Hey Fellas. There seems to be a lot of vacant office space here in Phoenix and I was looking to acquire something and remodel it for CoLiving. The basic arrangement would be 20 bedrooms (each with their own bathroom), a large kitchen with multiple appliances, and a few common areas spread out over around 6000 sqft.
Do you think 300 to 400k would be a realistic budget to overhaul the place to luxury apartment standards?
Yes, that sounds like a realistic budget depending on what type of property you're starting with. I've been able to create coliving spaces for 6-8 bedrooms in the Denver area for around $100k or less.
Do you have any experience managing a coliving property? And if not, do you already have a prop mgmt company in mind (i.e. Common, Outpost, Xcommunities, etc.)? How will the zoning work in Phoenix taking a commercial property and turning it into a coliving residence?
That’s what I am wondering as well. Can anyone shed some light on this? Doesn’t sound like a bad idea if you can get zoning isn’t an issue.
Hello, no I don't have any experience running a CoLiving space at the moment but I do have lots of experience managing groups of people. Right now I'm doing as much research as I can. If I can find a vacant plot of land close to the light rail in the downtown area and build the right team around me I might even go for a new construction with a much higher budget.
Yes, the zoning issue was my first thought. Changing the use from commercial to residential (and not just residential, but MF as opposed to SF) will be significant. Whether the city will be open to it probably depends a lot on the municipality. (For example, you might find it easier to do in Glendale than Mesa, or whatever.)
If the zoning issue turns out to be prohibitive, I don't see why you couldn't find existing space in a residential zone to make this work. In downtown Phoenix there is already a lot of MF zoning, so you may be able to find your vacant land in an area that's already zoned for it. Co-living is certainly a hot new trend! Would love to see someone try it in Phoenix.
It likely already exists in Phoenix, you just maybe have to do a little research. I would check on the zoning and group housing laws before making any moves. That is a big issue here in Denver and in many other cities, but everywhere is unique.
On the management side, it's a good idea to start making friends with other people locally who work in community housing. As the density increases, more problems arise and adults turn into giant babies pointing fingers at the other ones. Chores, code of conduct, locks on doors, allotted kitchen and fridge space, common area rules, guest rules, etc all become very important. Higher expense on management, but higher returns. Millennials, who coliving appeals to, like to live in city centers. But the recent retiree demographic for coliving is willing to live a little farther out (if shopping amenities are still walkable) and the the price point is lower. Building community with dinners, parties, and group outings also becomes vital.
Originally posted by @Lia Martinez :
As the density increases, more problems arise and adults turn into giant babies pointing fingers at the other ones.
Actually it would be inaccurate to say I don't have any experience with CoLiving as I spent almost 12 years of my life living in communal environments. Also I was pretty close with a group of grad students in Tucson who moved in together close to UA in a big house with a pool. They had a strict no internet/social media policy and organized a lot of social events until life pulled them in different directions. Good times! Aiming to capture the same feeling in my operation if I can overcome all the obstacles.
My main concern right now is marketing. I'm not having much luck testing the market on Craigslist and I'm guessing social media might be the answer, but I don't like using it myself. How do you advertise your properties?
Hi Justin, you're right, the use of Craigslist has decreased dramatically in the past couple years mainly because of the increase in scamers. I now use mostly Roomster ($10/week) or Roomie aps. I wish a free one existed. Tried Facebook marketplace and was weirded out by the responses.
Great responses Lia! I usually just sit back and read but yes, definitely great advice to speak with some CoLiving PM's and get that lined up. I manage my own here in NYC and can tell you from experience...Us humans are very "special" people.
I think you would have issues converting commercial to muti-family. If you could get past them you would have no issues filling the property in Tempe or as close as you can get to ASU. There are quite a few 10-15 bedroom student homes in the area that are seem similar to what you are trying to do on the edge of south Scottsdale and throughout Tempe.
I spoke with @Matthew Ryan about this earlier today. He has had success doing similar projects to what you describe in the Oakland and Berkeley area of San Francisco.
@Justin Ramos - I only have the details you've posted so forgive me if I'm missing something here: From my perspective, you've got some serious digging to do. I applaud your ability to see a problem and want to adopt a solution. That's very entrepreneurial of you. But with that being said, here are some serious things you've omitted in your evaluation process that could drastically affect your budget:
(1) As others have mentioned: ZONING. This takes Legal (land use attorney) + depth of Architectural experience. It doesn't matter what your budget is if you can't even get the building approved for it's the new, intended use. Some zoning laws are antiquated and you may have zoning regulations that are unfavorable to this type of housing. If you haven't spoken to someone at the planning office, that's the best place to start.
(2) It will be hard to estimate costs for construction until you understand what the change of use will trigger; here in Oakland/CA it triggers structural upgrades, fire upgrades, electrical, etc. Understanding this can be the make-or-break on a project.
(3) You need a GC/architect who have worked together before and have a good working relationship. They need experience in this space (adaptive re-use or work with commercial interiors) This can also come in the form of an integrated design/build firm. This will save you time and essentially, holding costs.
(4) I'm not sure if you've considered this but any time spent on entitlements, zoning approvals, etc. just to start construction will have no only soft costs associated with it, but also holding costs from your lender. You need to factor this in as it can have a very negative affect on the returns of your project. If you're bringing in outside investment, this will also put you at a disadvantage to other investments that pay right out of the gate. So there has to be significant upside on the back-end through a sale or refinance.
Sorry if you've considered all the above and this was repetitive. Hope this helps. Last thing I'll mention is operating a co-living property is very different than living in one. Property Management is HARD. Being an operator and a PM is MORE difficult, IMO. I would seriously consider finding an experienced operator to help you out of the gate. It's a lot of heavy lifting for just one person or even a team of 2-3 to handle.
My law firm does lots of zoning work in Phoenix and other Arizona cities, and we help clients with site selection for their projects all the time. We have urban planners on staff to keep costs economical. Please send me a message if you’d like to discuss further and I can connect you with our team. Thanks
No need to apologize Matthew. Only an unchecked ego would take offense to sound advice.
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