A rooming house is a single property divided into five self contained studios, each leased separately. Same land, same mortgage, same rates as a standard house, five incomes instead of one. Two brand new turnkey packages are available at Winter Valley in Ballarat, at roughly half the Brisbane entry price.
The economics are simple. A standard investment house carries one land cost, one mortgage, one set of rates and collects one rent. A rooming house carries the same fixed costs and collects five. That is where the yield comes from, and it is why the numbers hold up without needing a bargain purchase or a fringe location.
Winter Valley sits on the western edge of Ballarat, about ninety minutes from Melbourne on the Western Freeway and a short drive from the Ballarat train line. Both packages are brand new house and land with five self contained studios.
| Suburb | Package price | Rent per week | Rent per year | Gross yield |
|---|---|---|---|---|
| Winter Valley | $745,500 | $1,100 | $57,200 | 7.67% |
| Winter Valley | $805,500 | $1,250 | $65,000 | 8.07% |
Prices are current at the date of publishing. Victorian rents are quoted on a 52 week basis.
This is the entry point to the whole strategy. The same five studio structure in Brisbane starts at $1,300,761. At $745,500 a Ballarat package puts a rooming house within reach of a deposit that would otherwise buy a standard three bedroom rental yielding under 4 percent.
Victoria is the state where the term is actually defined in law. Under the Residential Tenancies Act 1997 a rooming house is a building in which one or more rooms are available for rent and four or more people can occupy those rooms. That definition brings a full chapter of the Act with it, covering rooming house agreements, entry rules, and what a resident is entitled to.
On top of the Act sit two more requirements that do not exist in most states. The operator must hold a licence from the Business Licensing Authority under the Rooming House Operators Act 2016, which includes a fit and proper person test. The building itself must be registered with the local council as prescribed accommodation under the Public Health and Wellbeing Act 2008, and the council inspects it.
Minimum standards are set in regulation and cover the things that matter to somebody living in one room: a privacy lock on the door, natural light and ventilation, safe electrical and gas installations with periodic safety checks, food preparation and laundry facilities, and heating in the room.
Why the paperwork is the opportunity. Three separate approvals, an operator licence and a council inspection is exactly the reason most investors look at an eight percent yield in Victoria and go back to buying a standard rental. The ones who do it own an asset in a market other people have talked themselves out of.
What we handle. Package selection and the numbers against your income and structure, the builder relationship, and an introduction to the licensed operators who run these day to day, which is the part most people do not realise they can outsource entirely.
Licensing and registration attach to the operator and the building, so both are confirmed on the actual property with your own legal and accounting advisers rather than promised on a web page.
Gross yield is the easy number. What matters is what lands in your account after the property is run, and a rooming house costs more to run than a standard rental because you carry the utilities and the common areas. Here is a full year of real trading from a completed property, itemised.
| Management at 9% | $10,228 |
| Insurance, building and landlord | $3,500 |
| Council rates and utilities | $3,000 |
| Water usage | $2,400 |
| Gardening and cleaning | $2,350 |
| Internet | $1,320 |
| Electricity, after 13.3kW solar | $1,100 |
| Fire safety and smoke alarms | $450 |
| Pest inspections | $300 |
| Total for the year | $24,648 |
Deagon, Brisbane. Against gross rent of $113,641 that is 21.7 percent, on 98 percent average occupancy.
| Winter Valley package price | $805,500 |
| Gross rent | $65,000 |
| Outgoings on the same structure | $20,270 |
| Net rent | $44,730 |
| Net yield on purchase price | 5.55% |
Five and a half percent net, on a $805,500 purchase. A standard Ballarat rental at the same price would gross around 4 percent and net closer to 3. The gap is the whole point of the structure, and it is there before a dollar of depreciation is claimed on a brand new build.
The running costs above are the Deagon actuals applied to Victorian rent, which is an estimate rather than a Ballarat trading history. Most of them, insurance, internet, gardening, safety checks, do not fall just because the rent is lower, so the outgoings take a bigger share of a smaller gross. Depreciation on a new build is claimed on top and needs a quantity surveyor's schedule on the specific property, which is why there is no number for it here.
Two completed properties, tracked from purchase. Both are Queensland builds, because that is where we have the longest trading history, and both show the same pattern: the yield you buy at is not the yield you keep, because room rents are reviewed far more often than a single twelve month lease.
Bought at $1,068,900. Rent per room rose from $400 to $446 a week, lifting gross rent from $103,449 to $113,641. Net yield 8.33 percent after the outgoings shown above.
Total investment $1,263,900. Rent per room rose $54 to $470 a week, about $14,000 a year across the five studios. Built slab to practical completion in 146 days.
Estimated value $1,740,000 against $1,263,900 invested, sixteen months in. On a capitalisation approach every $10 per room per week adds roughly $37,000 of value.
How those valuations were arrived at. Both figures use a capitalisation approach, which values the property on the income it produces rather than on comparable sales. That is the standard method for this asset class, but it is an estimate and not a bank valuation, so treat it as an indication of direction rather than a number to borrow against. Past performance on two properties is not a forecast for a third.
The yield is not a secret. Anyone can read that a five studio rooming house in Ballarat grosses around 8 percent while the three bedroom house next door grosses 4. What stops people is everything in the Victorian rules above: an operator licence, a council registration, an inspection regime and a set of minimum standards, none of which apply to a normal rental. Finance is the second filter, because lenders assess these differently and some will not lend against them at all.
That is more moving parts than a standard rental, and it is the single reason most investors never own one of these despite the yield being public knowledge. It is also why the ones that do get built are worth owning: the barrier that keeps you out keeps everyone else out too.
What we handle. Package selection and the numbers on your income and structure, the one part contract if you are buying through a fund, the builder relationship, and an introduction to the specialist managers who run these properties day to day.
Compliance detail is specific to the property and the council, so it is confirmed on the actual package rather than promised on a web page.
Most investment property costs you money each week to hold. A rooming house at this yield does the opposite, and that surplus has somewhere useful to go: an offset account against your own home loan, where every dollar saves you interest the tax system gives you no help with.
See how the offset strategy works, including the worked example on a $700,000 home loan and why the property you choose changes the answer by years.
Full brochures with floor plans, inclusions and the rental appraisal for each. We will also model what one looks like against your income, deposit and structure, including whether it works inside a fund, and walk you through it on a call.
