You might have heard of the keywords such as Co-living investment, Rooming House, HMO, Shared houses etc. These are now common terms used by savvy property investors.

So, what is this new type of property? Why is it getting popular? Is it a good investment?

We have compiled a comprehensive guide that covers
- the basics
- insights for Investors
- FAQS.

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Table of Content

Part 1 - The basics of Co-living Homes

• What are Co-living Homes?
• The biggest advantage of Co-living Homes
• Who buys Co-living homes(The Market)?
• Pros and Cons

Part 2.- Coliving Design Examples

Part 3 - Investing in Co-living Homes

• Coliving offers 6 income streams
• Traditional property vs coliving

Part 4 - Why buy or invest in Coliving Homes (backed by research)?

• The problem
• What most investors do
• What does the data say?
• Tenants share their homes anyway to save and make money- Flatmates and Facebook marketplace examples

Part 5 - How to identify investment hotspots for Coliving investments

Part 6 - FAQS

Part 7 - The Opportunities

• About Heaps Good Homes
• Coliving Opportunities
• Thanks Heaps!

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Before I jump in, let me tell you this HARD FACT.

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What most property investors will do, and continue to do..

Despite all the information available, most investors and investment advisors will continue to put their money into ‘old faithful’ –

the 4 bed family home.

Even though 76% of people searching for rental accommodation are single and couples, the standard property investor adds another dwelling to the property market that doesn’t match what the market wants.
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Most investors will put their money into a space that doesn’t get fully utilised and doesn’t maximise the area in which they could potentially commercialise.
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Many will utilise negative gearing as a strategy too however many investors don’t realise that negative gearing is a trap. If it doesn’t produce positive cashflow – you will be tied to your job, forever.

Isn’t the purpose of investing to take steps toward financial freedom?

Don't be the uneducated investor! Now, let's dive in!

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Part 1 - The basics of Co-living Homes

What are Co-living Homes ?

In a nutshell, coliving home is a just normal residential house in which all residents get a private bedroom and bathroom with shared common areas.

Coliving homes are fully furnished like airbnb and offer perks such as all-inclusive amenities and utilities, professionally furnished, leisure facilities and a genuine sense of community.

Coliving home just looks like a normal family home from the outside and inside, and can be sold to investors or owner occupiers as an exit strategy.

For that reason, Coliving investment is an ultimate strategy to achieve both positive cashflow and capital growth.

For your reference, here’s a sample coliving home (see below) to give you an introduction to the cashflow strategy that allows you to build wealth faster.

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The biggest advantage of coliving homes!

The biggest advantage of coliving homes is the flexibility to sell it to investors or owner occupiers.

The floorplan of the house is such that it can used as a coliving home or a normal family home. The only significant difference is bathrooms in every room - that's actually a good thing even more families.

So why not enjoy positive cashflow while you are holding the property and have flexibility when you sell it. The uttimate syrategy to achieve both positive cashflow and high capital growth.

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Who buys Coliving Homes (The Exit Strategy)?

Sell to an investor or SMSF = Continue to rent as a Co-Living Home
Sell to an owner occupier = Owner occupier type market (vacant possession)
Sell to a multi-generational family = Owner occupier type market (Family & Parent/Kids)

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Low risk and captures 100% of the resale market!

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What are Pros and Cons of Coliving Homes?

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What are the Pros?

3 tenants, 3 incomes
3 income producing properties on one title

Higher Rental Returns
this is normally 50% more than a traditional house

Capital Growth
Coliving are still rare and provide great capital growth, some times even more than regular family home.

Lower Costs
No body corporate or strata fees are payable to a body corporate manager
Only one set of council rates are applicable

Save $10,000 in stamp duty
When you buy a block of land then build… you only pay stamp duty on the land… so this will save you an estimated $10,000 immediately.

Larger Rental Market
Target markets - Smaller households… which makes up the majority of the rental market
Most people looking for rental properties are singles and young couples

Flexibility
Coliving homes can be sold to investors or families.

No council infrastructure charges apply (unless stated in your build contract)

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What are the Cons?

