Since PadSplit’s founding in 2017, Frank Furman, PadSplit’s Co-Founder and Chief Growth Officer, has walked countless properties and coached PadSplit Hosts shares four factors to consider when selecting an income-producing PadSplit property.
PadSplit works best when both the property and the neighborhood are a good fit. As a PadSplit Host, optimizing your returns starts long before a Member moves in.
Location, location, location: the old real estate truism answering the question:
“Where should I buy?” Does it hold up when the question becomes “Where should I buy…my next PadSplit?”
The answer is mostly yes, but with a focus on fit. After years of coaching PadSplit Hosts through property selection, let’s dig into four important factors: market, neighborhood, street, and individual property.
Market:
My first job was busing tables at a little Italian trattoria outside Philadelphia. My co-workers were predominantly young immigrants from Mexico and Central America who sent most of their earnings home to support their families. Buses stopped running at midnight, so if we closed late, we’d pile into my four-speed Toyota Tercel and drive into West Philadelphia, dropping each person off at their house. Each of my coworkers was renting a room.
Room rentals already exist in every market, because every market has workers making too little to rent a home or an apartment. It is not unique to big cities and college towns. If you do a quick search on Craigslist for room rentals in your area, my guess is you’ll find plenty of options.
Unfortunately, some markets restrict an owner’s free use of property through restrictive zoning. We recommend starting with your target market. Check your local market’s definition of “family” in single-family zoned neighborhoods. Markets such as Atlanta, Washington DC, and Seattle allow six or more persons within that definition, while others permit as few as two. Of course, if other Hosts are already operating PadSplits in your market, it’s a positive sign. If you have an existing property or are considering a purchase in a particular market, our Sales team is happy to walk you through their recommendations.
Neighborhood/Sub-Market:
Within any metro area there are hundreds of sub-markets, each with a different feel. Finding the right fit for a PadSplit is as simple as looking at the location through the eyes of a prospective Member: a single person (not a family) who works in the community. You are shopping for them. You might not love being on a bus or rail line — but if you utilize public transportation to get to work, it becomes much more appealing. Living next to the airport is noisy — but worth it if you work there five days a week. Proximity to public transit and major employment centers is paramount.
The Immediate Vicinity:
There is no substitute for walking the street in front of any property you’re planning to buy. How does it feel? Are cars parked on the street? How many homes on the street are rentals? Would you feel safe walking to the bus stop at night? Would your mother?
Look at the prospective property through the eyes of your neighbors. Your PadSplit might have more cars than average — will street parking be a nuisance? Does it share a driveway with a neighbor’s property? That could be an issue. It will certainly be full of renters. Will it be the only rental on the street?
PadSplit residents work a variety of job shifts, sometimes on weekends or the night shift. Would neighbors be alarmed to see people walking into the house late at night? Neighbors who are proud of their community are an asset. Often the best bet is a street with a mix of owner-occupied properties and rentals.
The Property:
The purchase price and renovation costs are important and factor into whether or not the property will work. Given those parameters, your goal is to maximize revenue by delivering more of what Members value:
- Bedrooms: This is the core product that your customers are paying for, so generally, revenue increases linearly with the number of total bedrooms. The size of bedrooms is secondary — while small (80-100 sq ft.) bedrooms may command lower prices, residents generally won’t pay much more for bigger rooms. However, there are upper bounds to the number of bedrooms, no matter how big a property is. Asking more than 8 people to share a kitchen, for example, may lead to cleanliness issues and a general lack of accountability. And of course, more bedrooms often means more cars and thus greater potential for neighbor complaints.
- Bathrooms: Turns out, people like having private bathrooms. PadSplit residents are willing to pay a 30-50% premium to have a private bath. In general, more bathrooms are better, and no more than four bedrooms can share any bathroom.
- Amenities: Unlike traditional rentals or apartments, common areas such as patios, big yards, or a pool don’t translate to incremental revenue. These common area amenities may be unwanted liabilities or unnecessary upkeep costs for Hosts.
- Parking: The total amount of parking available should be enough to keep Members and neighbors happy. Ask yourself if the amount of parking at the property and on the street is enough to accommodate the number of bedrooms. Some properties are blessed with a wraparound driveway and parking in the back. Others are more limited. Many Hosts will set down a gravel parking pad to accommodate overflow and prevent residents from parking on the grass, which can often frustrate neighbors.
There’s no perfect system to determine if a property is a great fit for PadSplit, but there is a simple one: Do your homework and consider the property from all the perspectives above.
Need help getting started? We’ve built a PadSplit Vendor Network of real estate agents in our target markets who can help you find the perfect property. Create a Host account to get access to our vetted vendors.
