Co-living Spaces- A Coming Age of Real Estate Investment
A co-living space is a concept of shared living where resident occupy single bedrooms in a furnished house with shared common areas such as the kitchen. It is an affordable living arrangement that provides state-of-art amenities to the tenants.
From the investment perspective, co-living is a form of commercial real estate investment that comes into existence when an investor decides to lease out his/her residential property to co-living companies. These companies design and manage these apartments. They may create additional rooms or spaces for beds to rent out, create common spaces for relaxation, and make necessary changes to the common areas such as the kitchen, bathroom to suit the co-living standards. The investors generate a constant rental income from their share of capital gains from these companies.
Co- living is a recent concept of modern housing that has gained massive popularity amongst the millennials all over the world. Co-living spaces are in fact the representation of how the sharing economy has grown over the years and still continues to grow, thanks to the ever increasing demands of the millennials.
Why Does It Make Sense to Invest in Co-Living?
The co-living industry in India has been rapidly expanding, with newer operating models entering the market. It has ushered in opportunities, especially for young working professionals and students, who are being serviced by startups. Many investors in India are now actively looking to diversify their portfolio by including co-living spaces and this rise in demand is more common in cities like Bengaluru, Hyderabad, Chennai, and Pune. We will further discuss the prospect of co-living from a real estate investment perspective.
Since most of the tenants staying in co-living apartments are college students, they often tend to stay throughout their entire college term. This ensures a steady rental income for at least 1-4 years and if your apartment is situated in a prime spot that is close to many educational institutes and offices, then you are likely to get new tenants all year round. This factor also ensures that there won’t be any unexpected move outs and even if one person moves out, there is only one room vacancy that can be replaced soon and this would not be a great burden to the owner.
Low Cost of Maintenance
Since investors lease out the property to organised companies dedicated to transforming your property into a co-living space by making the required renovations, they do not have to bear the cost of making renovations. Moreover, these companies would turn your asset into a commercial investment and would share the profits and income generated with you. This would ensure a steady monthly income without you having to worry about repair costs.
Moreover, damages to the home are reduced because people are less likely to pound nails into the walls, hold pets, or scribble on the walls. Students or professionals, unlike families, which require strict community regulations to protect the integrity of the home.
Higher Rental Income
Co-living offers several advantages over multifamily investments. Although tenants profit from reduced rent and group benefits, co-living investors may generate a dramatically higher NOI for a similar-sized property, up to 40% more than a conventional rental. Moreover, under co-living, owners have the option to rent more spaces as, they earn rent based on the number of beds or rooms that they offer. Therefore, in general the aggregate of rental income generated by renting out individual rooms to single tenants will be greater than renting the entire flat to a single family.
Therefore, provided that tenants rent by the room, operators will receive higher rentals in co-living assets compared to multifamily properties of comparable size. In addition, co-living spaces also protect the investors from unexpected move-outs as even if one person decides to move out before the termination of their tenure, there is only one vacant bed to be taken care of and it is easier to find one single tenant than to look for prospective families to rent out to, incase a family moves out.
Increasing Cost of Living
The metropolitan cities such as Bengaluru, Gurgaon, Mumbai, Pune and Hyderabad have seen a heavy in-flow of students and employees owing to the growing job and higher education opportunities. It is no secret that the cost of living of each of these cities is on the rise but so is the desire amongst youngsters to pursue their careers in these cities. Therefore, co-living residential spaces are a cost effective alternative for millennials looking for affordable living options.
Co-living spaces come with all the necessary amenities in terms of proper Wi-fi network, gas , electricity, furnished household with common kitchen, gym, pool, common room etc. that is cheaper than traditional PGs, hostels and even studio apartments! It also meets the needs of professionals and students who do not wish to shell out a major portion of their salaries and allowances on apartment leases and unnecessary costs of security and broker fees.
Co-living spaces offer many benefits not only to the tenants but also to the investors and owners of such properties. It supports high rental income despite the slowdown in the market and offers the scope to adjust rental income according to the inflation. As compared to other residential investments it is easier to find tenants. Moreover, it is easier for investors to maintain the property since they ultimately share the cost of repairs with the co-living companies. Due to these reasons, co-living is a lucrative real estate investment that is widely gaining popularity in India.
Assetmonk is a unique online real estate investment platform that provides curated high- growth commercial properties to investors. It follows a due-diligence process to shortlist the most lucrative investment options to meet each investor’s unique portfolio and financial goals. Stay updated with the recent real estate insights with Assetmonk.
Frequently Asked Questions on Co-Living Spaces Investment:
A co-living space is a form of commercial real estate investment that arises when an investor leases out his or her residential property to co-living companies, who renovate it to meet current co-living requirements and provide cutting-edge amenities.
These businesses can rent out additional rooms or spaces for beds, build common areas for relaxation, and make appropriate improvements to communal areas like the kitchen and bathroom to meet co-living standards. From their share of capital gains from these firms, the investors produce a steady rental income.
It is a form of investment that guarantees a steady rental income without having to worry about the expensive maintenance and repairs. In India’s real estate market, demand for co-living spaces is growing at a faster rate. India’s co-living market is worth $12 billion. Investing in these communities makes sense because demand appears to be increasing.
Co-living space is a concept of modern housing that allows different residents to share the same apartment space. It offers basic facilities like wi-fi, gas, electricity apart from shared common spaces such as kitchen, common relaxation areas, gyms and living rooms etc. It provides a platform for people to socialize with different people who are like-minded and provides an affordable alternative to students and professionals.