If you’re a landlord looking to increase margins, then you need to know about co-living. It’s a new market for the UK and savvy landlords are itching to get in on this cash cow rental sector. In this quick guide, you’ll find co-living explained for landlords in full. So dig in!
Co-living explained
Co-living is not really new and many UK landlords have been doing it for years. Properties around universities have long been snapped up and used as student housing for decades. With universities in every city, all kinds of properties from 3-20 bedroomed homes are used as student housing. They typically comprise separate bedrooms with shared bathrooms, kitchen, and living space.
Co-living is merely an extension of this market for different sectors who also benefit from the social aspect of community living and reduced rents. Instead of bedrooms, the separate living space is often an en-suite, with a small living space.
Typical renters of co-living spaces
Graduates/professional
Co-living is often targeted to graduates. The style of living is an extension of student life, but just better quality and professional. It appeals to many, especially those that may be moving to a new city after getting their first job and without a network of friends. It also appeals to their pocket. A small apartment may not be affordable and, therefore, their only other option would be to lodge with a landlord.
Professionals in London
Housing in London is notoriously high. Rents are so high, that a large proportion of people in London live as lodgers. This is often in poor quality housing and is far from satisfactory, often leading to disputes and other issues. Another sector is professionals in London that could easily afford an apartment but appreciate luxury co-living. Apartments in co-living spaces range from upwards of £2000 per month.
Another reason, Ph.D. students or new graduates benefit from co-living is the ability to collaborate into the small hours tackling tough projects such as research, law, medicine, or coding problems.
Baby boomers
Co-living is no new thing for baby boomers in the UK. For those on benefits and housing assistance, a tenant may choose to be moved to a similar co-living space, often known as assisted housing. Occupants of these spaces require no care but benefit from a warden check in regularly. For those with greater means, baby boomers often choose to buy small apartments. Older residents benefit from the community aspect and check-in on each other.
Why should landlords consider co-living
The maths
The cost of buying property suitable for typical baby boomers in suburbia or professionals close to the city is going to be far greater than for students. That’s a given. But a monthly rental for students often will bag a landlord around £350 per month or less.
It’s estimated that people in the UK spend around 35% of their income on rent. Those on lower incomes may pay a larger percentage. Graduates typically earn from £20-40,000 from their first job meaning they now have more money to spend on rent. Rentals outside of London start from around £900, with rentals in London starting from around £1100. You’ll, therefore, be able to pocket around £4000 for a four-bedroom co-living space, which is good going for improved specs and location. And far more, than you’d likely get for most four- bedroom houses. You can obviously make far more on properties with more bedrooms.
Other benefits
While co-living spaces for young professionals and others are going to require a far higher spec than cheap student housing, there are huge benefits. Students are notorious for being filthy. Straight from the nest, and with no office to get to at 9 am, students are offered the cheapest alcohol in town. And encouraged to drink as much of it as they can before vomiting.
Unable to drink sensibly without falling over and attending A&E departments, students are far from the ideal tenants.
Still children at heart, they take their filthy washing home on weekends. And cleaning in a house full of other students that refuse to clean is at best futile and at worst unpopular among peers. While landlords can still make good profits renting large houses with several bedrooms, there’s still only 9 or 10 months’ rent to collect. And that’s just as well since you’ll spend a month cleaning up the damage before renting to the next set of students, come term time.
Less Damage
With typical renters being new graduates, if you rent small apartments they can just afford, many are still readjusting to life as a normal civilian. The 9 am office bell means drunken nights are out of the question on a school night, but there are still the weekends. Getting to work every day rather than attending a few lectures a week, is stressful enough for new graduates, so weekends spent cleaning are things that graduates have yet to adapt to.
That’s where communal living in a large space is of huge benefit to both new graduate renters and landlords. Shame is a great leveler and community living helps people to raise their game and living standards to acceptable. When kitchen spaces are beautifully designed with dishwashers, few will abuse the environment and cause damage and leave a mess. So money spent on high spec good quality and long-lasting kitchen appliances and fittings will last.
Check on your property regularly
In addition, you can offer room cleaning, once a week or a fortnight, in a more of a “hotel-style” arrangement rather than student service. Few tenants will turn this service down, so you’re making sure your property stays clean on a weekly basis. And it’s all accounted for in your all-inclusive cost which tenants expect to pay extra for and are glad to. Not just that, it’s perfectly acceptable to pay a cleaner the minimum wage, so it’s not a huge outlay.
Your cleaner can make sure the bathrooms are spotless for tenants improving their satisfaction, and that the kitchen including ovens do not become splashed and dirty.
No need for contracts
Co-living spaces tend to work on different terms than traditional renting with minimum 6-month or 12-month contracts. Rooms are offered on monthly or minimum 3-monthly terms smaller deposits of usually 2 weeks. This is a boon for tenants, especially new graduates who may struggle to get together the funds for a month’s rent and a deposit.
While as a landlord you won’t be getting a full month’s deposit, you can charge different rates depending on the length of stay, with one-month rentals being the highest. The way you offer rooms means you won’t have to spend time on room-only contracts for each tenant. Not least, if you’ve ever rented to a group of students, you’ll find that when the bills come in, it’s rare for the whole group to all pay their share, leaving you with the balance. Charging an all-inclusive rate and having regular weekly checks on the high spec hotel-style amenities all but eliminates the need for security deposits.
Whilst you’ll need to advertise for your co-living spaces if you’re aiming to appeal to graduates and you already own student housing, then look no further than your existing tenants. As soon as they have graduated and found their first job, you can offer them an upgrade to new professional living accommodation.
Considerations
Just like with student housing if you are looking to venture into co-living you will need to apply to your local council for a Houses in Multiple Occupation (HMO) license. You’ll need to ensure there are annual gas certificates in HMOs as with other rentals. And that PAT testing is done on electrical appliances every five years. Further regulations apply to HMOs and larger HMOs that have more than five tenants. You’ll need to make sure, there are enough bathrooms and the bedrooms are large enough. The communal areas must also be in good order, with ample rubbish facilities, and enough fire regulations in place.
You may need to apply to your local council for planning permission before you embark on a co-living space. If you are sold with the idea of cashing in on this lucrative rental market, then you may want to consolidate. Consider selling your current tenant housing rather than over-extending yourself.
Extras and add-ons
Co-living spaces often offer suites that have one communal area and kitchen and may have around three to six bedrooms. And these suites may be connected to other suites which all have the use of facilities such as a yoga studio or gym. More luxurious co-living spaces with a large number of rooms may also have a swimming pool.
All of these facilities are offered as free sweeteners. Along with superfast 5G wifi and communal workspaces. However, many co-living spaces also have a bar, coffee lounge, and provide breakfast and evening meals. If you fancy yourself as something of a hotelier, these are also lucrative revenue sources in co-living spaces. But you need to have enough rooms to make the service worthwhile financially.
Things to remember
- Co-living is a burgeoning new market for landlords to explore with opportunities for vastly larger profit margins.
- You’ll need to apply for planning permission and research your local market before investing in a project like this. But the financial gains are clear to see.
- You’ll need to decide on your desired tenants and check out estate agents specialising in this kind of investment.
- You can take a course offered by the National Landlords Association which can give you all the information you need about compliance and more.
- For landlords that love interior design, co-living spaces offer the opportunity to create light, airy, and boutique-style accommodation. You can check out ideas at co.living.co.uk.
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