Slighly Higher cost to build?
The cost is slightly more than a traditional home since a coliving home does have more bathrooms, bespoke kitchen and pantry, solar panels, door locks in every room, house is fully furnished.

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Conclusion

In summary, the advantages of a coliving home, far out weight the disadvantages. A flexible modern coliving design will have broad market appeal as a principal place of residence, and/or shared dwelling, and/or to create multiple income streams as a cashflow positive real estate investment.

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Part 2 - Colving Home Design examples

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Example Design 1 (4 beds, 3 Bath, 2 Garage)

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Example Design 2 (3 bed, 3 Bath, 2 Car)

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Part 3 - Investing in Coliving Homes

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Coliving offers 6 income streams

A coliving home  generates “multiple income streams”.

Here’s a few examples of the different income streams that are automatically created once you buy a dual occupancy property.

Income 1: Rental income generated from tenant #1

Income 2: Rental income generated from tenant #2

Income 3: Rental income generated from tenant #2

Income 4: Mortgage loan reduction

Income 5: Depreciation and tax savings

Income 6: Capital growth.

The end result… is a cashflow positive real estate investment property that essentially pays for itself over time and automatically creates the above six income streams.

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Part 4 - Why buy or invest in Coliving Homes (backed by research)?

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The Problem for Traditional Property Investors

Standard property investing is not
living up to expectations.

Looking at infrastructure, migration, and government spending are no longer enough data points to base investment decisions. We need to understand the way people are living and create living alternatives that cater to those needs – not the other way around.

Right now across Australia, there is an over supply of standard family homes.

The majority of people looking to rent simply don’t need what is available and simply can’t afford it. With over 30% of Australia’s population renting, 48% of renters have a personal income of less than $35,000 a year.

It gets crazier…

Most investment advisors still push their clients into family homes and the majority of investors still opt for a 3+ bedroom home. This rut of investment stock is further hardened by our bank’s influence over approving finance. Anything that isn’t benchmarked against the standard home, tends to get undervalued which cripples any new stock providers offering something that the market actually wants.

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In the history of Australian property supply vs demand,
we have the largest mismatch on record.

The 4 bedroom family home is the holden commodore of the investment landscape in Australia and look at how that turned out. People refer to the Australian dream and that still applies to families, but more and more people are no longer fitting that ‘family’ mold.

For those that find a studio or 1bed apartment are then struck with a variety of new challenges, affordability, and Social Isolation.

Just because individuals can live in a studio, doesn’t mean that it’s affordable – quite the opposite actually. Per dollar, people who live by themselves are the worst affected in Australia with an average 44.4% of their wages spent on housing.

As a result of being on their own and added accessibility to digital ways of connection, social isolation contributes quite significantly toward mental health issues

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What is the data actually saying?

Australia has the largest homes in the world, with a reducing number of people who live in them.

If you were to take the mindset of a property developer, the return on the investment per square metre simply isn’t viable.

To put this into context, if you had 246m2 in Hong Kong, you would be able to fit just over 22 homes for the same space here in Australia. Using that same logic, a home of 246m2 could fit 55 people inside it.

Looking at the reliability of a family as a tenant, the average time span of in a standard family home is 6-12 months whereas someone who is single or a couple is 2 years. As a result of the oversupply of family homes, families have more choice whereas someone on their own stay longer because they know their options are limited. There is a massive undersupply of affordable dwellings designed to cater for single people.

Homelessness is increasing

As we go to sleep tonight, there are twelve million empty bedrooms across the country and we have 116,000 homeless people sleeping in vulnerable situations. This is not the typical assumption most Australian have around someone who is homeless but people who sleep in their cars, couch surf, temporarily in caravan parks etc. The fastest demographic of homelessness in Australian is women over the age of 55, be it through no fault of their own but merely unfortunate circumstantial outcomes.

We live way to big in Australia and the affordability is reflected in the rate of increasing homelessness. From 2011 to 2016, homelessness increased by 15%. 1 in 200 people are classified as either Primary, Secondary or Tertiary homeless in Australia. These statistics correlate with the rising prices of housing.

