Starting a Small Business/Question for Lee
A friend that I knew for the past ten years is a family doctor. He got his own office clinic that he use to meet patients and to teach medical students, who get their internship training in his clinic to become physicians.
My friend sends his medical students to stay in a rented house to sleep few miles from his office and they pay rent while they are attending their training. That house is owned by strangers that we donít know.
I am thinking about buying my own home, and I want to have some roommates in order to make the house a rental property while I live in the same house to manage it myself. I told the doctor when my house is ready, he can start sending his students to me instead of sending them to the stranger. The doctor liked the idea and he said that he can post an ad for me in his web site free of charge, and he told me that I can expect about three to five people per year to come to my house to sleep and pay rent. He wants my rooms to be furnished with king or queen beds, he want his students to have access to kitchen and shower with towels, he wants to determine the amount of rent I should ask for, and he also want me to buy home insurance, but I think that insurance for the house is not necessary and is a waste of money. Insurance is not required for me because I am not going to use mortgage or loans and I will buy the house in a safe area.
I never owned a house before and I donít know the pros and cons about rental properties. I am just going to have about three rooms including basement. I did not buy the house yet but I donít think the house will have enough space for 4 to 5 people per year because I will be living in the house myself in addition to the other renters. Any ideas or suggestions that you have about this topic are appreciated.
First of all insurance and it must be a tenants insurance is absolutely essential. Tenants will not treat your house as well as you do and if one of them got injured you would be liable. Your insurance will cover this. Secondly you have found a good, reliable customer and what he is asking is not unreasonable and will be required by many tenants. Perhaps you should listen to him. You need to ascertain how many students at a time you will be expected to put up. This will be a good source of income and help you pay your mortgage so it is a wonderful opportunity for you to purchase a larger house than you could hope for.
Sit down with your potential customer and friend and work out what he thinks his students need. Check about food costs as well, and factor in that you will be living in less room with others. Then cost this out with regard to a potential property. Work out your figures but do not depend 100% on this income.
Now check with your local council and state for any local requirements. You may also need some fire and health regulations to be adhered to. You might also need a licence.
Lastly you will need to pay tax on your income. A good accountant or the SBA will advise you on what costs you can offset against this income.
Even without tenants you will still need insurance, you risk losing your house to flood, fire, hurricanes etc that happen even in safe neighbourhoods. Thefts happen all over the world, no matter how safe - even the Queen of England has been broken into several times and she has an army camped on her grounds!
Your friend is giving you a great opportunity so listen to him/her.