Many single tenants don’t need an entire property to themselves. They’re happy to share with other tenants to quickly find affordable accommodation in a tough market.
But only if NOT living in each other’s pockets like typical housemates, thank you very much.
Co-living housing is on the rise across Australia, as one profitable solution to a national rental crisis fuelled by property shortages.
What is co-living housing?
Multiple singles rent self-contained rooms on the same property, custom-fitted to offer the best of both worlds to unrelated tenants: private living in shared spaces.
Typically three to six individuals enjoy the privacy of their own bathroom, ensuite and kitchen storage – within a larger communal area that lowers living costs and combats loneliness.
Here’s the best part:
As an investor, you can potentially double your rental yield by charging each tenant a separate rental fee for self-contained rooms, rather than charging a group rental fee like in traditional shared housing arrangements.
Everyone wins!
National rental crisis creates golden investment opportunity
Have you noticed people panicking about putting a roof over their heads?
There aren’t enough affordable rental dwellings to house the overwhelming number of tenants looking for homes across Australia, as indicated by low vacancy rates.
In fact, the national rental vacancy rate reached a record low of 0.7 per cent earlier this year.
Although there was a slight improvement in May (1.1 per cent), this figure falls short of the 3 per cent that indicates a healthy market.
To put the low vacancy rates into perspective:
Proptrack economist Angus Moore says there’s LESS THAN ONE rental property available “for every 100 renter households” in Perth, one of the hardest hit cities alongside Sydney and Melbourne.
This national rental crisis is driven mainly by:
- Surging population growth
- High interest rates
- Elevated cost of living
- Construction delays amid skills shortages and supply-chain problems
One solution?
Co-living housing increases the number of individual rental spaces on the market (rather than entire properties). This is perfect for tenants who only need a small, self-contained space.
Reminder:
Sharing communal areas lowers tenants’ living costs, while investors profit from higher rental yields by charging unrelated tenants separately.
What is co-living housing?
Co-living housing gives individuals private, self-contained rooms (normally a bedroom, ensuite, and kitchen storage) within a larger communal space designed for sharing.
Shared spaces often include communal kitchens, living rooms, backyards and sometimes even workspaces, gyms or recreational areas. The concept is built on community, affordability and convenience – offering a blend of private and shared living experiences.
Co-living tends to be more affordable for tenants than conventional renting.
Residents typically enjoy fully furnished rooms with access to shared amenities such as high-speed internet, utilities and maintenance (all included in the rental cost).
This is a popular option for people looking to live in busy urban areas without the financial burden of high rents and long-term lease commitments. Flexibility of lease terms is a key feature, accommodating both short (typically three-month minimum) and long-term stays.
Co-living rentals normally accommodate three to six tenants individually in self-contained rooms.
An allocated manager is available 24/7 for management services, contactable via phone. This single point of contact is responsible for any maintenance issues or roommate disputes.
Who is co-living accommodation suitable for?
Anyone really!
But co-living rentals increasingly appeal to millennials, young professionals, and students who value social interaction, networking opportunities and cost-effective living arrangements.
It’s also an attractive option for seniors, who often find themselves in challenging housing situations due to limited finances in a competitive market. Sadly, fewer than 2 per cent of traditional rentals are affordable for single people relying on the Age Pension, according to an eye-opening 2024 report by Anglicare Australia. Older women are particularly vulnerable to discrimination in the housing market and financial concerns.
One of the benefits of seniors living together is they can choose co-living properties that have been customised to meet their physical and social needs.
Tenants may choose co-living accommodation with people from the same demographic who share their interests, or branch out to live with individuals from different walks of life.
Is co-living safe?
Thanks to stringent regulations, co-living in Australia is generally considered safe. Professional companies that prioritise security and well-being tend to operate co-living spaces. These operators implement safety measures such as secure entry systems, surveillance cameras, regular maintenance and background checks for residents.
However, as with any housing arrangement, the safety of a co-living space depends on the specific property and its management.
