The housing affordability crisis isn't going away. But for landlords willing to rethink their rental strategy, there's a powerful solution hiding in plain sight: room rentals.
When Atticus LeBlanc, founder and CEO of PadSplit, converted his first property to a room rental model, his net operating income jumped from $1,100 to nearly $2,400. But the transformation went beyond his bottom line. A resident named Tiffany, who had been living in an extended stay motel dodging drug dealers to catch the bus to her night shift security job, moved into one of his rooms. Within three months, she bought her first car. Three months after that, she moved into her own apartment.
"It wasn't charity," LeBlanc reflects. "She was thanking me for creating this transformative impact in her life, but I was making more than twice as much. That's one of the magical things about this model. You can do good and do well simultaneously."
The room rental opportunity landlords are missing
The traditional buy, renovate, rent playbook no longer pencils out in most markets. Home prices have climbed while rental rates haven't kept pace, squeezing cash flow for property owners. Room rentals offer a different equation entirely.
"In a co-living strategy, you're looking at a 2x increase realistically in net operating income," LeBlanc explains. The monthly mid-term rental and co-living strategies are both one of the very few ways to obtain cash flow in our current market.
With around 60,000 room rentals on Furnished Finder (opens in new tab), the largest mid-term rental platform in the US, and 36,000 rooms on PadSplit (opens in new tab), the largest co-living marketplace in the US, a partnership was inevitable. PadSplit recently added 1,000 additional room rentals (opens in new tab) to the Furnished Finder platform.
Why room rentals work: the math behind the model
The profitability of room rentals comes down to basic real estate economics. In multifamily properties, studio apartments command the highest rent per square foot. The same principle applies to single family homes when you rent by the room.
Consider a typical three bedroom home in the Atlanta suburbs that might rent for $2,000 per month as a whole unit. That same home could easily accommodate six or seven bedrooms when you convert underutilized spaces like formal dining rooms or home offices.
At $800 per room, six bedrooms generate $4,800 in gross monthly income. More than double the traditional rental approach. "How many landlords have ever made money off of their formal dining room or a home office or a second living room?" LeBlanc asks.
The key is pricing each room at approximately 60% of what a studio apartment costs in your market. While each individual room is more affordable for residents, the cumulative rent from multiple rooms far exceeds what you'd earn from a single tenant household.
Understanding net operating income
Net operating income, or NOI, is your rental income minus your operating expenses before your mortgage payment. It's the standard metric for comparing property performance apples to apples.
When LeBlanc converted his first five bedroom house from a traditional rental to room rentals, his NOI nearly doubled. He was earning the same from one property as he would have needed two properties to generate under the old model.
This measurement matters because it shows the true earning potential of a property regardless of how it's financed. A 2x increase in NOI means significantly more cash flow, faster equity building, and better returns on your investment.
Solving the housing crisis one room at a time
The United States faces a housing shortage estimated between 1.8 million and 7.5 million units. At the same time, economists estimate there are between 32 million and 130 million empty bedrooms sitting unused every night.
"You don't have to be very good at math to see that if we just filled those bedrooms, lo and behold, you could solve that overnight," LeBlanc points out.
But the housing crisis isn't just about supply. It's about access.
One third of the entire rental population in the United States consists of one or two person households earning less than $35,000 per year. At that income level, the maximum rent they can qualify for is approximately $873 per month. In most American markets, finding an apartment at that price point is nearly impossible.
These are the TSA agents at airports, grocery store cashiers, food service workers, and night shift security guards. They're people we interact with every day who serve our communities but struggle to afford housing in those same communities.
Traditional rental underwriting excludes this population entirely. They can't meet the 3:1 income to rent ratio. They don't have $1,000 for a security deposit. Their credit scores may not meet minimum requirements.
Room rentals remove many of these barriers while still providing landlords with profitable, stable income.
The demand that doesn't fluctuate
Unlike short term rentals that experience dramatic seasonal swings, room rental demand remains remarkably steady across economic cycles.
PadSplit launched in 2017 and has weathered multiple market disruptions including the COVID-19 pandemic and interest rate spikes. Through it all, demand has remained consistent.
"The pyramid is widest at the base," LeBlanc explains. "We're talking about a population who is making less than $50,000 a year. It's not really a question of choice where they're choosing between an apartment in this nice area versus an apartment over here. If they can't overcome that deposit or they can't meet that income to rent threshold, they don't qualify anywhere."
During COVID, when many expected shared housing demand to plummet, PadSplit saw very little drop off. Residents stayed because room rentals were still far better than any alternative available to them.
This stability extends to occupancy rates. While short term rentals operate like roller coasters with dramatic peaks and valleys, mid-term and co-living rentals maintain occupancy year around.
Markets where room rentals are exploding
Room rental demand is strong nationwide, but certain markets are seeing particularly high demand relative to supply. For Furnished Finder, the top markets where room rental demand is outpacing supply include:
Silicon Valley, California
Washington DC
Portland and South Portland, Maine
Rochester, Minnesota
Boise, Idaho
PadSplit has seen explosive growth in Los Angeles, a market that surprised many observers. The company has also created over 10,000 affordable units in the Atlanta metro area alone, representing half of the city's goal to create 20,000 units by 2030.
The common thread across all these markets is the same: working people who serve these communities need affordable places to live.
"I often ask elected officials or policy makers, do you think the people who serve your communities deserve at least an opportunity to live there?" LeBlanc says. "Very rarely do those elected officials ever say no. If you want someone to work at the grocery store down the street, that person has to have a place to live."
What makes a property suitable for room rentals
Not every property works for room rentals, but the requirements are more flexible than many landlords assume.
Each bedroom must meet basic safety standards including egress windows, electricity, lighting, and smoke detectors. Rooms must be furnished with at least a bed and storage for clothes. Most rooms are single occupancy, though about 10% accommodate families.
The beauty of room rentals is that spaces originally designed as formal dining rooms, home offices, or bonus rooms can often be converted to rentable bedrooms. Architecturally, these spaces frequently already have the necessary windows and can easily accommodate a door for privacy.
