A co-living investment property refers to a property whereby there is a single investment property with multiple individual tenancies. Tenants have exclusive use of a private room and have shared access to common areas such as a common kitchen, living area and laundry. A great example of a co-living property we manage can be found here
Co-living has become a popular investment option for those investors looking to increase their cashflows as interest rates have risen. Gross rents in a co-living property are often significantly higher than a standard property, with rents often 70% – 100% higher. Gross rental yields of 8-12% are not uncommon, depending on the property location and configuration.
Co-living has also increased in popularity with tenants and investors alike as several cyclical and structural factors have increased its appeal.
The well documented housing shortage has made housing increasingly unaffordable. Many renters are considering alternative options for their housing needs, which has seen interest in co-living skyrocket. According to www.flatmates.com.au there was an additional 50,000 tenancy profiles created in the month of July 2023 alone.
As tenant quality has improved (co-living is often wrongly associated with transient boarding houses), so has investor interest in the asset class. The emergence of co-living as a force in the Australian property market is being driven by a dire need for more housing that is simply not being provided. In fact, despite migration exceeding 550,000 between FY23-24, fewer dwellings were added than five years earlier.
This brings us to the next trend driving co-living, which is the return of international students. Co-living has always been popular with international students, and the return in force of international students following Australia’s international borders reopening has seen vacancy rates drop dramatically for co-living properties, with occupancy rates now exceeding 95% in Melbourne and Brisbane.
Finally, strong interest in co-living is being driven by regulatory acceptance of the model. In Victoria, rooming houses that meet certain requirements can be built as a Class 1B with up to 9 rooms and without the need to go through Town Planning at a local council level (see here for more info).
In Brisbane (depending on the council), investors can build properties with up to five rooms without the need to be licensed as a rooming house operator (see here
This provides a unique opportunity for investors to access higher yields than would otherwise be the case.
There are other benefits too depending on the state, including exemptions to land tax and significantly higher depreciation benefits (think about depreciating nine bathrooms, nine kitchenettes, and furniture).
Certainty Property is the leading co-living property manager across Australia. We provide an end-to-end management solution, including offering Australia’s only co-living rent guarantee provided by a property manager. We operate in Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra, as well as several major regional locations such as Ballarat.
Co-living requires a high-touch property management solution given it operates within a different regulatory regime and by its nature, as you have multiple independent tenancies under a single roof.
If you’d like to find out more about our co-living management solution, you can find out here
