Which Legal Considerations Matter Most When Purchasing Multi-Tenant Properties in Queensland?
You think you found a goldmine. It’s a massive six-bedroom place in a decent suburb. The math looks incredible on the back of a napkin. You figure you can rent out each room separately, triple the yield, and retire to the Gold Coast by Friday.
Stop right there.
I have seen more investors burn cash on multi-tenant deals in Queensland than any other asset class. They get blinded by the gross yield and ignore the legislative landmines. They think “passive income.” The council thinks “unlawful use.”
If you want to play in the high-yield sandbox, you need to understand the rules. Not the fluffy marketing brochure version. The hard, legal reality.
Residential Tenancies vs. Rooming Accommodation Legislation
Here is the biggest mistake rookies make. They assume a big house is automatically a multi-tenant investment. It isn’t.
In Queensland, the magic number is five.
If you rent to fewer than five unrelated people, you usually fall under standard residential tenancy rules. But the second you sign a lease for a fifth unrelated person, you have crossed a line. You are now running “Rooming Accommodation.”
This is not just a label change. It changes the entire legislative framework. You are now operating under the Residential Tenancies and Rooming Accommodation Act 2008. The rules for evicting a tenant who punches a hole in the drywall are different. The notice periods are different. Even the way you hold the bond changes.
I once watched a guy in Logan buy a “seven-bedroom cash cow.” He filled it with seven students. The council knocked on his door three weeks later. He didn’t have the right classification. He had to kick out three tenants overnight and lost about $15,000 in retrofitting costs just to stop the fines.
Don’t be that guy.
Class 1b Requirements for Co Living Houses
This is where the physical building matters. Standard houses are Class 1a buildings. They are built for families.
Legitimate multi-tenant properties often need to be Class 1b.
What’s the difference? About $50,000 in renovations.
Class 1b buildings need stricter fire separation between rooms. They need emergency lighting. They need disability access in some cases. You cannot just slap a lock on a bedroom door and call it a boarding house.
The trend right now is co living houses. It sounds modern. Agents love using that term because it suggests a premium lifestyle. But legally? It is just rooming accommodation with nicer furniture. If you buy a property marketed as “co-living” and it is still a Class 1a building, check the occupancy limits immediately. If the previous owner was running it illegally, that liability becomes yours the moment settlement happens.
QFES Fire Safety Standards and Compliance
The Queensland Fire and Emergency Services (QFES) do not mess around.
In a standard rental, you check the smoke alarms once a year and change a battery. Easy.
In a registered rooming house, you are looking at hardwired, interconnected alarms in every single bedroom and hallway. You need exit signs. You need evacuation diagrams on the back of every door.
I looked at a deal last year where the yield was supposedly 9%. I asked to see the fire safety compliance report. The agent went quiet. Turns out, the place had battery-operated alarms from Bunnings. To bring that property up to code was going to cost $12,000 in electrical work alone. That 9% yield evaporated instantly.
Council Zoning and Planning Schemes in Brisbane
Just because a house is built as a multi-tenant property doesn’t mean it is allowed to be there.
Every council in Queensland has different planning schemes. Brisbane City Council is different from Moreton Bay. Moreton Bay is different from Ipswich.
Some zones allow rooming accommodation code-assessable (meaning if you tick the boxes, you are good). Others are impact-assessable (meaning you have to ask the neighbours if they are okay with it). Spoiler alert: neighbours are never okay with it. They hear “rooming house” and imagine a frat house.
You need to check the interactive mapping for the specific address. Look for overlays. Is it in a character precinct? Is it in a flood zone?
If you don’t know how to navigate the City Plan, pay someone who does. A good buying agent Brisbane will spot a zoning conflict in ten minutes. It costs money to hire them, sure. But it costs a lot less than buying a property you can’t legally rent out.
Commercial Valuation Risks for Multi-Tenant Loans
This isn’t strictly “legal” in the sense of a court of law, but it is a contractual nightmare.
Banks hate these properties.
If a valuer walks in and sees locks on every door and a kitchenette in every room, they might not value it as a residential house. They might value it as a commercial asset.
Why does that matter? Because residential loans are cheap and high leverage (80% or 90% LVR). Commercial loans require a 35% deposit and have higher interest rates.
I had a client try to refinance a multi-tenant conversion he did himself. The bank revalued the property $100,000 lower than what he spent because they applied a commercial capitalization rate to the income instead of using comparable residential sales. He was stuck on a high-interest bridge loan for two years.
Essential Legal Clauses for Purchasing Multi-Tenant Assets
When you put an offer in, standard REIQ contract clauses won’t save you.
You need special conditions.
You need a “Due Diligence” clause that specifically allows you to investigate the lawful use of the property. Do not accept a “Building and Pest” clause as a substitute. A building inspector checks for termites. They do not check if the council approved the downstairs conversion in 1998.
You need to see the “Final Inspection Certificate” for any modifications. If the seller can’t produce it, walk away. Or crush them on the price.
Strategic Compliance for High-Yield Property Investment
I love multi-tenant properties. When you get them right, the cash flow is unbeatable. I have seen portfolios transform from negative gearing disasters to positive cash flow machines with just one or two of these assets.
But you have to treat it like a business. It is not a set-and-forget house in the suburbs. It is a highly regulated, compliance-heavy operation.
Do the homework. Check the zoning. Count the smoke alarms. And for the love of profit, check the building classification.