Properties can be located anywhere in the United States. PadSplit operates in 41 states, limited only by where hosts are willing to meet their brand standards. Furnished Finder has room rentals available in all 50 states, representing about 20% of their total inventory.
Older homes in established neighborhoods often work particularly well because they tend to have more rooms and flexible floor plans. But properties ranging from 1960s split levels in Atlanta to brownstones in Brooklyn to houses near the Presidio in San Francisco can all succeed with the room rental model.
Debunking the myths about room rentals
The biggest misconception landlords have about room rentals is that mixing strangers in the same house will create total chaos.
"I ask folks, when's the last time you saw a fight break out at an airport or on an airplane?" LeBlanc challenges. "It's not that it never happens, but people are in pretty tight quarters for sometimes very extended periods of time. Humans are programmed to be social creatures. Folks work it out."
In reality, most room rental properties operate more like apartment buildings. Residents spend time in their private rooms. If you walked into a random room rental property, you'd likely hear a pin drop or someone watching a show in their room. The kitchen is almost always empty.
The room has become the new apartment. Residents use their rooms as their home base, much like apartment dwellers use their units.
Other common myths include concerns about seasonality, zoning restrictions, and HOA rules.
Seasonality in room rentals looks far more similar to traditional apartments than to short term rentals. Demand exists year round because the need exists year round. Many short term rental operators have converted to room rentals specifically to avoid the dramatic seasonal swings and achieve more stable occupancy.
Zoning issues are extremely rare, affecting only about 0.4% of properties. Most short term rental regulations don't apply because room rental stays are 30 plus days. When zoning questions do arise, they typically stem from operational issues like unkept lawns or trash problems rather than the rental model itself.
HOA restrictions are more variable and require careful review of bylaws before purchasing a property in an HOA community.
The economic impact beyond individual landlords
Room rentals create a “four sided win" benefiting residents, landlords, communities, and taxpayers.
Residents save an average of $317 per month compared to their previous housing situation. PadSplit alone has saved residents over $200 million cumulatively.
Landlords see their net operating income roughly double compared to traditional rental strategies.
Communities gain housing supply without new construction, helping essential workers afford to live where they work.
Taxpayers have saved over $10 billion compared to what would have been required to create a comparable number of affordable housing units through traditional affordable housing programs.
"More profitable, more affordable, and far more efficient for taxpayers and communities," LeBlanc summarizes.
How to get started with room rentals
For landlords interested in exploring room rentals, the first step is research.
Visit Market Insights (opens in new tab) on Furnished Finder for local demand statistics including average rental rates per property size (including rooms) and popular tenant types. This data helps you project potential returns before making any commitments.
Talk to other hosts who are already operating room rentals. They'll share the good, the bad, and the ugly of their real world experience.
The key is starting with the right mindset. As LeBlanc puts it: "Landlords need to believe that their residents deserve their respect. If you treat your residents like humans, then you'll be successful."
Get started today with room rentals:
https://www.furnishedfinder.com/list-your-property
https://www.furnishedfinder.com/search/furnished-rooms
The Furnished Finder and PadSplit partnership
Furnished Finder and PadSplit recently partnered to bring 1,000 room rentals across seven markets to the Furnished Finder platform, with more to come.
Both companies share a core philosophy: furnished housing should be more of a service, and renters shouldn't be locked into rigid 12 month lease cycles that don't match how jobs and life actually work.
The partnership includes API integration so the platforms communicate in real time about availability, creating a seamless booking experience for renters.
When you find a PadSplit property on Furnished Finder, you know you're working with a trusted brand. The listing appears on Furnished Finder, then the remainder of the rental experience happens through PadSplit's platform.
Room rental demand on Furnished Finder is up 32% year over year. With approximately 60,000 room rentals representing 20% of Furnished Finder's total inventory, the growth trajectory is clear.
Why room rentals represent the future of residential real estate
The housing affordability crisis isn't going away. Home prices remain elevated. Construction costs continue climbing. Zoning restrictions limit new supply in many markets.
Meanwhile, the nature of work is changing. Remote workers are no longer tied to a single location that might exceed their cost of living. Contract workers and gig economy participants need flexible housing that matches their variable income. Travel nurses and corporate professionals on assignment need furnished spaces for months at a time.
Room rentals address all these trends simultaneously.
They create housing supply instantly by utilizing existing empty bedrooms. They provide affordability by allowing residents to pay for only the space they need. They offer flexibility with month to month terms. They come furnished and ready to move in.
For landlords, they provide superior cash flow in a market where traditional rental strategies often fail to pencil.
"Both PadSplit and Furnished Finder are catering to renters who are looking for midterm rentals," LeBlanc notes. "Because they're looking for midterm, it just makes more sense that they are furnished, usually with utilities included. It just makes life easier. You'll continue to see that sentiment take over rentals generally as we move forward just because it's such a better experience for a renter."
The landlords who recognize this shift early and position their properties accordingly will have a significant advantage in the years ahead.
Taking action this week
If you're a landlord or aspiring investor interested in room rentals, here's what you can do this week:
Register as a host on PadSplit or Furnished Finder and explore the Market Insights (opens in new tab) available for your area. Check pricing and existing supply to understand the opportunity.
Review your current properties or properties you're considering purchasing. Could underutilized spaces be converted to additional bedrooms? Does the floor plan support private rooms with the necessary safety features?
Connect with other landlords already operating room rentals. Ask about their experience, challenges, and results.
Run the numbers on your own properties. Calculate what your net operating income could be if you rented by the room instead of as a whole unit.
The opportunity is real. The demand is proven. The model works.
As LeBlanc's story about Tiffany demonstrates, room rentals create transformation on both sides of the transaction. She went from an extended stay motel to her own apartment and first car in six months. He doubled his net operating income on the same property.
That's the power of aligning incentives and solving real problems in your community.
The question isn't whether room rentals will continue growing. The question is whether you'll be part of that growth.
