boarding room". Does this mean that it is the room that is let to an individual, rather than the dwelling as a whole being let to a group of tenants? The property I am looking at is currently let by the room (more than 6 tenants), and managed by a local agency. Would this constitute a boarding house?

From what I can tell, a boarding house must satisfy certain safety requirements, such as having a sprinkler system. The house I am looking at does not satisfy such requirements - could this be an illegitimate boarding house? (Where's the Sherlock Holmes smilie when you need it?)

Any input will be very gratefully received.

Paul.

[NZGEMS]

Hi Superdad
My understanding of a boarding house is a place where you have an onsite manager normally who overseas the property and makes sure the rent is paid, yes it is let by the room, some rooms have their own bathrooms and some may share one. so a 6 bedroom house would not come under the boarding house title I would think.

Just my understanding of it from what I know of them. have one or two friends with them.
Robyn

[MareeM]

go ask Fritz

Hi Superdad

Fritz is your man to ask about boarding houses. Think he may be away at the moment, but perhaps you could try sending him a private message?

...you will find posts from him in a thread I started a few weeks ago "virgin trader seeks help".

Cheers

[Aston]

If the house you are looking at has more than 5 tenants and is let by the room, then yes it is technically a boarding house and it comes under a separate set of regulations as far as the local authority is concerned. It must have a Certificate of Fitness and must be inspected annually by an Independent Qualified Person (IQP). If it is not currently registered as a boarding house, it is quite likely that it is operating illegally.

I've operated Boarding Houses and the return can be good but complying with the regulations is important and can be expensive.

Aston

[FatBelly]

Superdad - also be sure that this place satisfies fire regulations with the council. I looked at a bigger property a while back that was converted and running as 8 bedrooms however you could legally only rent out 5 as the council deemed it to be a boarding house (due to the number of rooms and that it was let per room) and required the property to be fire rated and complient with fire standards before signing off and allowing all 8 bedrooms to be let.

Your mention about this place not having sprinkler systems worries me that this could be the case for the this property also. When I investigated costs to complete the fire-rating work it looked to be a very expensive exercise.

[SuperDad]

Thanks everyone for your responses so far.

I was off down to council this morning to view the property file on this house anyway, so I'll enquire there about the council regulations pertaining to boarding houses.

MareeM - thanks for the reference to Fritz - I'll follow that up. I have found a posting by Fritz on boarding houses on another thread - informative reading!

Aston - I see that on another thread you had posted a list of "Boarding House Provisions". I've Googled my heart out, but I can't find an original source for those provisions. Where did you get them from? Also, you mention that "If the house you are looking at has more than 5 tenants and is let by the room" then it is a boarding house. What if it has six tenants but the house as a whole (rather than individual rooms) is let? Would this still be a boarding house?

FatBelly - I'm sure that the cost of installing a sprinkler system would be very expensive. If the deal looks like a good one, this could be a powerful bargaining tool. The other worry with the property not having sprinkler systems in place is that it is currently tenanted by a bunch of heavy drinking smokers - it only takes one to doze off half way through a smoke and there's a headline news item.

Thanks again everyone for your help. I'll let you know how my council enquiries go today.

Paul.

[Glenn]

I am IQP registered and do a number of Building Warrant of fitnesses.
You need a BWOF when there are things like sprinklers alarms and so forth in the houses.
The same laws applies to all of NZ but many local authorities apply these laws differently and more enthusiasticly around the country.
The big issue is having people sleeping upstairs.
Mostly they require alarms and these alarms are what triggers the BWOF.
Investing in a 6 room house may seem a great money spinner but you have to factor in the cost of managing the property, power and gas, more cleaning and so on. This means a different number of numbers needs to go into the spread sheet calculations.
Do no get blinded by the big numbers on the income side of the sheet and forget the large and hard to quantify (Negative numbers.)

[SuperDad]

Thanks Glen!

I know, the big numbers on the income side look good, but that yield will quickly be eroded by the costs. If the proeprty still looks like a goer after my time at council today, I'll start doing the costings. Do you have any figures to suggest for things like maintenance, cleaning, management, advertising and the like?

Paul.

[SuperDad]

Hi All,

Just an update on my investigations re: boarding houses. I have been to my local ouncil and, suprise surprise, I can't get a clear answer concerning whether or not the property I am looking at would constitute a boarding house (a "residential unit") as opposed a "residential dwelling". So working on the worst-case scenario, I have contacted the fire engineering and safety consultants recommended by council. I have been told there that, even if the house were a boaring house, the number of rooms and tenants would mean that no smoke alarm, fire alarm, or sprinkler system would be necessary. (Scary, but thems the rules.)

I have spoken with my fire and general broker, and house cover on the property (through NZI) comes to $463 PA (incl. GST), for a 250m2 dwelling. He is certain that the property, as I have described it to him, falls under standard IP rates.

Paul.

[Lizard]

I would think that you would also need to factor in Power bills . If you are paying then I guess there is no worries (for the tenants) about how many heaters are going either!

[clark]

Hi Paul

I have just brought a very simular property for a client in Christchurch and have all the costings of how much this particular property costs to run if you are interested.
Just send me a pm and I will forward you the details of the outgoings and this may help you in your due dilligence of your property.

Kind Regards
Trish Clark

[waiopehu24]

What if it has six tenants but the house as a whole (rather than individual rooms) is let? Would this still be a boarding house?

Good question and the answer would also help me alot, as the first property taht I buy will have 6 bedrooms and a garage.
I will have people renting out the rooms and I will live in the garage.
I guess this is where the difference between 'flatmate' and 'boarder' come to play.
I guess in my situation, I could either have everyone (including myself) pay their portion of the rent into my laqc, and so they would be boarders.
However if they each paid their rent into a seperate account, I could then pay this lump sum into the laqc and they would be 'flatmates' (and I can get my DTLS)

In your situation though Paul, I dont think you would be living there, but it may be possible for the individuals to pay the rent somewhere in the 'middle' then transfer it as one rent into your rental income account??