Housing Affordability is decreasing

People living on their own spend on average 44.4% of their income on housing. The Australian benchmark for when living becomes unaffordable is when housing costs exceed 30% of an individual’s income. Projections show that people living on their own will make up 24% to 27% of all Australian households in 2041 (compared to 25% in 2016) and increase by between 0.7 and 1.2 million (32% to 53%) from 2016 to 2041.

When looking at the average rent of a 4 bedroom home as per the Department of Health & Human Services Rental Report, we see it costs $420, whereas avg price of 2bed home is $415. Therefore each extra bedroom is worth $2.50 per week, on average.

This begs the question – why do the majority of investors keep building 4 bedroom homes? The return is simply not viable.

Social Isolation and Loneliness

Social isolation and loneliness vary across age groups. Loneliness tends to be more common in young adults, males, those living alone, and those with children, either singly or in a couple (Baker 2012). The Australian property market is catered and modelled for the majority around families – the least likely group to experience social isolation and loneliness.

• 1 in 10 (9.5%, or around 1.8 million based on 2016 population) Australians aged 15 and over report lacking social support (Relationships Australia 2018)
• about 1 in 4 report they are currently experiencing an episode of loneliness (Australian Psychological Society 2018)
• 1 in 2 (51%) report they feel lonely for at least 1 day each week (Australian Psychological Society 2018).

For people who live on their own, very little housing options allow for social connections that produce positive outcomes.

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“ARE WE BUILDING THE RIGHT STUFF?”

Analysis by Michael Matusik

Free Matusik Missive – I believe that demographics, eventually, shape everything.

And whilst there is a demand for more compact housing, the want to live on top of each other (and the ability to afford the premium to do so) is at odds with Australia’s future demographic shape – and more importantly, what our key buying groups want & can afford.

The same thinking also applies to new McMansions in outer suburbia.

Let’s start from the top

As we outlined several months ago, we don’t use the more traditional generational demographic markers, such as Baby Boomers, when assessing underlying housing need or demand; we think they are too broad.

Instead, we break the housing demographic market into six distinct buyer segments:

• Young renters
• First home buyers
• Upgraders
• Downsizers
• Retirees
• Aged care

Children, when it comes to housing need, are captured in older segments.

The first chart below shows the relative size (by no. of residents) within each key demographic segment within Australia today. But it is the change in household formation that best determines future housing need, as shown by our second chart below.

Our second chart suggests that over the next ten years there will be a need to build more homes for first home buyers; people downsizing & retirees.

Annual housing need for young renters is projected to decline (and so, I have to ask who is actually going to rent out all those little inner city boxes?), as too is the demand for upgrader housing.

So the need for those new, big suburban homes should also wane.Housing required for aged care – for now – is likely to remain steady.Working out how many new homes are needed (and what and where these new homes should be), is more than just dividing the annual projected total population growth by the average number of residents per dwelling.

What we like to do is work out what is happening in each of the six distinct buying segments.

This provides us with a guide as to the real underlying need for new homes(remember, it is about household formation & not just population growth), and a better understanding as to what homes are actually wanted.

Let me demonstrate this by using first home buyers & those looking to downsize, as examples.

A bit more about first home buyers

Fast facts:

• 35 to 44 years
• 3.3 people per household
• 36% no children at home
• 30% couples or living alone (lucky buggers!)
• A projected 20% of total new housing demand over next decade

Brief description: HECS; partnering later; parents as friends; travel; options galore – so it is not until their mid-30s to-early 40s that many buy their 1st home.Important housing considerations: room to grow; affordability & property improvement

Preferred housing options: some apartments (inner city); some townhouses/duplexes &small houses (middle suburbs); larger detached & dual-income homes (outer suburbs)

What most buy: a property that can be improved & is capable of taking in a tenant/s to help pay the mortgage

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And what about downsizers?

Fast facts:

• 60 to 74 years
• 2.1 people per household
• 92% no children at home
• 71% couples or living alone
• A projected 32% of total new housing demand over next decade

Brief description: As their title suggests, many want to move into something smaller & if possible in their existing neighbourhood.