Episode 168 Transcript
The first PadSplit I ever converted, it was a five-bedroom house. My net operating income at the time was around $1,100. And after I converted it, my net income, my net operating income was almost $2,400. And in the first six months, I'll never forget this this woman, Tiffany was her name, she moved in. She had been living in an extended stay motel. in her own words, was dodging drug dealers and prostitutes to get to the bus stop to be a night shift security guard. She saw our house and said, "I've never lived in a situation like this, but this is the nicest house I've ever seen." She was saving $600 every month relative to what she was paying at the motel. Three months later, she buys her own used smart car. Three months after that, she moves out and and gets her own apartment. And at the same time, I was earning more than 2x greater. Today's guest is Atticus LeBlanc, founder and CEO of PadSplit, a co-living platform that has helped thousands of landlords convert underutilized space into room rental income across the country. He sees room rental trends at a scale most landlords never will, and today he's bringing that view to the show. The housing shortage is not going away, and landlords who understand where this market is headed have a real edge. PadSplit and Furnished Finder recently partnered to bring 1,000 room rentals across seven markets to the platform. Atticus is here to tell us why that number is just the beginning for landlords who have not explored room rentals yet. Can you give us a quick picture of what Pads Split is and the problem it was built to solve? >> Of course. Yeah. So, so PadSplit is a two-sided marketplace, not dissimilar from Furnished Finder, but we were really geared uh to provide access to private rooms in shared homes, specifically for the 50% of Americans who struggle to afford their rent. And uh what that means is like we are co-living platform. We're actually the largest co-living marketplace in in the US. We have almost 36,000 rooms and we're a consolidated source of lead generation, move ins to get those rooms, individual rooms in shared homes filled very very quickly. Then we collect the payments from all those residents. Uh and we're kind of the first point of of triage and support anytime tickets come in from those residents about uh whether it's a leaky toilet uh in which case we route that ticket to the the specific person on the the hosts team that that they deem appropriate. Really we we are in the the kind of trust and accountability business as well. But uh at our core we make we make shared housing possible by also making it profitable. >> I love it. So you guys are beginning to end >> getting these rentals available and then managing it from from move in to move out. >> So so so managing not so much. We're not on site. So we're we're fully remote team. So we're not actually out there fixing the leaky toilets. Uh but on the the resident management side uh from like lease up to move in through the payment and and their journey uh we are kind of holding hands the entire way. >> Sure. All right. So room rentals are growing a lot and and to your point I think it it's it's having this really necessary impact on the affordability crisis and the housing shortage. Um, and this is something that people probably didn't think of quite as much years and years ago, but you're taking a three or four bedroom house and renting it out per room. Um, how do you quantify the impact that renting these properties by the room has had on the housing shortage? Is like is it moving the needle and making rentals more affordable and more attainable, like more available for people who need a good place to stay? It's a great question. Uh I really think of like two primary drivers that that fuel this housing crisis that we're in today. Uh the first a lot of people talk about which is housing supply. And so how do we create more supply to decrease demand to lower prices and create more affordability? Uh shared housing is really the fastest most effective way to do that in in my opinion just looking at the math. Meaning there are millions and millions of empty bedrooms that sit empty and unused every single night. Uh estimates from economists range from anywhere between 32 million up to 130 million. Every single night. Well, every estimate that I've ever read of the housing quote unquote shortage is between 1.8 million units to 7 and a half million units. Well, anybody who you don't have to be very good at math to see that wait a second, if we just filled those bedrooms, lo and behold, you could solve that overnight. And and so that's kind of how we address the supply side of the equation. The the second pillar that that really creates this crisis that no one really talks about is this access question. And when I say access, I mean what are the barriers to entry that prevent someone who has income from being able to qualify for and pay for uh a market rate apartment or just any available living unit in their community. And those those barriers to entry often come in the form of like a 3:1 income to rent ratio just for underwriting purposes. And if you make less than that 3 to1, it becomes really, really difficult to qualify. Uh if you need an upfront deposit to be able to get in, and we know that very few Americans have over $1,000 for an emergency expense. Uh so another one would be like credit score, uh utility deposits, and these things just kind of stack one on top of the other to prevent working Americans or retired Americans or or folks who are otherwise on fixed income from being able to access any affordable housing unit or any housing unit at all in their communities. And so PadSplit tries to address both problems and uh we remove a lot of those barriers to entry and we do that I think most importantly by aligning incentives with landlords uh who are motivated by the bottom line and and what we do through our share shared housing marketplace is demonstrate how renting by the room can be significantly more profitable while it's also more affordable and more accessible to to those residents. So, you're casting a wider net for qualified residents, uh, and you're make it e you're making it easier for them to pay and stay. Uh, and because even though like each individual room costs maybe 50 or 60% of a of a one-bedroom apartment in the given area, when you add up each of those bedrooms, you get to this tipping point. In single family housing, it's usually around four bedrooms. Uh where you're you end up being more profitable renting by the bedroom. That's always been true. Like that's always been true. >> Uh not anything that we invented. What what we really do is take the operational load uh that has prevented landlords from taking advantage of this model and and setting up this technology so that they can actually do it now whether they have one house or hundreds of houses. So, you're really taking it and making it a three-sided win. You're giving more inventory because we're taking one house and we're turning it into three or four rentable spaces. We're making it more affordable and then you're also making it more profitable or perhaps more higher occupancy for the landlord or the owner of the property. >> Yeah. So, I mean, talking about it as a three-sided win, I I think I think you're right. Uh the the other piece I would add though, maybe it's a four-sided win in that uh we've at this point saved taxpayers over $10 billion billion with a B compared to uh what they otherwise would have been required to spend these these local cities or states to create a comparable number of affordable housing units in those communities using traditional affordable housing structures. So, uh, yes, more profitable, more affordable, and far more efficient for for taxpayers and communities. >> And is Patlit all across the nation? Do you guys have any restrictions as far as what types of properties you work with, or does it need to be one where the landlord or the property owner doesn't live there and it's only these residents? What what kind of um restrictions or barriers do you put on which properties you work with? >> Yeah, great great question. Um and and the answer is really