Why Property Investors Love BOARDING HOUSES
Why Invest in Boarding Houses & Why More Property Investors are Finding Boarding Houses Attractive Real Estate Investments
There has been growing residential housing demand. More demand close to major city centres throughout Australia, causing governments to seek more affordable housing options. This demand has fuelled higher investment returns and is the reason why property investors love boarding houses as a property investment.
The affordable housing policy
In 2009 the NSW State government introduced a new affordable rental housing policy. This State Environment Planning Policy – Affordable Rental Housing 2009 (ARHSEPP) was formulated to increase the supply and affordability of rental & social housing in New South Wales. This has, in turn, led to increased demand and higher property values for boarding houses.
What are boarding houses? What does boarding house mean?
Over the years, boarding houses have been unfairly perceived to provide accommodation for troublemakers in our society. There might have been the occasional lousy element in the past but things have changed considerably in recent years.
In addition, many boarding house property investments are well-appointed with quality inclusions hardly noticeable in residential and commercial areas. As such, boarding homes are well designed and have well managed house rules to attract reliable quality tenants. Thus they provide an excellent, consistent cash flow income for the owners.
Affordable low-cost housing alternative
Boarding houses aim to provide affordable low-cost shared housing accommodations. Specifically for people who do not have the need or affordability to pay rent via traditional housing accommodations.
Some people consider boarding houses residential investments, while others classify them as commercial property investments. The following article goes through the main differences.
What are the benefits of a boarding house property investment? Are boarding houses profitable?
Generally, boarding houses give better returns than traditional residential properties. It is common for boarding house investment properties to return double (or sometimes more) the gross income for similarly priced residential real estate. At the same time, enjoying similar capital gains.
What type of returns have boarding houses getting?
For example, throughout the major areas of Australia, we are currently seeing net returns on normal residential property around 1-2%. On the other hand recent sales of boarding houses have shown net investment returns of around 5-7%.
This return is usually higher than most other quality commercial property investments in similar areas, which generally show cap rate returns of between 3.5 and 5 % net return.
Please note that most residential property journalists quote gross returns and not net returns. This is the rent collected before the payment of expenses, when talking about residential property.
The planning policy allows for exclusive bonuses in Floor space for lot size.
There can be various tax advantages.
What are the features of boarding houses? What is a boarding house, tenancy?
Boarding houses provide lodgers short-term rental residency for a period of three months or more.
They may have a separate or shared bathroom, kitchen, laundry, and living/common area rooms.
Part or all of the building can be rented out for lodging.
How do you set up a boarding house, and where are you allowed to build them?
You were allowed to build boarding houses with council consent in most areas, including low, medium, and general residential areas.
Property investors and developers would have to lodge applications with the council for assessment. This assessment will consider the consent based on the building’s design, fire safety compliance, and various environmental factors.
The boarding house development should also be designed to be in character with the local area.
What is the maximum number of rooms allowed?
In New South Wales, new boarding house developments in low density, areas are limited to 12 or fewer rooms. In other areas, the maximum amount of rooms permissible would depend on the floor space ratio and height limits relevant to local council environmental plans.
What are the other special requirements for these boarding house property investments?
Rooming house development proposals should be appropriately designed to be in harmony with the local area
The boarding house property investment should be close to public transport services.
There should be appropriate landscaping and property setback to be congruent with the existing Streetscape.
Room size requirements for Boarding houses
At least 20 m² of open private space should to be included. Additionally, eight m² next to the boarding house manager’s accommodation to the front of property setback if applicable.
One car parking spot for every two rooms in all locations. Plus one parking spot for each person who’s working with the development and is also a resident on the property should be provided. Also, one cycle parking space required for every five rooms.
At least one communal room should receive at least three hours of direct sunlight during the day in mid-winter.
What are the minimal room sizes for a boarding house?
The smallest room size is 12 m² for single rooms and 16 m² for double bedrooms with a maximum room size of 25 m².
A maximum of two lodgers is allowed per room.
Other room requirements that should be included
At least one communal living area is required for the house residents if the boarding house has more than five shared boarding rooms.
The lodging-house must have a reasonable kitchen and bathroom shared facilities within the complex. Self-contained food preparation areas and bathrooms are allowed but not a requirement for each room.
In addition, an on-site manager is required if the accommodation house has 20 or more residents.
When a boarding house is developed in a commercial zone, the ground floor which fronts the street cannot be used for residential purposes. The only exception is if another planning instrument permits it.
Boarding House ACT 2012
Boarding houses are regulated inn most States. In NSW they are regulated through Boarding House ACT 2012
The purpose of this Act is to create clear rules for making sure people who live in registered boarding houses get good services and are safe and well. We do this by:
(a) Making a system for registering boarding houses so we know where they are and that they meet certain standards.
