In 2022, 41% of renters spend 35% or more of their income on rentWages are struggling to keep up as rents and the cost of living rise. Living in a big city is so expensive that most young professionals live far away in old apartments to save money. With the high cost of rent, it is unfathomable for the younger generation to even consider buying their own home.
But what if there was a way to save 30% to 40% on rent while living in a new apartment? Plus, rent includes utilities, regular cleaning, furniture, and community events. Too good to talk? It’s a reality, called communal living, and it’s on the rise.
Examples of communal living
The world is heading towards a sharing economy. Ten years ago, taking a taxi with a stranger or living in a stranger’s house was unimaginable. Then came Uber and his Airbnb, a multi-billion dollar business.
There is no doubt that communal living will become a big part of our lives in the near future, but building a house is not easy. Co-living properties typically have to be built from scratch due to their unique characteristics and layouts.
Co-living is a complex strategy and not simply filling existing units with strangers. Buildings should be designed with adequate privacy, soundproofing, amenity space, etc. Property management is certainly labor intensive, and developers must navigate local zoning ordinances and building codes to obtain approval for cohabitation projects.
Developing a co-living property is risky and time-consuming, but it is also very fulfilling and rewarding. Let’s take a look at the pros and cons of cohabitation.
Advantages of communal living
reduce loneliness
Not everyone is an extrovert, but most people want to feel part of a community. In this new digital age we live in, loneliness is increasing wherever you look. Isolation, especially after the pandemic, has become a problem for many, young and old.
Co-living works to solve the problem of loneliness by pairing residents who are likely to connect and hosting several community events such as yoga and cooking classes. Communal living communities even have a weekly dinner budget.
Overall, communal living works to heal some of the broken fabrics of our society from a social perspective.
affordable
Perhaps the biggest advantage of living in a co-living space is affordability, saving tenants hundreds of dollars in rent per month. For example, rent for a new studio in Los Angeles is about $2,000 a month. A co-living suite costs just $1,400, including furniture, utilities, and regular cleaning.
rising with inflation degree of interestand due to severe supply constraints, housing is becoming more and more out of reachMany young people are forced to stay in rentals. But when renting is just as expensive, if not more expensive, than owning a home in some US cities, it’s harder than ever to succeed.
community manager
Having a community manager is a great way to promote community events. Like her Assistant Resident (RA), the Community Manager is responsible for addressing tenant needs and questions, resolving conflicts, organizing social events, and keeping the apartment tidy. A good community manager can greatly improve the living conditions of co-living her tenants.
comfortable
Living together is convenient in three ways. Most co-living properties are built in popular areas close to restaurants and transportation, so the first is the property’s location. Most places can be reached on foot.
Second, it’s easy to move in. Most co-living properties are fully furnished and available for short-term leases, so you can pack up and move in. All essentials such as kitchen utensils, beds, sofas and TVs are provided.
Finally, making friends with people in your building is a very useful way to expand your network. There are many interesting and unique people to meet in the co-living space. Some of these people may own fast-growing businesses that you could work with. Others are connected enough to help you advance your career.
This is very useful for people moving to a new city where no one knows them.
higher property valuation
Co-living properties are cheaper per person, but due to their higher density, you can actually pay more per square foot. For example, a traditional apartment rents at $3.00 per square foot, while a co-living property can charge about $4.00 per square foot. Even with exit cap rates that are 50 to 100 basis points higher, co-living properties may still have better valuations per square foot than traditional apartments.
Disadvantages of communal living
A symbiotic strategy is not bulletproof. There are some drawbacks here.
Possible bad roommate
If you’ve had roommates before, you know it’s like playing the lottery. I don’t really know their habits until I start living with them. An unpleasant roommate can have a huge impact on your daily life.
That’s why some shared accommodations have a bedroom lock and bathroom so you don’t have to worry about the cleanliness of your other roommates. . Shared spaces such as the kitchen and living room are also cleaned regularly. Many co-living operators also do their best by matching roommates and hiring community her managers. Community managers can act as peacekeepers and facilitate roommate conflicts.
However, it is very difficult to eliminate all problems, so it is a risk that tenants and landlords who live together need to be careful.
less privacy
Not only cleanliness but also privacy is taken into consideration. Equipping the bedroom with a lock, preferably a digital lock, is a must. Noise complaints are also very common. Most co-living units lack upgraded sound isolation, such as adding elastic channels between adjacent bedrooms. If you are a tenant moving into a co-living property, you should ask your property manager how your bedroom walls are insulated.
Shared bathrooms are usually a nightmare. Asking your roommate to clean the toilet or sink is never a pleasant conversation. It is highly recommended to provide tenants with private bathrooms. Adding a bathroom to an existing building is difficult. That’s why the best co-living properties are designed from the ground up by industry experts.
safety concerns
Depending on how you look at it, communal living can be good or bad in terms of safety. Living with strangers is obviously not safe. However, you may feel safer if your background checks are done correctly. Living alone can be dangerous depending on where you live. For example, property break-ins have become more common in some cities, so having a trusted roommate is actually safer than living alone.
Lack of parking
There is not enough parking space in the co-living property. This is another reason why communal living isn’t great for families or people who like to drive. However, some communities offer rental cars, so instead of paying monthly car payments and insurance premiums, you can rent a car whenever you want.
Of course, not having a car is another way tenants can save money, but this isn’t viable for most people in cities other than New York and the Northeast.
increased wear
Due to the increasing number of tenants, the units quickly become dilapidated. Flooring, paint, baseboards, doors, etc. are easily damaged and need to be replaced. Property managers should check in more frequently to ensure the property is kept in good condition.
Finally, each bedroom’s lease ends at a different time, so the unit never fully rotates, making repairs and maintenance difficult. Material selection is very important. Choosing commercial-grade flooring and durable paint can save property managers a lot of headaches in the long run.
Conclusion
Communal living is important in the future, especially as affordability continues to decline and younger generations lose confidence in their homeownership prospects.
Is cohabitation the right choice for your family? No. But for individuals between the ages of 18 and her 30, it offers a cheaper, more connected, and convenient alternative to traditional rentals.
As an investor, it’s important to pay attention to this trend and find ways to profit from it.
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Note by BiggerPockets: These are opinions written by the authors and do not necessarily represent the opinions of BiggerPockets.