Benefits of co-living for tenants (why demand is growing)
- Affordability: generally costs less than traditional rentals in busy urban areas.
- Rental fee typically includes utilities and maintenance costs.
- Fully furnished houses save money.
- Accessibility: it can be easier for singles to find affordable accommodation during a housing shortage.
- Flexible short and long-term leasing terms.
- 24/7 management services via phone.
- Social connections with like-minded individuals or people from different walks of life (e.g. students and seniors living together).
- Best of both worlds: private, self-contained rooms in a shared communal setting. Tenants enjoy as little or as much interaction as they want!
Increase your profits with co-living investment
Is co-living worth it for investors?
Yes.
Co-living housing offers new and seasoned investors a golden opportunity to increase rental yields – mainly due to the high demand from singles for affordable urban housing in a tight market. There’s no shortage of students, professionals and seniors looking for co-living accommodation options, particularly in major Australian cities like Sydney, Melbourne, Perth and Brisbane.
Higher rental yields (POTENTIALLY double the standard rental):
One property contains separate tenancies for self-contained bedrooms (bedroom and ensuite). This is more profitable than traditional rentals that don’t include self-contained bedrooms. Investors rent out each self-contained bedroom separately. If three people live in the same property, you can charge three separate tenancies and earn more money than only one rental fee for a traditional rental.
For example:
A traditional three-bedroom house may yield $550 per week in rental income. However, with a three-bedroom purpose-built co-living house, the investor could charge $320 a week for each of the three self-contained bedrooms—potentially yielding $960 per week instead. A 75% boost to rental yield is certainly worth considering.
Steady rental income:
Have no fear if one tenant vacates or can’t pay on the odd occasion, you’ll still have other tenants paying their weekly rent separately. Multiple tenancy agreements for the same rental provide a consistent income stream, even if one self-contained room becomes unoccupied for any period of time.
You’re not relying on one income stream, so rent generally comes through regardless of individual circumstances.
Diversified tenant base:
Co-living attracts a diverse tenant base, lowering the risks of relying on a single-category tenant. This diversity can enhance the resilience of rental income streams, as the property is less susceptible to market fluctuations affecting specific tenant groups. For example, if student demand declines, the property may still attract young professionals or remote workers (groups positively geared for higher returns).
Higher retention via community-oriented living:
Co-living fosters a sense of community, enhancing tenant satisfaction and retention. Happy tenants tend to stick around, reducing turnover costs for investors. The emphasis on social interaction can also create a positive reputation for the property, attracting more tenants through word-of-mouth referrals and positive reviews.
Easy management:
Centralised services efficiently manage co-living properties by streamlining operations. This scalability allows investors to manage multiple properties easily, leveraging economies of scale. Property management companies specialising in co-living can enhance operational efficiency, ensuring high service standards and tenant satisfaction.
Let’s get the best return on your co-living investment
At SAFORE, we specialise in property investment strategy to assist you in navigating the real estate market and optimising the value of your next property investment. Access to some of Australia’s most reputable builders means we can find the perfect co-living investment property for you. Whether you’re a first-time investor or a seasoned professional expanding your portfolio, we are here to assist you every step of the way.
Choosing between a traditional house and co-living investment property is a pivotal decision that should reflect your unique investment goals, risk tolerance, and financial situation. Each option offers distinct opportunities and challenges – making it crucial to evaluate the pros and cons to make confident, well-informed decisions in real estate investment.
NEED ADVICE?
Co-living housing could be your next game-changing investment. As an experienced property adviser, I’m here to help you unlock the potential of this exciting market opportunity. Together, we can explore strategies to maximise rental yields while meeting Australia’s growing housing demand.
Fill out this form or call 1300 697 767 for a confidential consultation. Let’s make your next property investment a profitable one!
Interested in other impactful investment strategies? Check out my blog about NDIS housing to learn more about a rewarding property investment opportunity that benefits members of our community most in need. It’s a strategy that aligns profitability with purpose, and I’d be happy to discuss how it could fit into your portfolio.
