Co-Living – A Profitable Type of Affordability
They’re being dubbed ‘adult dorms’ and the trend is spreading across Southern California. As prices for apartments have climbed, many Angelenos are renting smaller spaces at smaller prices: a private bedroom, a bed in a shared room, a sleeping pod, a bunk bend, even couches.
For college grads, newcomers to L.A., actors on a budget, and those generally making less than $80,000 a year, co-living provides a much needed and immediate option for affordable housing in one of the most expensive housing markets in the U.S. Prices for spaces can range anywhere from $300 to $1,300 a month, depending mostly on the privacy and amenities tenants are willing to pay for.
Even more surprising to some, co-living spaces are profitable rental models for real estate investors, both large and small. On a small scale, co-living companies like Eddy.co are taking 3 bedroom condos, that would typically rent for $3,500 - $4,000 a month, placing 4 designer bunk beds in each room, and charging an average $800/month for each (3 rooms x 4 beds x $800/month average rent = $9,600/month gross). Tenants are screened, have to undergo a background check, and provide a small deposit ($750) as they would with any other apartment. The owner has the potential ability to pay the loan, utilities, cleaning, and still generate four digit cash flow each month.
Major Firms Taking the Lead
On a larger scale, the model is so profitable it’s attracting the attention of large firms, like Greystar, who recently partnered with Blackstone to focus on co-living spaces. Greystar is an industry leader of rental housing including corporate, collegiate, and senior housing across the globe. At an event just this month, Greystar’s Director of Real Estate, Kesha Fisher, shared how the company is developing projects in Los Angeles, with co-living in mind -- starting with their new AMP lofts in the Arts District.
In addition to studio and 1 bedroom apartments, she shared the AMP lofts will feature a floor dedicated to providing short term rental and co-living spaces. While the model is not as extreme as sharing bedrooms, certain occupants, will share bathrooms with two other people, and a kitchen with others. Shared living inhabitants additionally gain to access the same luxury amenities including gym, pool, sauna, and workshop provided to any other tenant.
Co-living is a rapidly developing trend that stands to alter the face of rental housing in Southern California. Personally, I’m excited to see co-living spaces gain traction. Too long have we viewed affordability and profitability as two things at odds with one another, that simply no longer have to be. Co-living with the right strategy, team, design and amenities, can provide mutual benefits to tenants and landlords, to developers, and help LA on a whole bridge the gap to affordability.
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