What is Coliving? Why should you care? What are the benefits?
Hi BiggerPockets community,
I want to share some insight on the growing industry of Coliving. It is a model which is answering a number of market demands both from the tenant and landlord side. The post is a bit longer than average to provide some real understanding. In here you will find shades of traditional rental, vacation / short-term / airbnb rental , hospitality, commercial and other strategies. It could get as simple or as complex as you’d like to get involved. There are - definitely - strategies which could be applicable to your rental business in some way. I hope this is refreshing and that you find it useful!
What is Coliving?
A variety of shared living arrangements can be called Coliving however, the most common model is the one which allows tenants to rent individual rooms in a property. Based on that core product, Coliving companies offer other integrated services which are complimentary. In overview, some of the attractive propositions of the Coliving model to tenants are flexibility, convenience, community and affordability.
Services
In more detail, the company is a service layer which addresses major pain points of people living in high-density urban areas. Let’s take a look at the services and the challenges/needs they address.
- Challenge: Finding A Place. Service: Digital Platform. [ Convenience ]
Craigslist used to be where people found their apartments. Today however, simply going to a Coliving company’s website allows for the tenants to view safe and quality options, by the room.
- Challenge: Affordability. Service: Shared Housing. [ Affordability ]
Straightforward unit economics.
- Challenge: Lease Term Needs. Service: Flexible Terms. [ Flexibility ]
Most Coliving companies will allow for flexible lease terms starting at 1 month minimums. The changing culture of work and remote workers are an increasingly large demographic which find incredible value in this offer.
- Challenge: Finding Roommates. Service: Interest Based Roommate Service. [ Community ]
A very large percentage of people in high-density urban areas live with others who are not immediate family. Not just young people who are trying to find their footing but also professionals of all ranks and people of all ages. There are many reasons for this but the most common one is affordability and another one is loneliness. Coliving company provides an interest based roommate service by designing their messaging for a certain target market and properly vetting the tenants. On-going community management keeps an eye on relationships and property care, similar to a dorm RA.
- Challenge: Bureaucracy. Service: User Friendly Process [ Convenience ]
In comparison to regular landlords, Coliving companies make the bureaucracy much smoother and even pleasant for tenants just as a service oriented company would.
- Challenge: Moving. Service: Furnished Rentals [ Convenience ]
The process of moving is painful for a lot of people. The Coliving experience can eliminate the reason for having to rent a truck, carry, buy or store furniture. Add this the increasingly growing trend of non-ownership.
- Challenge: Running Operations. Service: Operations Handled. [ Convenience ]
Utilities and cleaning service are handled by the Coliving company. For tenants, no need to set up utilities and collect utilities from roommates or fuss about who needs to clean what.
The Properties
Coliving companies engage with the properties they operate in a few different ways.
- Master Lease: The company signs a master lease on a property and subleases it to their “members” (tenants) as they are usually referred to.
- Property Management: The company signs a property management contract. Example: The company may promise the owner market rate rent as well as a share of profits above market rate.
- Ownership: The company is the owner and manager.
The Trends
More so than a ‘fad’, ‘trend’, ‘hip’, Coliving surge has it’s roots firmly planted in housing prices, stock, and a massive cultural shift underpinned by technology. Driven by fundamental market needs in places like NY, LA, SF, etc. , it can be confused as just a “fad” due to the progressive culture of these places but that isn’t the only thing driving the demand. It’s that these places also are in a crisis of space and price.
12% rent increase. 7% income decrease.
25 million american live with roommates,. A %20 increase since 2012.
60% of humanity will I’ve in cities by 2025. A %20 increase from today.
40-60% of adults report loneliness. The number is highest in urban areas.
The Economics
The economics are usually superior than a traditional rental. The amount of rent which can be received by renting rooms individually to different people adds up to a higher gross than renting the same 3 bedroom apartment to 1 person. It's like turning your 6 bedroom SFR into a 6 unit Multi.
The Operations
The management, if done wrong can be an absolute nightmare. Nothing less than absolutely professional will suffice. If done right however, it can potentially be easier than a traditional rental because - People live more thoughtfully when they are accountable to others and - The community brings in references, significantly lowering marketing costs and vacancy.
A property management software, chat communication tool, central calendar are necessary.
I think there is a good amount of information here on Coliving. I hope that it got you thinking about some changes in the way people are living. The implications can be quite important for all landlords to think about whether you may want to try out the Coliving model yourself, partner with a company or just be in the know about market demands. Times are changing and real estate is also seeing some of the effects.
Let me know your questions and/or thoughts!