that anyone anywhere can can leverage our platform in the US to to create housing in their communities. We're in 40 states right now. I think maybe maybe actually 41 as of this week. Uh but that's really just a question of where we have a willing host that's willing to meet our brand standards. the the real uh I guess restrictions are just whether or not a a host in our parliament is is willing to meet our brand standards for property. So each bedroom has to meet kind of underlying HUD standards. You have to have egress windows from from each bedroom. Uh from our perspective, you also have to provide a bed. It has to be furnished, right? You guys should be familiar with that. Uh there has to be a a place for clothes, light, electricity, smoke detectors in each in each bedroom. Um nearly all of our rooms are private. Uh so some are double occupancy. About 10% are are more than one occupant per room, but th that's a family, right? So, uh, mother, father or child where you have some situations that are just better suited for families, but by and large it's single occupancy and, uh, we can go really anywhere that that people would would like to try out the model. >> So, where have you seen the needle move over the last couple of years? We're hearing PadSplit has uh, a large number of thousands of properties nationwide uh, in 41 states. Furnished Finder has room rentals in all 50 states, around 60,000 on the Furnished Finder website, which is about 20% of Furnished Finder's inventory. How have you seen all of the efforts being put into the room rental strategy, really move the needle with the data and and how the market is changing over the last couple years? >> Yeah. Well, I mean, in in terms of affordability, it's been pretty significant. our we do a a resident survey every single year and they report to us that they're they are saving $317 a month relative to what they were doing before and very rarely was that that they had their own studio or one-bedroom apartment. They could have been staying with a friend or in some cases in an extended same motel. Uh but across the board $317 a month which is well over $200 million that that we've saved for those residents. So, it is it is pretty significant. And then on a market by market basis, I'm here in Atlanta where we are based, we've created over 10,000 affordable units here in the Atlanta metro area when the entire city of Atlanta, their goal is to create 20,000 units by 2030. So, just to put it in perspective, and that's with zero tax funding at all. So, so it really can be a meaningful part of any city's solution. Uh we were really thrilled to be welcomed by the city of Portland recently. We're working with the the city of San Francisco's housing accelerator fund currently. And I think more and more we're we're opening the eyes of uh both cities and states to say, "Wait a second, like this is another tool in our toolkit that we can leverage to create more affordable housing and actually partner with the housing providers, uh the private individuals and landlords and homeowners, frankly, who who are increasingly coming to the platform uh with extra space who who recognize, look, I could use a couple extra dollars from from renting this empty face. >> Yeah. So, let's let's talk about that a little bit more. The economy has shifted so much in the past few years. We're going this way and that way. How have those economic shifts impacted who's leasing their property by the room and also who is looking to rent by the room? What types of shifts have you seen in that, you know, the presence of the supply and the presence of the demand? >> Yeah. Well, I mean I I founded the company in 2017. So, uh if you've been around for just a couple years, you know, we've [laughter] had a lot of a lot of market roller coaster >> over that period. I mean, we were shared housing marketplace in COVID. >> And one of the things that was really interesting, whether you're talking about COVID or interest rate spikes, like our demand has been consistently steady across all of those different market fluctuations. And and the short answer as to why is because the the pyramid is widest at the base. What do I mean by that? Like we're talking about a population who is making less than $50,000 a year. And so it's not really a question of like choice where they they're choosing between uh an apartment in this nice area versus an apartment over here. if they can't overcome that deposit or they can't meet that income to rent threshold, they don't qualify anywhere. And so this solution is is really just much more accessible than anything else that they that they have availability for. So even during COVID, we saw very little drop off in demand, which surprises a lot of people. You think, oh gosh, it was like a pandemic, so why would anyone choose to share housing with one another? And the answer was because it was much better than any other alternative that they had. And so they stayed with us through that that period. And and that's really been consistent across the board. I think taking shared housing or co-living aside for a moment. We're probably one of the very few operators and and marketplaces at all in the housing space that can underwrite these individuals. You think about just the size of this population. One third of the entire rental population in the United States are either one or two person households who rent who also earn less than $35,000 a year. Just let that sink in for a second. So at $35,000 a year, that means the max they're going to qualify for is about $873 a month. Well, regardless of where you're listening from, like $873 a month for an apartment is is really hard to come by in in most American markets. And then on top of that, let's assume you had one at 873. Well, that's only the person that's earning 35 grand, not the person who's earning 30 or 25 or 24. And and these are like anybody you see on the tarmac at the airport, like most TSA agents, uh anyone at uh at, you know, a quick service food restaurant or behind the grocery counter at the grocery cashier. Like you run into these people every day and it's a huge part of the population that almost nobody in the housing space can underwrite. And so like that's really who we service. And because they have so few options, we've just continued to see that demand grow across lots and lots of markets because this is absolutely a need and it's a far better option than anything else that that they typically have access to. Looking for a simple, professional way to manage your monthly rental? Furnishers landlord tools [music] brings everything together. Tenant screening, lease templates, and online rent payments all in one place. Stay [music] organized, save time, and stay in control. For more information, explore Landlord Tools today. I really like what you're saying about how it is a need because I think about what you said about during CO how you didn't see the demand drop off and it's because this population, they need somewhere to stay, right? regardless of of what is going on um outside of the four four walls of their house, they need that place to stay. So, you're really helping to solve this need. And I think that's a that's a great tiein and one of the core reasons that Furnished Finder and PadSplit have been able to partner in the way that we do. And we'll talk about exactly um how we're working together in a little bit here so that everybody can understand kind of this the synergy that we have. But there's a really great core message of like solving needs, right? It's different than a vacation market. It's different than renting a house to bachelorette parties on the weekend. It's >> solving this need for people to stay. whether it's because they are, you know, a service worker or they're a TSA agent and they have a low income and they need somewhere to stay in in their home area or whether it's because you've got a travel nurse or a corporate traveler on on assignment who they they need somewhere, right? So, there's this core that you are as a landlord >> solving these problems that really affect the community around you. >> Yeah, absolutely. I mean, one of the questions uh I often ask elected officials or policy