Co-living property investment: a guide for investors

Co-living property investment: a great positive cash flow investment strategy. Everything you need to know.

Co-living property investment: a unique opportunity for investors

Co-living property investments have in recent years emerged as a lucrative option for investors seeking both stability and profitability.

We caught up with UNO broker Andrew Wyers to delve into the world of co-living properties.

We cover what they entail, their advantages and disadvantages, financing options, and how to embark on this exciting investment journey.


Summary

  • Co-living or 'rooming properties' allow separate tenancies within a single house, typically accommodating 4-6 individuals.
  • Typical co-living tenants include working professionals, students or international professionals. They are hence strongly positively geared.
  • Special lenders can recognise higher rents on co-living investment properties which could boost serviceability unlike on a typical residential property.
  • A $3,000 commercial property valuation is required if you are depending on rent for mortgage serviceability on these properties.
  • Advantages include high rent and positive cash flow, stable tenants, and flexibility in finding new tenants.
  • There are some costs associated with furnishing, utilities, and insurance requirements.


What is a co-living property investment?


Co-living properties allow separate tenancies within one property. They typically consist of private bedrooms and bathrooms alongside common areas. Examples include international student accommodation, and housing to accommodate contract/FIFO workers.

UNO Broker Andrew Wyers said co-living is an attractive option for property investors.

“​​Especially in the high interest rate environment we’re in at the moment, these properties are extremely positively geared. So after all expenses and mortgages, owners could profit $20,000-40,000 a year. Whereas a normal property in this environment could be zero.”

“This is because, unlike typical residential investment, co-living bases rent on each room which can be quite profitable,” he said.

Borrowing money to fund your co-living investment


Andrew is experienced in helping customers find co-living loans appropriate to their needs. He said co-living mortgage products have a few key differences from typical home loans.

“Generally, some lenders work off the expected rental market value when lending. Even if your co-living property could make $1500 a week, a big lender might say but that isn’t what the property next door is going for. So the lender needs to be okay with lending to this type of investment property,” Andrew said.

“Specialised lenders will do a commercial valuation on the property. It’s still classed as a residential loan, but they need a commercial valuation which costs around $3,000 for the owner, the borrower.”

“The lender will then go off this value, the rent that is expected on a co-living property, which is typically much higher than normal rentals,” Andrew said.

Despite these differences, co-living property loans have typical mortgage features such as digital banking and offset accounts.

Andrew said an 80% Loan-to-value (LVR) ratio is typical for this type of loan.

Book in a call to talk to Andrew Wyers


Benefits of investing in co-living property investment


Andrew said co-living properties are an attractive investment because they are positively geared, unlike many residential investments amid high interest rates.

Co-living properties can also guarantee a sense of stability in terms of tenant vacancies. If someone moves out of a co-living property, you can still collect rent from the other tenants, unlike in a typical rental which would sit vacant.

Finally, if you are relying on property income for mortgage serviceability, specialised lenders can consider a much higher co-living income compared to traditional lenders who only accept a ‘market’ value.


Disadvantages of co living property investment


Andrew said as with any investment, there are potential drawbacks to co-living property investment, namely around property management, and utilities insurance.

“If you’re not using a good property manager who is experienced in multiple people living in a property and the higher demands this creates, that can be an issue. So pick a good property manager.”

“These properties also usually come fully furnished and with the bills paid for. So as a property investor, you could have to connect water, gas, and electricity,” he said.

Andrew also said co-living properties come with higher insurance requirements compared to typical rentals.

“It comes down to insurance requirements and unrelated residential parties. So insurance on these properties can sometimes be higher and have different requirements,” Andrew said.

How do I invest in co-living property?


Andrew said the common route for co-living property investment is approaching a builder who specializes in co-living accommodation.

While it is possible to buy existing co-living properties, these are harder to come by.

Next, you will need to find the right lender. An experienced UNO broker like Andrew can help you with this while streamlining the process.

Andrew said co-living investments can be surprisingly affordable when compared to normal residential properties.

“These properties typically appeal to somebody who wants to diversify their property investment strategy while enjoying a high-income investment,” he said.

Investing in co-living property with SMSF


It is possible to invest in co-living properties under a self-managed super fund (SMSF).