(b) Setting rules about how people are treated when they live in these boarding houses and making sure those rules are followed.
(c) Making rules for boarding houses that provide extra help and care to their residents. We also have rules for the staff who work there, including standards for the services and places they provide.
(d) Encouraging boarding houses to keep getting better and providing good services for the people who live there.
How are boarding houses managed?
When is a boarding house manager required?
A manager for a boarding house may be required under certain circumstances. The need for a manager can vary based on the size and specific features of the boarding house. Here are some scenarios where a manager may be required:
Large Boarding Houses:
In larger boarding houses with a significant number of residents, it is common to have a manager to oversee day-to-day operations. this ensures residents’ well-being, and management the property.
Assisted Boarding Houses:
Assisted boarding houses provide additional services like personal care or support for residents with disabilities, They require the appointment of a manager to ensure the proper provision of these services.
Some boarding houses catering to specific populations, such as seniors or individuals with disabilities, may have regulatory requirements that mandate the presence of a manager with relevant qualifications and training.
If the boarding house operations are complex, involving multiple facilities or services, having a manager can be beneficial to coordinate and oversee these operations.
The specific requirements for managers can vary based on the jurisdiction and the nature of the boarding house. Owners and operators should consult local regulations to determine when a manager is required and what qualifications are necessary.
What are the development Incentives for boarding house investment properties
Incentives for developers to build boarding houses, particularly those focused on providing affordable housing, can vary depending on the local government policies and regulations. Here are some common development incentives that may be available:
Local governments may offer planning concessions, such as reduced development fees or streamlined approval processes, to encourage the construction of boarding houses. This can make it more financially viable for developers.
Some regions provide financial incentives or grants to developers who commit to building and operating boarding houses that meet certain affordability criteria. These incentives may include direct subsidies or low-interest loans.
Developers may be granted permission to build at higher densities than the zoning regulations would typically allow in exchange for providing a certain percentage of affordable housing units, including those in boarding houses.
Tax incentives or credits may be available to developers who invest in affordable housing, including boarding houses. These incentives can reduce the overall cost of development.
Partnerships with Government or Nonprofits:
Developers may partner with government agencies or nonprofit organizations to access funding or resources for boarding house projects. These partnerships can provide financial support and expertise.
It’s important for developers to research and engage with local authorities and housing agencies to understand the specific incentives available in their area. These incentives are often designed to promote the development of affordable and supported housing, including boarding houses, to address housing affordability challenges in the community.
The Boarding Houses Act 2012 (NSW) is a vital piece of legislation designed to safeguard the rights and well-being of residents in boarding houses and promote the development of affordable housing options. By registering and licensing these facilities, establishing clear standards, and offering incentives to developers, the Act seeks to strike a balance between ensuring residents’ safety and encouraging the growth of this essential housing sector in New South Wales. Understanding the Act’s key provisions and distinctions between boarding houses and assisted boarding houses is crucial for all stakeholders involved in this sector.
How have boarding houses investments evolved over recent years?
I have seen boarding houses evolve over the years. Quality fittings and amenities similar to hotels and other accommodation properties are common in newer developments. In my experiences working with boarding house clients/owners over the last 30 years, I have found that good management and design are essential to attract higher rents. It helps maximise investment returns for property owners. It attracts better-quality tenants while minimising labour and maintenance costs.
Owning a Boarding HouseSound like a good Property Investment for You?
To sum up, it may be possible that the highest and best use of your property could be for a boarding house property investment. Like to find out? Contact Con Tastzidis at CST Properties on 02 9882 2221 for more reasons why property investors love boarding houses and why you might too. For a free appraisal fill out this form via this link
Ready to consider a Boarding House for your property Investment portfolio? Is boarding house property investment right for you? Follow link to see our latest boarding house listing – To have a look at our newest listing follow this link.
Written by Con Tastzidis
Con is Managing Director of multi award-winning Commercial Real Estate brokerage and consulting company CST Properties since 2001.
With over 40 years of hands-on experience, Con Tastzidis has etched an indelible mark in the Hotel, Tourism and leisure commercial property and business sectors. Having engaged with national and international hotel and property companies/owners, Con possesses a profound understanding of the intricate dynamics that drive success in this arena.
Con is the author of several books, including Amazon top-selling book “Real Estate Investing For The Residential Investor-The- The 7 Myths of Commercial Real Estate Explained”. In this book, Con outlines many of the successful outcomes he has achieved in both good and adverse economic conditions for his clients. Con has been featured in several national and international media outlets, including FOX, CBS, NBC, ABC, CNN, and BLOOMBERG.
Con can be contacted through this link Feel free to contact Con Tastzidis at CST Properties.