Why Invest in Rooming Houses?
Consistent Demand and Low Vacancy
Rooming houses respond directly to one of the biggest gaps in the Australian housing market: affordable, secure, single-occupant accommodation. With rental prices surging and housing supply tight, the demand for private, furnished rooms has never been stronger — particularly among students, essential workers, and single professionals.
In Victoria alone, the median rent for a one-bedroom apartment is over $450/week excluding bills (Domain, 2024), pricing many people out of traditional rentals. In contrast, rooming house rooms often rent for $250–$300/week inclusive of bills, making them both attractive and accessible.
Because of this, vacancy rates in well-managed rooming houses tend to stay below 2%, significantly outperforming the general rental market. And since each room is leased individually, one vacancy doesn’t impact the overall income stream the way it would in a traditional rental model.
Put simply: demand is strong, consistent, and growing — even when the broader market slows down.
Rental Uplift & High Yields
Rooming houses consistently outperform traditional rental properties when it comes to rental income and yield. By renting out individual rooms under separate leases, investors can generate significantly more income from the same property footprint — without needing to purchase additional land.
In Victoria, the average rental yield for a standard residential investment property sits around 3% to 4%. In contrast, a well-located and professionally managed rooming house can achieve gross yields of 8%–10%, with many investors reporting 150%+ rental uplift after conversion.
Here’s a basic comparison to illustrate a house in Carnegie:
Traditional 4-bedroom house
Rented to one family: $800/week → ~$41,600/yearConverted rooming house (7 rooms)
$300/week per room → $2,100/week → ~$109,200/year
That’s a 162% increase! before factoring in tax advantages like land tax exemption and depreciation on furnishings or upgrades.
These properties are also more resilient during vacancy periods. If one room is unoccupied, the remaining rooms continue to produce income — making cashflow more consistent and predictable over time.
Combined with rising demand for affordable housing, the rooming house model delivers not just yield, but stable, diversified, and government-aligned returns.
Unlock Land Tax Exemptions with Rooming Houses
One of the most overlooked but powerful benefits of investing in rooming houses in Victoria is the potential land tax exemption. Under the State Revenue Office (SRO) guidelines, properties that are used exclusively as registered rooming houses providing affordable accommodation may be exempt from land tax — significantly improving your net return.
This exemption doesn’t apply to traditional share houses or standard investment properties, making rooming houses a standout strategy for long-term investors looking to maximise yield while minimising holding costs.
When set up correctly — with Class 1B compliance, council registration, and individual leases — your rooming house may qualify for this annual saving, which can amount to thousands of dollars per year.
This isn't just a tax perk — it's a clear sign that government policy aligns with this model, creating a win-win for investors and communities alike.
Diversified Risk and Income
One of the greatest advantages of the rooming house model is the built-in income protection that comes from multiple revenue streams under one roof.
Let’s say you own a standard investment property rented to a single household. If they leave, your income drops to $0 overnight until a new tenant is secured. But with a rooming house, income is spread across 4, 5, or even 7 separate leases. If one room becomes vacant, the rest keep earning — helping to cushion cashflow and minimise financial stress.
This risk-spreading strategy is particularly valuable during economic downturns or market fluctuations, where tenant turnover is more likely. For example, in a 6-room rooming house renting at $275 per room, a single vacancy only reduces income by 16.6%, compared to 100% loss in a single-lease property.
This kind of income resilience is what makes rooming houses a favourite among yield-focused investors.
Fast ROI and Strong Asset Performance
Rooming house conversions don’t just generate income — they recover costs and generate returns faster than most traditional investment properties.
In Victoria, a simple rooming house conversion can cost between $30,000–$45,000 (depending on size and existing condition), but many investors report achieving full payback in 12–18 months, with ROI exceeding 100% in the first year.
Compare that with the average residential property, which may take 5–7 years to break even on negative gearing or a custom built rooming house that you wont see any cashflow for at least 12 months!
Once operational, a well-managed rooming house can deliver gross rental income of $80,000- $100,000+, especially in metro or transit-accessible suburbs. These properties also benefit from strong asset appreciation, especially if you've improved the layout, compliance, and tenant appeal.
Paired with land tax exemptions, depreciation benefits, and consistently high yields, it’s clear that rooming houses aren’t just a niche strategy — they’re a high-performance property asset in today’s market.