“You can also have this type of loan within an SMSF. The only difference is an SMSF won’t allow you to buy and renovate an existing property, it needs to be a new build,” Andrew said.

Want to know more about using superannuation to buy an investment property? Read our guide here.

Book Call Now

Book Call Now

UNO home loans

Need help with your home loan?

UNO Brokers are available night and day for a quick review or your situation and bring expertise that will support better decision making that will save you time and money. Book in a quick call when it suits your busy schedule

Get Started

Related Articles

TESTIMONIALS

What our customers are saying

A M
June 21, 2024
I only have praise from my Uno experience! I was a broker sceptic, having done all of the hard work myself for my first two property purchases and sale. I'm now a proud broker advocate having used UNO (Karis Churchill) for two refinances and purchase. The value add Karis brought cannot be underrated! Not only has Karis got me the best rate, with a bonus cash back (nearly unheard of in this climate), she has done it with the least back-a-forth and with the least administrative burden on me (the thing that can deters people from refinancing to begin with). Karis is always on top of everything. Karis knows her stuff. She is the most responsive of any professional service provider I've ever used (my banker never text with an update at 7pm on a Sunday) without being overbearing. You know she's got your back and in my experience the value speaks for itself. Thank you to the whole UNO team, thank you especially to Karis.
Read more
Leanda Cawdry
June 8, 2024
Very pleased with the outcome of this process, Michael Parsons and his team at UNO were helpful, communicative, and took all the stress out of the process of finding me a refinance deal that met my needs. Would definitely recommend Michael and UNO, and I already have!
Read more
Glen Matthews
May 29, 2024
Regarding UNO Home Loan services. I had great experience with uno home loans, Michael parsons was my broker for UNO Home Loans we had excellent communication throughout the whole home loan application. If I had any questions on home loan application which were many were answered in great detail. He had the time to assist me in filling out endless application forms at anytime through the day or night which made the application process stress free. So I would strongly recommend Michael parsons from UNO Home Loans to try his services you will not be disappointed. Thanks to Michael parsons I have the lowest home loan interest rate I could ever hope for which I particularly ask for. It’s was a pleasure working with him. And will be using his services in the near future.
Read more
Gillian Anderson
May 28, 2024
Thank you to Michael and UNO for their help in securing our home loan. I like the way they break everything down in simple terms to ensure that you can make the right decision. Michael was polite and very patient to help us get things across the line. We are now sitting in our first home away from rental circus. Can't recommend them enough. Thanks Michael and thanks UNO
Read more
Andy Song
May 17, 2024
Amy has been absolutely wonderful as a broker. I would not hesitate one bit in recommending her services.
Read more
Troy H
May 13, 2024
Scott Wilkinson did a great job as my broker. He was very patient and always happy to answer my numerous questions throughout the considerable period of time that it took to secure a suitable property. Would certainly recommend Scott and the team at UNO for anyone seeking a broker.
Read more
Elvin Singh
May 10, 2024
First time I have used a Broker and I must say Andrew Wyers and his team were amazing to work with and handled my refinance from a Big4 bank. He was able to understand my needs and find a lender that will be able to help me grow my investment portfolio. Andrew and his team kept me updated as part of my refinance journey and made the process super easy and I was able to refi to new lender in under 2 weeks. Would highly recommend Andrew.
Read more
Nadine Steffens
April 19, 2024
Scott and the team at Uno are absolutely 💯 amazing. I don't think I could have done my loan on my own. They are highly motivated and I do recommend them.
Read more
Andrew
April 16, 2024
Dealing with Scott Wilkinson was an absolute delight. Scott is tenacious, hard working and readily available. He made a very stressful process for me and my partner smooth sailing. Would highly recommend.
Read more
Liam Sugiono
April 15, 2024
Amy and her team were efficient and knowledgeable as our broker. They were easily contactable and ensured all our needs were met.
Read more
Mike Vincent
April 10, 2024
Andrew is the best broker I have worked with and one of the few people who understands the investment journey from both a personal and professional standpoint. Andrew is an asset to anyone from a first home buyer to a seasoned investor.
Read more
Yu Su
April 9, 2024
Amy was very help and quick respond when I have questions. Really recommended.
Read more