Rooming Houses vs Share Houses: Key Differences Every Investor Should Know
Learning the differences between rooming houses and share houses is key for investors looking to move into the Rooming House industry - whilst both offer benefits to an investor only one provides all the benefits!
What Are Rooming Houses?
Rooming Houses are legally defined as multi-tenant dwellings where individual residents rent private rooms within a singular location - often these have shared facilities like kitchens or bathrooms. In Victoria, a property is classified as a Rooming House when four or more unrelated people occupy the home under separate rental agreements. These properties must comply with Class 1B building regulations and be registered with the local council in order to operate as a legally compliant Rooming House
What Is a Share House?
A share house, on the other hand, usually involves a single lease agreement or co/tenancy agreement where all tenants share the cost and responsibilities collectively. There’s no requirement for Class 1B compliance, and typically less structure around tenant rights, responsibilities, and overall security of the house.
Why Rooming Houses Are a Smarter Investment
| Feature | Rooming House | Share House |
|---|---|---|
| Rental Yield Potential | 8%+ average from multi-tenant setup | Typically 3–4%, single tenancy |
| Individual Room Leases | Yes – each tenant has their own agreement | No – tenants sign a single group lease |
| Council Registration Required | ✔ Yes – must be registered and inspected | ✖ Not required |
| Class 1B Building Compliance | ✔ Required – ensures legal protection & safety | ✖ Not applicable |
| Risk Mitigation | High – diversified income from multiple tenants | Lower – reliant on one group staying together |
| Land Tax Exemption (Victoria) | ✔ Eligible under affordable housing provision | ✖ Not eligible |
| Occupancy Turnover Risk | Low – vacancies are absorbed room by room | High – full income stops if tenants move out together |
| Management Model | Professional – structure, rules, and oversight | Informal – self-managed by tenants or private landlords |
| Government Alignment | ✔ Supported as affordable housing solution | ✖ No formal recognition or support |
Why It Matters for Property Investors
Rooming House offer greater control, higher returns, and long-term sustainability — but they come with strict compliance obligations. Understanding these distinctions is critical if you're planning to convert a property or build a compliant rental asset.