makers is just, do you think the people who serve your communities deserve at least an opportunity to live there? >> Right. >> And >> yeah, >> uh very rarely do those at least elected officials ever say no. And so when you think about just regulatory policy and um some of the constraints that a lot of cities have around uh how many unrelated people maybe defined in a family uh like it ultimately comes back to that that very basic question. If if you want someone to work at the grocery store down the street, that person has to have a place to live. And and that's usually where we have a meeting of the minds with any local jurisdiction is they they all acknowledge, yeah, okay, we can do the math and see that this person who's earning 15 bucks an hour actually can't qualify for anything in the area, but we need them. We need them to be able to live somewhere. >> We need them. They're supporting they're supporting this economy. They're supporting the community >> and go. So, if you're listening right now, you're hearing there's a giant opportunity as a landlord, an investor in this space to go seek out a property if you don't have one, or if you have a property that you can utilize for room rentals. Um, I I flex my properties that way. Sometimes I rent them out as entire spaces, other times I rent them out as room rentals, and sometimes I can get slightly more and still help with the affordability by uh flexing to the room rental model. So for property owners, investors, Atticus, that are listening, it's not only a giant need on the tenant uh on the tenant side, but there's a huge opportunity on the landlord side. Can you speak to kind of some of that current real estate market and why the room rental strategy is actually very strong for landlords at this point? >> Yeah. Well, I mean, so many markets now as as you know, and and uh Katie, I know you're in you're in Denver. uh like the traditional playbook of buy, renovate, rent just doesn't work anymore. >> It doesn't pencil, right? >> It's real tough. >> And and so in a co-living strategy, you're looking at a 2x increase realistically in NOI. Uh could be a hair less than that, could actually be more than that depending on how you manage it and how many bedrooms you have. But it's just if you want cash flow, this is one of the very few ways to do it in our current market given what home prices happen to be and and where where rents and where the need happens to be. So like that's really the opportunity and why we continue to see people uh use PadSplit as the name of co-living in many in many cases because we've operationalized it in such a way that you can actually scale this model and not that people couldn't do it on their own. I think they they certainly can and and have for many many years. I actually started this business not PadSplit but I started doing shared housing in 2009. The problem is do you want to go scale that and create a viable income for your s for your family and and for the future where uh you can do 5 10 15 20 100 houses uh that ultimately help you build wealth. And so more and more those are the types of of investors we see coming to the platform where they usually come for the income because they're excited about the the 2x increase in net operating income but then they stay for the impact because I tell you what like when you see that you have moved someone in some cases like that was a a home health aid living in her car and she moves in and 10 months later is able to buy a house like that's transformational and that becomes really addictive, right? And and if you get to see that, wait a second, I'm making more money and I'm creating that type of impact. >> Uh like those are those are the stories that really keep us motivated and I think keep investors coming back to the platform and and homeowners as well. >> It's that four-sided win that we talked about. Atticus, I want to rewind just a second because you said something that threw me back to my commercial real estate days. You said NOI. So, I want you to explain that to our audience a little bit and then explain how how room rentals can really impact that measure. >> Sure. So, so yeah, net net operating income is basically your your income less your expenses uh before your mortgage. So, I don't I don't have a lot of visibility into what our landlord's interest rates might be on a given property. So the net operating income measurement, [clears throat] excuse me, really gives you an apples to apples comparison of property A versus property B versus property C. So when we look at at apples to apples comparison, like from a traditional single family rental strategy to co-living, that's where you should see that 2x increase uh approximately in in your net operating income. >> Yep. It's just another measurement of how how good your your property is doing or can do. Don't get overwhelmed by it if it's the first time you've heard it. It's just another another way that you can measure the the potential or the success of a property. >> But but it's but it's important and and >> totally. Yes. And and and the reason why co-living and pads split specifically can can be 2x better NOI or greater in some cases is because you think about like what is a single family home or or even an apartment unit like what actually drives revenue like how do you how do you actually create rent from that? And you're talking about your your commercial experience. Anyone who who knows anything about multif family knows that your studio apartments are your highest rent per square foot. So the biggest bang for your buck comes from your smallest units, which makes sense, right? Uh what in a in a single family scenario though, like how many landlords have ever made money off of their formal dining room or a home office or a second living room and there's like nothing. That's totally wasted. And and the same thing is true as you talk about more bedrooms. The difference in in rental rate between a fourbedroom house and a five-bedroom house is very little. It's it's certainly nowhere near the cost in that same market of a studio apartment. >> And so so the scenario this creates again not anything that we invented. It's just something that that we we are taking advantage of from an opportunity perspective. So that what it allows us to do or or any co-l livingiving provider is to say okay well we're going to price the individual bedroom at say 60% of of a studio rental >> and but now instead of that second bedroom being worth less and your third bedroom being worth less and your fourth bedroom being less like now that 60% is repeated over and over and over. >> Totally. And now you can actually turn that formal dining room for instance into a rentable bedroom because architecturally there's almost no difference. They still have an egress window in many cases. They still have a door. >> And so that's really how co-living generates more income than than a traditional single family home. You think about like a I don't know a three-bedroom home uh suburbs of Atlanta, maybe your $2,000. Well, that same three-bedroom home could easily yield six or even seven bedrooms. Well, at $800 a month, uh you can do that math and realize pretty quickly that if you've got six bedrooms, uh at 800 bucks, you're now grossing 4,800. And yeah, it continues to to compound from there. Yeah, I think I think this is a really important reflection of keeping your options open and being flexible to pivoting when you are a landlord, a property owner, an investor, and even if you only have one property, right? Still keeping that that core theme of flexibility and the abil the ability to pivot. If you have a four-bedroom house that you have been renting monthly and all of a sudden it's it's not moving them the way you want it to, you can pivot into these room rentals, right? We see it on Furnished Finder all of the time. And like Atticus is saying, our when you're talking about whole units, the demand for furnish on Furnished Finder for these studios or one beds, one bed units >> is the highest because we see a lot of travelers who are traveling alone >> or traveling in pairs. But if you have a larger property, there's less supply, less demand. But if you