Important housing considerations: low maintenance; convenience; like-minded residents; existing location; small projects

Preferred housing options: spacious apartments (inner city); townhouses/villas & dual income homes (middle-outer suburbs)

What most buy: well-priced, usually in smaller complexes; private; secure & with space for visitors & grandchildren

Of course, some first home buyers might buy a small downtown apartment or many might choose to continue renting; just as those looking to downsize might just decide to stay put &age in their existing home.

Some from either group might buy a large home in outer suburbia, too.

But if the right housing is provided & importantly at the right prices, then many in these two sample markets – along with those in our other four key buyer groups – would buy. Sofactoring in considerations such as housing affordability is also important.

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Housing that’s really wanted

Our second graphic below outlines what we think is needed when it comes to new housing across Australia over the next ten years.

Our modelling varies, according to location & local economics. For example, in a middle ring suburb, many would opt for a two-bedroom property rather than one with a single bedroom.

Many would prefer, in this situation, a three-bedroom dwelling, assuming they could afford it.

A household’s housing preference will usually change by location; with more opting for one bedroom stock closer to the CBD & more wanting three+ bedroom properties in the more outer suburbs.

So the proportional range for each housing type shown in the graphic above, caters for location spread ranging from inner city suburbs to our regional centres.

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End note

We need to provide much more diversity when it comes to our new housing stock acrossAustralia. Some places are getting this right, whilst too many are not.

There needs to be much more choice in the housing mix than essentially tall things downtown& big boxes in the outer suburbs.Town planning dogma is forcing too much new supply in the wrong places & for the wrong reasons.

Governments at all levels are not interested in improving Australia’s housing choice.

All housing – not just new stock – is too expensive as a result.

We are not building the right stuff.Many more Australians would move into more suitable digs if it was available to them.

Not everyone wants to (or can afford to) either live in a three+ bedroom detached house or an expensive shoebox in the sky.

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Population projections demand coliving homes

Australia's population is expected to increase by more than 30% from 2016 to 2041.

Whopping 4,109,000 new households will need new dwellings in the next 2 decades.

Imagine 3,636,000 couples with no children + 1,536,000 single parent households + 3,523,000 lone person households = 8,695,000 small households

That's 65% of the total market needing SMALL HOUSEHOLDS

Market demands Smaller Dwellings and Coliving Homes is the solution to the burning problem of population growth and household needs.

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Tenants share their homes anyway to save and make money- Flatmates and Facebook marketplace examples

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The Flatmates Angle

Flatmates gets millions of views of every year and thousands of listings existing for Rooms for rent, Granny flat for rent, Studio for rent, share house for rent, student accomodation etc.

Guess the most popular search terms on Flatmates in the year 2023! It's undoubetly studios and granny flats! People want smaller dwelling and privacy at the same time. And that's what dual occupancy homes offer.

The rent for such shared yet private accomodation is very good and brings great yield to investors. Capital Growth combined with lucrative rental yield will set you up for success.

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Facebook marketplace angle

Facebook has thousands of listing on shared house. studios and granny flat rental, and most disappear in a week due to unreal demand for such affordable living.

Demand > Supply! And that's the reason why we call it as "The Missing Middle". There is huge under supply of such creative home with dual occupancy floor plans.

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Part 5 - How to identify investment hotspots for colving homes

Supply, Demand & Affordability are the 3 things that move the market. If Demand is greater than Supply and if the people have the capacity to buy, the property prices will go up. It works the same way for rental property, if demand of rental properties are more than supply and if people can still afford to pay the rent, the rent prices will go up.

When things are no more affordable, the market moves to the next best suburb and the property boom and doom moves like a wave.

So how to identify the hotspots?

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Step 1. Identity the Growth Area, Region or Market

These are the big picture macro drivers for a market

• Population Base: that is sound and showing signs of growth. Do people want to live here?
• Infrastructure Spend: both with private and public sector money. Is the area being supported by government and backed by investors to expand?
• Employment or Jobs: is there money in the area and will more money be coming into it to drive prices higher?

