Property investors are looking for ways to boost the yield on their properties to offset higher mortgage costs. A unique approach that increasing numbers of investors are considering is co-living properties that house a collection of individuals rather than a family.

This trend is particularly prevalent in student housing, where large four or five-bedroom homes are transformed into shared living spaces for students. Nonetheless, there is an increasing movement towards co-living arrangements that cater to singles and even couples. In recent years, there has also been a rise in specialised housing under the NDIS, designed to accommodate a variety of occupants with specific medical needs. These diverse groups can all benefit from co-living, which offers a range of advantages.

Affordability

The primary benefit for singles and young couples is often affordability. As the rental crisis in Australia continues to escalate, many young Australians and those in lower-paid positions find it challenging to afford rent. Shared accommodation options, such as boarding houses, offer cost-effective living in desirable locations. '

Many of these properties are professionally managed, with expenses like internet access, electricity, gas, and water included in the rent. This makes them an attractive choice for individuals seeking comprehensive services at a cost lower than renting a private property.

Privacy

The other major advantage of this type of property is that they offer more privacy than your typical share house. Many co-living properties are reconfigured or purpose-built so they include ensuite bathrooms. This makes them more suitable for couples or even singles who want more privacy compared to your typical share house where different tenants would also use the same bathroom. However, most co-living spaces would still have one kitchen and dining area for the entire household.

Investor benefits

The concept of co-living properties like boarding houses is particularly appealing to investors as they can typically earn far higher yields on their properties than they would renting it out as a family home. In some cases, the yields might be twice as high as a normal family rental, with some specialist properties under the NDIS offering even higher yields.

There are also other advantages, such as the fact that there are multiple leases on the property at any one time. That means if a tenant moves out, there is likely to be other cash flow still being generated by the property. While there are also other tax deductions available to investors due to the different costs that come along with a multi-resident property.

Given that these types of properties are normally larger, they also offer multiple exit strategies. You can sell the property back to an owner-occupier, as well as an investor who will be tempted by the strong yields on offer.

However, there are some risks worth considering. When purchasing or refinancing a co-living property, lenders might view it as a commercial property and want to apply a lower LVR. Similarly, if you’re trying to sell to an owner-occupier, and the property has been extensively reconfigured to suit multiple occupants, this might hurt the value.

Finally, managing multiple tenants can also be tricky. Typically, tenants will look for short lease terms, and there is often a high turnover of tenants. If you look to use a property management company that specializes in short-term rentals and co-living properties, they will also likely charge higher management fees than a traditional property manager.