want to kind of tap into that lower level of there is more demand there, right? You can pivot into this and and still kind of operate the way that that has been working for you. It's it's not that fundamentally different. You're just taking this little pivot to make it work. So, >> yep. >> Adas, when you said Atlanta and you're talking about a dining room, you know, becoming a rentable space, to me that triggers like a lot of markets that maybe have older properties, right? What markets are you seeing room rentals explode? Is it these markets that are older homes that maybe have have less land to build on? Is it like the New York cities where it's just, you know, sky? Like what are what are the markets where you're seeing that the demand is significantly outpacing the supply and you're like, I can't I I can never have enough of these properties. >> Yeah. So, so, so the demand is greatest where the need is greatest. So, you're talking about New York for instance, like we don't have a huge presence in New York, but there are 100,000 uh squalid basement room rental dwellings in Queens alone. So, I mean, it's there's a massive need in a market like New York uh like I mean, New York, LA, San Francisco, all these really high cost cities. Guess what? They still have people who work at the grocery. They still have people who do food delivery. They still have TSA agents. So, yeah. So there there's huge demand there. The bigger question is like how do you actually create supply in those markets? And and the the type of supply in even in New York versus in LA is very different. But with that said, I I just hosted a one of my college buddies here uh who lives in Brooklyn and we were we were talking about his brownstone in in Bedstey in Brooklyn and it's like yeah, you could easily do this. I was just in San Francisco last week and the house that we were staying in could easily be a PadSplit, but like very different between a a fourstory walk up brownstone versus kind of this this house near the Prescidio in in San Francisco versus a a 1960s split level in Atlanta. The reality is like every like hosts and landlords generally are really good at getting creative to meet that demand. The question is awareness and to your point like do they know wait a second I have this other tool that I can deploy in this area in this type of home that works cuz yeah I mean I I strongly believe that the people who are closest to the problems are the are the best equipped to solve them and those landlords in those markets they know their markets and and really what we're offering and I think Furnished Finder as well is like oh by the way here's the source of demand that you can access that you didn't really know existed before. And and here's how you can fill an individual room that previously you might have had to go to Craigslist or or Facebook and build a bunch of systems independently and then maybe fill it with someone who's reputable and and maybe not at all. Mhm. And for you those of you that are curious, the top cities for Furnished Finder where room rental is outpacing supply, where the demand is outpacing the supply is Silicon Valley, Washington DC, Portland and South Portland, Maine, and Rochester, Minnesota, and Boise, Idaho. So, I if you're really paying attention to this episode, uh you're realizing that room rental demand is really strong everywhere because there's that affordability need, right? So, look at your inventory, look at your next move and decide how can I really help towards this affordability crisis and still be a strong landlord uh and have my properties working for me in the meantime. So, Furnished Finder room rental demand is up 32% year-over-year and you know, you can hear from Attekus that PadSplit is moving in so many strong directions and our partnership really outlines that. So, why don't we dive into a little bit of that partnership of, you know, why Furnished Finder and PadSplit really uh work together so well on this room rental opportunity. >> Yeah. I I mean, for me, it's it's pretty obvious in that like I know we both believe that furnished is the future, right? And that that housing can and should be more of a service. Uh like why should someone have to pick a 12month lease and then go have to buy furniture and and move into a place? If we're talking about just the overall renter experience, it's it's far more uh desirable for the majority of renters to have a furnished place to live that they don't necessarily have to lock in a long-term commitment, right? That's not how jobs work. That's not how just your your life doesn't automatically cycle in 12-month increments. uh and everything falls just so into monthly and and annual increments. And so, yeah, I I think it just provides so much more flexibility for renters. And both Pads Split and Furnished Finder, I know, are catering to to those types of renters who are looking for midterm rentals. And because they're looking for midterm, it just makes more sense that they are furnished, usually with utilities included. In our case, they're they're always included. and it just makes life easier. And so I I know that that we have always been aligned in that philosophy and and I think you'll continue to see that sentiment take over rentals generally as as we move forward just because it's it's such a better experience for for a renter. And so that part was obvious and uh you know we we want to fill rooms as quickly as possible for all of our hosts. And so one of the key elements of the partnership for us was just getting this this API integration so the sites are talking to each other about real-time availability and and folks can can move through the booking process as seamlessly as possible uh because we were already listing on Furnished Finder and and now it just makes it much smoother and I think a better experience overall for anyone who's looking for a midterm rental. Yeah, I think what I've observed about this this new partnership that we have and PadSplit now has a really large number of room rentals listed on Furnished Finder. Um, and we've worked really hard to like Attekus is saying make that that tech integration work seamlessly because we're both trying to solve pro the same problems. We're trying to make renting your property easier, better, you know, make sense numbers-wise for landlords. And we're trying to give travelers and people who need a place to stay a really good place to call home, right? Like we have we have the same the same problem and challenge that we're trying to solve for everybody. So, and I think we both have very trusted marketplaces by not only the property owners, but the tenants, the residents. So, it's this very organic transition. When you're on Furnished Finder, you see that a property is listed and it's it's hosted by PadSplit. You know, that's a reputable that's a trusted brand. You find it on Furnished Finder, then you're going to go over to PadSplit for the the remainder of the experience, right? And it's going to be seamless because we're trying to solve this this same problem and trying to make the world of room rentals and midterm rentals better for all of the parties involved. So, it just it makes sense and I'm I'm excited to see where this goes. I'm excited to see um you know how much inventory ends up being kind of on on both platforms so that we can help these travelers and not only travelers but like you said the residents. It's not always a traveler who's staying in midterm rentals. It's a lot of times just people who are in between houses or doing construction or maybe they just need a place to stay and like you're saying they can't afford the rent that they see on the flyer for an apartment down the street. We're solving that affordability and the the availability. So I think it just it like it makes sense. >> Yeah. I mean think about um some of the people in customer service roles now too, right? Throughout the throughout the US uh or marketing. I mean, a lot of remote workers who are no longer tied to a specific jurisdiction who maybe can't afford anything in San Francisco even though their company may be based there. Well, through Furnished Finder and through PadSplit, they can say, "Oh, you