A real-estate investor says he's cracked the code to producing 'at least $1,000 of positive cash flow every month,' but his rent-by-the-room strategy isn't for everyone

• Peter Keane-Rivera owns single-family homes that he rents by nan room to maximize rate flow.
• It's a much hands-on strategy but offers higher returns and diversified rate flow.
• Some of nan challenges see uncovering compatible tenants, but nan other effort is worthy it to him.

Peter Keane-Rivera owns 2 single-family homes successful nan greater Seattle area, but he has 9 tenants paying rent.

His finance strategy is to "buy nan biggest location you tin and capable up each nan rooms pinch paying tenants," nan 32-year-old told Business Insider. "And, if you can, adhd immoderate worth to nan location arsenic you spell on — you don't person to do it each astatine erstwhile — past refinance, either to a little complaint aliases a cash-out, and usage that money to do it again."

Keane-Rivera purchased his first location — a 3-bedroom that he converted into a 4-bedroom — successful 2017, and his 2nd — a five-bedroom pinch an unfinished mother-in-law suite — successful 2019. As of 2024, he has 4 semipermanent tenants successful nan first home. He lives successful nan 2nd home, has 4 semipermanent tenants successful nan different bedrooms, and converted nan mother-in-law suite into a short-term picnic rental.

He's shopping astir for a 3rd home, arsenic his rent-by-the-room strategy has generated patient rate flow.

"I cognize really to upgrade properties to make them nutrient astatine slightest $1,000 of affirmative rate travel each month," said Keane-Rivera. The norm of thumb that useful for him is: "You request nan number of rooms to beryllium astir six to 7 erstwhile your spot worth is astir $600,000 to $700,000, and you're looking astatine a 6.5% liking rate."

There are different factors, specified arsenic "the quality and nan layout of nan house, wherever it's located, and what improvements tin beryllium made," he added.

Keane-Rivera says he brings successful betwixt $849 and $1,450 monthly per room. That doesn't see his Airbnb unit, which is nan astir lucrative and averages $2,666 a month.

His rental income would look a batch different if he listed his single-family homes arsenic 1 unit, he said: "For instance, if I conscionable rented retired my rental spot that I don't unrecorded in, I'd astir apt get $900 to $1,000 little per month. I really want that $12,000 astatine nan extremity of nan year."

Of course, nan other $12,000 comes pinch trade-offs.

Challenges that travel pinch renting by nan room: 'Managing personalities'

More tenants typically intends much work.

If you're renting a spot by nan room, "It's decidedly much hands-on," said Keane-Rivera. "There's decidedly much to coordinate. You're not dealing pinch 1 tenant; you're dealing pinch five, six, possibly seven."

As a landlord, you're fundamentally connected telephone astatine each times but expect nan telephone to ringing much if you person aggregate tenants sharing a space.

"Someone calling astatine 9 p.m. because something's incorrect is going to hap much often," he said. "If your finance strategy is to get a humble return pinch minimal effort, you should astir apt look astatine thing else. If you want to get a higher return and you don't mind spending nan other effort, it's thing you should look into."

Finding tenants to stock a abstraction hasn't yet been a situation for Keane-Rivera, who lists his rooms connected Roomster, Roomies, and Facebook Marketplace.

"There are a batch of different sub-groups looking for thing much economical: group coming retired of college, group getting their first job, group who conscionable sewage divorced," he said. "I would opportunity everyone that rents pinch maine is looking to prevention money."

The challenge, sometimes, is roommate compatibility: "You're decidedly managing personalities. If you person excessively galore alpha males nether 1 roof, you person problems. You get calls and texts saying personification did this, and it's ne'er immediate; it's ever astatine nan breaking point. So I look for group who I deliberation would unrecorded cohesively pinch 1 another."

That takes clip and effort. Whenever he's looking to capable a vacancy, he interviews aggregate prospective tenants to find personification who qualifies financially and is simply a bully characteristic fit.

Renting by nan room is much hands-on and not for everyone, but tin create much rate travel and little your wide risk.

"You diversify your rate travel by having 4 tenants nether 1 tile alternatively of one," said Keane-Rivera. "Very seldom will you person each your tenants move retired and if you do, that's suggestive of immoderate bigger problem that you should astir apt spell fix."

It's a peculiarly appealing action during tricky marketplace conditions and could beryllium a measurement for rookie investors to get their ft successful nan door, he added: "The measurement prices connected homes support going nowadays if nan younger procreation doesn't person their parents' expertise to trim them a down costs cheque aliases doesn't person a six-figure tech occupation I'm going to deliberation they're going to person a very difficult clip purchasing a home. If they want to really get into one, this is simply a viable action for them."