Co-Living: A Modern Solution for Multi-Occupancy Housing

Co-living homes are an innovative and profitable solution for modern housing needs, providing both flexibility and financial benefits. Over the years, the concept of large rooms with ensuites has been popular among high-end clients, and now this idea has evolved into the Co-living model, which is gaining traction due to its affordability and convenience. In this article, we will share insights into what Co-living homes are, their benefits, and how they can be a very lucrative investment opportunity.

What is Co-Living?

Co-living is a modern form of shared housing where individuals rent private rooms within a larger shared property. These homes typically feature private bedrooms with en-suite bathrooms and sometimes kitchenettes, allowing tenants to have their own space while sharing communal areas like kitchens and living rooms. At present (2024), a co-living bedroom can fetch around $350 per week per room. This means a five-bedroom home can generate approximately $1,750 per week or $91,000 per year. Given that the mortgage on a $1,000,000 interest-only loan is around $60,000 per year, the cash flow on these properties is phenomenal. (Refer Plan/diagram)

Benefits of Co-Living Homes

Co-living homes offer numerous advantages, making them an attractive option for both tenants and investors. Here are some of the key benefits:

• Affordable Living: Co-living is generally more affordable than traditional renting, as tenants share the cost of common areas.

• Flexibility: Shorter lease terms and fully furnished rooms provide greater flexibility for tenants.

• Community: Co-living fosters a sense of community, reducing the isolation often experienced in single-occupancy rentals.

• Convenience: With amenities like ensuite bathrooms and kitchenettes, tenants enjoy a high level of comfort and convenience.

• Profitability: For investors, co-living homes can yield high rental returns, making them a profitable investment.

The Negatives of Co-Living Homes

Co-Living Designs are not smooth sailing with the council. As this is new to Perth some councils put this under a Class 1b structure which

• Council Changes: we have had numerous occasions where council has change the plans the layouts, even the ensuite configuration to this style of development

• Parking: Both council and your neighbours may insist and require adequate parking facilities for each tenant.

• Fire requirements: often each room must be insulated with a fire resistant wall cladding

• Length of tenancy risk: From our experience ion the current market we have not seen tenancy levels drop in Co-Living style construction. We have seen where poor design such as dark areas or small windows to a specific area or room, the tenancy can change every 6 to 12 months. These designs due to this risk, our strongest recommendation is to spend the extra and don’t skimp on the floor plan, the specification and construction. Ensuring the consistency of rental income far out weighs the risks.

The Evolution of Multi-Occupancy Homes

Having large rooms with ensuites is not a new concept. Over the years, many blue-chip clients with large families have designed homes with ensuite’s off each bedroom. This trend continues with co-living homes, which often feature modern conveniences like air fryers, slim TVs mounted on walls, and small bar sinks/basins in each room. This setup allows tenants to have full facilities within their rented space, enhancing their living experience.

Council Approval for Multi-Occupancy Homes

When planning a multi-occupancy home, it's essential to check with the local council for approval. Each opportunity must be confirmed with the council to ensure compliance with zoning and building regulations. Failure to do so can result in legal issues and delays in your project.

Case Study: Success Stories

For those who doubt the viability of Co-living style homes, consider the following case studies.

Case Study 1: University Student Housing

One of our clients built a triplex development over ten years ago, with each room rented to overseas university students. At the time, each of the five rooms was rented for $175 per week, generating nearly $900 per week. Today, this number would be close to $1,800 per week. Each room had a lock to the bedroom door, its own or shared ensuite, a small benchtop a basin and exhaust fan above. The students had their own air-fryer or microwave and kettle. The fridge was shared by each student.

Case Study 2: FIFO Worker Accommodation

Another client has a double-storey multi-occupancy/Co-Living home, renting rooms to FIFO (Fly-In-Fly-Out) workers. This property generates over $140,000 per year in rental income. There are 3 sections to the home with 8 rooms (all fully rented). Due to privacy and design protection, we cannot publish this design, but we are happy to share details in a one-on-one consultation.

From our experience the demand for these properties are so high that we have had property managers constantly inquiring about the construction completion date as there tenants are desperate for accommodation.

Furnishing Co-Living Homes

Some property managers managing these types of properties have requested fully furnished homes. Our recommendation is to confirm this requirement upfront so you can approach your bank and borrow for all relevant expenses. Fully furnished homes can attract higher rents and longer tenancies, making them a worthwhile investment.

Financing Co-Living Developments

Financing a co-living development is similar to financing a large-scale property investment. From our experience (note that bank rules may change), you will need a block on hold and a co-living/multi-occupancy design confirmed with the council. Additionally, you will need letters from three property managers confirming the rental per room. The bank will assess the rental income, tenancy risks, and total costs. These loans are often assessed as commercial loans.

Co-living homes present a modern and profitable solution for multi-occupancy housing needs. With private rooms, en-suite bathrooms, and shared common areas, they provide an affordable and convenient living option for tenants. For investors, the potential for high rental returns and steady cash flow makes them an attractive investment. However, it's essential to ensure council approval and consider furnishing the properties to maximize their appeal. With the right planning and execution, co-living homes can be a lucrative and sustainable investment.

FAQs

What is the average rental income from a co-living home?

The average rental income from a co-living home can vary, but as of 2024, a Co-living bedroom can fetch around $350 per week per room in the Perth CBD. For a five-bedroom home, this equates to approximately $1,750 per week or $91,000 per year.

Do Co-living homes require council approval?

Yes, Co-living homes often require council approval. These include a development application and a building certificate. It's essential to check with the local council to ensure compliance with zoning and building regulations before proceeding with your project. Commercial engineering requirements are sometimes stipulated.

Are Co-living homes a good investment?

Yes, Co-living homes can be a very good investment. They offer high rental returns and steady cash flow, making them a profitable option for investors. However, it's crucial to plan carefully, obtain necessary approvals, and consider furnishing the properties to maximise their appeal to ensure renter longevity.