know what? Like Little Rock, Arkansas or or Tulsa, Oklahoma or or Dallas seem like attractive options." and they can try those out for 3, four, 10 months and and determine, okay, like this is a place I can I can carve out a life for myself. Uh and and I think that just ultimately really changes the paradigm of of how people are living. Uh, one of our other partners likes to say that uh, the room is the new apartment and and I think that's that's we that's been true for us and people use their rooms as their as their home base. And uh, it it's really been impressive to see just the the outcomes that that these residents have created for themselves and the fact that landlords are are increasing their income and empowering themselves and their families financially as well. to many of whom like this was the f first home they ever bought, right? And and now all of a sudden they're able to leave their jobs and become either full-time investors or pursue their passions as you know in in one case I can think of a professional photographer. Uh it's really empowering on both sides and I think the key word that we always think about is just uplift and how do how are we creating uplift for both our residents and our our hosts on the platform. Uh, and I'm I'm sure that's uh that's how you guys think about it as well. >> Speaking of Uplift, uh, PadSplit, uh, you've already mentioned you can typically as a landlord make around two to two and a half times more rental income than with a traditional long-term rental. Uh, do you happen to have a specific example of a property that was underperforming and, you know, became significantly more profitable by switching to the room rental strategy? Sure, this is easy. Yeah, I I was the first host. [laughter] >> No, I love it. >> Yeah, I mean, I was um you know, back to that net operating income. The first PadSplit I ever converted uh had been uh it was a five-bedroom house. Uh and I had been doing market rate rentals, but also housing choice vouchers for that particular property. Uh my net operating income at the time was around $1,100. And after I converted it, my net income, my net operating income was almost $2,400. And in the first 6 months, I'll never forget this this woman, Tiffany was her name. She moved in. She had been living in an extended stay motel uh off of I20 east of Atlanta in a really tough neighborhood. In her own words, was dodging drug dealers and prostitutes to get to the bus stop to be a night shift security guard. She was a night shift security guard at at a film studio and she saw our house and said, "I've never lived in a situation like this, meaning shared living, but this is the nicest house I've ever seen." And she moves in. Uh, she was saving $600 every month relative to what she was paying at the motel. Three months later, she buys her own used smart car. Three months after that, she moves out and and gets her own apartment. And at the same time, I was earning more than 2x. creator and so like it wasn't charity. I always felt a little weird about that because like she's thanking me for just creating this transformative impact in her life but um but like I was making more money so I I was thanking her for for moving in. But but that's one of the the magical things about the platform is is you can do good and do well simultaneously. And when you realize that that's possible, there's just there's no reason not to do it. I feel like it's not too often in life where you have those where you can it's it's a it's a win for everybody. So those those have a certain amount of magic when they come to it. So all right Atticus I want to talk about misconceptions misconceptions landlords have about room rentals. Um what are some of the things that you hear on repeat that are myths or wrong about room rentals and and what's the what's the truth? Oh man, so many so many myths. We could we could talk for another hour. I'd say I'd say the biggest is just um it's the worst idea ever. It's going to be a total disaster. Uh like mixing strangers in the same house. Uh it's going to be total chaos. And you like back to the room as the new apartment. If if we were to walk into a random PadSplit right now, like you could probably hear a pin drop in most of those houses or you would hear someone like listening to uh the radio or watching a show on their computer in their room. Um but like everybody's in their room. The the kitchen is almost always empty. [laughter] like it like these a lot of these places operate more or less like apartment buildings or apartment complexes where like if you were to just walk around randomly people would be in their apartments and that's how people leverage most of their rooms. But the other key piece is I ask folks like look when's the last time you saw a fight break out at an airport or on an airplane? Like it's not that it never happens, but people are in pretty tight quarters for sometimes very extended periods of time. >> Like humans are programmed to be social creatures. Fight or flight response is real. Like folks work it out. And we've been living together for literally like 400,000 years. There's there's some some biological stuff there that's happening uh that that means that there's there's not total chaos at at every turn. uh and and and we of course build a lot in terms of the technology and trust elements to to reinforce a lot of those those positive behaviors and to uh to remove bad actors from the platform. >> So you mean not everybody in a room rental is is throwing fists every day? >> Yeah. Yeah. I know that's that's it's shocking. It's shocking. But but yeah, I mean it's it's it's far and away the biggest misconception that you're just going to have total chaos all the time. What about seasonality and occupancy? That's one, you know, that's pretty important in the midterm rental space just because that's a a myth a lot of times is that uh will you have occupancy year round? And you know, many stories, a majority of the stories on our podcast have over 90% occupancy. So, what are you seeing uh with the room rental um situation? Yeah, this is actually a big reason why we see a ton of short-term rental operators converting to PadSplit is is because uh they'll be in a market like Ohio or something that really doesn't get a lot in of traffic in the wintertime. Well, for us, like again, it's that need and if someone's working in that community and can't afford or access those traditional housing options, uh that demand still exists. So seasonality for us looks a lot more similar to the apartment world. Um but it's still I mean we don't see quite the same ups and downs that you do in in apartments and and not nearly what you do in short-term rentals. It's far steadier than that just because again you're at the base of the pyramid from an income perspective that you're targeting. Uh and and those jobs usually exist in in every season. Uh if if any host is interested or any landlord is interested in looking at it though, they can go on our site. We actually have a market insights page that that shows you occupancy by census tract or or zip code uh in any given market. So you can see how many pads split units there are, what the occupancy is, what the price is, and that makes it a lot easier to project. Okay. Well, if I were to buy a home or if you had a home in that given area, uh you can uh you can figure out what what you should what you should likely expect from a from a returns perspective. >> Very cool. Yeah. I feel like the seasonality in a short-term rental is like a roller coaster. >> The seasonality in furnished mid to long-term rentals, like we're talking about furnisher and PadSplit, is like a lazy river. Like you might have some curves here or there, but like >> they're easy swings, right? Like they're they're real manageable. >> Exactly. It's not it's not set it and forget it like um like a self- storage or in some cases if you get a really good single family tenant. >> So it's more work than than those, but you don't have nearly the full-time job or the constant turns that you do in in short-term rental. So So we see a lot of folks converting and often making more money actually >> through co-l livingiving than they were