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Step 2. Identify the unicorn Suburb or Local Area

This is how to zoom in on the best performing sub-markets within the macro market.

• Vacancy Rate Analysis – is the area over supplied?
• Yield Variation – can we create cash flow positive properties?
• Median Price – can we get in below this level and get a lift from this?
• Demographics – who is living here and what housing do they want?
• Household Incomes – can local incomes support the prices?
• Days on Market – how desirable is the market right now?
• Rental Appraisals – what is our expected cash flow?
• Market Appraisals – what is our expected end valuation?
• Comparable Sales – what’s happening right now?
• Mortgage Valuations – what will the banks lend against?
• Infrastructure – is the area desirable? Are there...
- Schools
- Transport options
- Medical facilities
- Shopping options
- Outdoor lifestyle opportunities
• Best Suited Type of Real Estate – Does the market want low, medium or high density?

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Step 3. Review all Property Options in Area

This is how to identify the best kind of property to build for a certain market.

Analyse the available options from developers, agents, builders and vendors

• Compare offerings against each other to see who is most suitable to deal with or do business with? (i.e. publicly listed, full time developer, mum & dad etc.)
• Review what is physically on offer? (i.e. available for purchase now or in future)
• What is the vision of future development? (i.e. schools, shops, bus stops, parks etc.)
• Owner occupier levels vs investor participation to avoid rental ghettos
• Brand Name Developers, are the big money players here?
• Community Appeal, is this an attractive place to live?
• Quality of Development (ie street appeal, underground power lines)
• Ripple Effect, what is driving people into this area?
• Price, are there realistic expectations in the market?
• Check the flood zones
• Identify if dual occupancy would work in the area

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We at Heaps Good Homes are passionate about crunching numbers and identifying unicorn deals for our clients, staff and company founders.

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You will be pleased to see the research we put through behind every deal.

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Part 6 - FAQS about Coliving Homes

What is typical rental return from a coliving home?

As a guide an investor would achieve anyway from a 6% to 8% gross rental yield for a typical colviing home. So a typical $700,000 coliving home would obtain say a 6.5% gross rental return or circa $1000pw in rent.

Why do coliving homes provide the highest rental return?

In simple terms, coliving homes really do provide cashflow for life. With multiple income streams, lower setup/running costs and with unlimited options... coliving homes provide the perfect combination of capital growth and maximum cashflow.

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How do coliving homes obtain the required building approval? (And is a rezoning or development approval required?)

All colving homes are built according to the building regulations and therefore obtain council approval and building approval during the construction approval process. (Colving homes do not require a rezoning and no special development application to council is required).

Can you help me find a block of land?

Yes, we can help you find the best available block of land... to suit your requirements.Once you set your budget, we can help find the best deal in the market place.

Obviously, the best blocks go quickly and the best deals are done off market... so be prepared and discuss your buying criteria... with us

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Can I easily finance a coliving home?

Yes, it is possible to finance a coliving home at 90% LVR. It is important to consult with a financial advisor to determine the best financing option for your situation.

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Part 7 - The Opportunities

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About Heaps Good Homes

We are an all-in-one platform seamlessly matching people who are looking to build a new home with unicorn deals and land estates.

Our mission at Heaps Good Homes is to make the process of buying land & building a new home simple, fair and stress free.

Our network of 500+ Builders, 7000+ Packages, and 1,000+ Land Estates empower you with choice.Our work ethic, expertise and end-to-end service make your every new property journey smooth and rewarding.

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Colving Opportunities

We have some exciting Coliving Homes & Coliving packages for sale by most trusted builders in Australia's newest masterplanned estates.

Feel free to browse those, and if you don't find anything interesting, we can find your a perfect block and match you to a perfect plan. Feel free to reach out to us at info@heapsgoodhomes.com.au

Browse Colving Homes for Sale>

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Thanks Heaps!

Thank you so such for reading this far. We are confident that we will be able to smash your property investment goals by matching you to high yield + high properties that will set you up for life.

You can reach out to us at info@heapsgoodhomes.com.au for anything and everything.