through their their STRs. And we hear with short-term rentals, of course, a lot restrictions, right? So that's one of the myths of midterm rental space is, oh, but there are there a ton of, you know, over 30-day restrictions, which are rare. We we rarely see them anywhere across the nation. What about HOA or zonings for room rentals? Are do you ever have any properties that aren't a good fit because of that or is is it pretty rare? >> Yeah, great question. Uh so so zoning is is a battle that we fight as an organization pretty regularly and and we win most of those battles. So there are um there are definitions on a local level that sometimes restrict uh sometimes based on old brothel laws. Sometimes it's just because they're outright discriminatory. You can't have more than two unrelated people or three unrelated people in a single family neighborhood. Well, like freedom of association is protected under the first amendment. You have equal protections clause under the fifth and 14th amendment. So like there are some constitutional arguments that we make in those cases. But but at our core like we are legally allowed uh and and we feel like we have a strong legal argument in any of those jurisdictions just based on how our legal structure is set up. And so that's what a lot of hosts depend on from us and and we keep an in-house legal team to to work through any zoning issues. Those types of issues are extremely rare in in PadSplits. Uh probably like 04% of of instances have any issue whatsoever. Uh but it usually comes down to just basic clean operations. Right? If your grass is cut and the trash is taken care of, like the only reason those issues become issues at all is usually because there was something else that triggered a neighborhood call. Uh and so that's the zoning side of things. and and very rarely do very strong operators have any issues at all. And and when they happen, we're there to to step in and and help. But on on HOAs, it's it's a little bit of a different story. And of course, a much wider variety in in bylaws under HOAs. And uh if if I ask an HOA owner if if they care about the the the people living in their community who serve their community, [laughter] they might say, "No, I don't I don't care at all." So, uh it's it's really much more wild west for for HOAs. Uh to your point, like short-term rental regulations usually do not apply uh because all our stays are are 30 plus days, but uh but yeah, HOAs, who who knows? I mean, so much variety. They can turn on a dime. Uh, use your discretion carefully is is what I would say for for any any thoughts on HOAs. >> And you can normally go into an HOA ahead of time knowing like if you get the documents before you purchase the property, you can go in and know, you know, what percent uh needs approval to to make that change. like one of our neighborhoods is uh we have very few in HOAs, but one of uh one of our Georgetown properties uh it's like 80% have to vote to change something and we can't even get probably 20% in a room together. So, it's a like it's not going to happen, right? So, if you if you know your HOA, if you can look at the HOA documents ahead of time, that can be helpful. >> Sure. >> Yeah. HOAs are the wild west. >> [laughter] >> I remember the the college town that I lived in when I was in college had a rule that um by law only three unrelated people could live in the same house together. But you're the enforcement of that now we're not saying that anybody should do anything that's against the law. But a I would not be surprised at all if that law has changed. It's been a long time. And b it only became an issue if the property was an issue, right? Because that's what it was there for. So that's why it's like I I feel like you've got again you're solving a problem. You're you're you're fulfilling a need that these people that are supporting the community have. So >> yeah, and and we're we're spending a lot of effort as an organization uh trying to get those laws changed, usually at a statewide level, >> sometimes local as well, but um Colorado passed a bill uh two years ago that that made it illegal for any local jurisdiction to use family relationship as a basis for occupancy. And it has to all occupancy decisions have to be based on health and safety, which is most people think anyway. >> Uh they have they have a series of bills that that we're we're helping around the country to to get into some of these legislatores. Uh there was one in Pennsylvania recently. There was another one in Connecticut, which unfortunately did not move forward. Um but they're called Golden Girls bills and and there's a a local nonprofit or a national nonprofit called Pacific Legal Foundation that's working on that. Uh because like for anybody's familiar with the Golden Girl show, like under a lot of these laws, the Golden Girls would be prohibited from living together in most of these communities. And and I think >> come on, it's the Golden Girls. >> Yeah, exactly. [laughter] Yeah. Most Americans don't even realize those kind of laws are still on the books. So, right, >> we're putting we're putting a lot of time, effort, and funding into trying to change that as well. Well, kind of to to wrap it up and really hone back in on our Furnished Finder partnership uh with PadSplit, like we said, we're very excited about it. Thousand room rentals added to the Furnished Finder platform and more to come. Uh what is one thing you would tell a landlord or someone that doesn't even have a property yet uh to do this week? >> To do this this week? Yeah. I I think um register as a host and check out the market insights page. just start start exploring and doing the research. Test if some of those myths that you might have in your head uh are real or or not and and talk to other hosts because they'll tell you exactly what their experience is, the the good, the bad, and the ugly. And there there's no magic bullet, but um but yeah, we're we know that we're we're solving a lot of needs for a lot of people and and helping landlords do good and do well. >> All right, Adas, we wrap up every show with rapid fire questions. So, we've got three of these for you today. Um, make your answer short and sweet because these are that type of question. So, first one, what is a market that surprised you with room rental demand this year? >> LA, uh, LA has been moving and shaking. >> What is one thing landlords almost always get wrong when they start with room rentals? They assume that their residents are significantly different than they are and they forget about the member experience. >> Hey, that applies to being a landlord, right? Like [laughter] >> like >> Yeah. You forget you forget to be a human, >> right? Yeah. Oh, man. That's a great one. All right, last one. What does a landlord need to believe to make co-working co-l livingiving room rentals work long term? >> Uh that their residents deserve their respect. That's it. I I think if if you if you treat your residents like humans, then you'll be successful. >> Yep. And that's what Furnish Fun, we always say. It's hospitality, right? It's not nightly turnovers, but you're still in the business of hospitality and taking care of your guests. where all they do is show up their suitcase. Uh so get started with uh the room rental strategy uh just by go to that market insights page on furnishinder or PadSplit. Uh and addictus, we really appreciate you being here. This has been a fantastic episode as expected. Uh and we'll catch you again next time. If you're loving our show, please don't forget to like, subscribe, uh share this episode with a friend if you think they'd find value in this space. Uh, thanks for joining us and we'll see y'all again next time. >> Thanks so much. [music] >> Thanks for joining us on this episode. If you're enjoying the Landlord Diaries, be sure to like, subscribe, and share [music] it with others. With over 300,000 listings across the country, Furnished Finder makes it easy for landlords and tenants to connect directly. No middleman, [music] no markups. Ready to list your property? Head to www.FurnishedFinder.com to be a part of the movement that's redefining rentals one connection at a time. >> [music]