An inside look at the growing asset class you may have never heard of.
There are more ways than ever to invest in real estate today, but not all investments are created equally. In particular, there’s one investment strategy — coliving — that is positioned to grow significantly in the coming years, regardless of how the broader real estate markets perform.
That’s because coliving is not just a high-returning investment, it’s also an innovative strategy for making quality housing more affordable, which is more important than ever as rent prices in urban areas are dramatically outpacing income growth.
Here’s how it works: Companies like Domos transform multifamily assets into state-of-the-art spaces that include fully private bedrooms and shared community living areas. This decreases rent prices for tenants and increases returns for investors, because each building can fit more units.
This type of housing is still relatively new to most real estate investors, but there are 3 key reasons why we believe it will continue to grow in scope and value in the future.
1. Coliving Makes Quality Urban Living More Affordable
For many people living in urban areas and making a median income, housing has become so unaffordable that they’re forced to choose between renting a low quality space and relocating to a less expensive town.
In fact, census data tells us that 46% of rent growth has outpaced wage growth, and at the same time, most of the new rental supply that’s been created since 2012 has been luxury housing.
Coliving presents a unique solution by allowing tenants to spend less on a per-person basis while still living in a safe and comfortable space with class-leading appliances and amenities.
We believe coliving will help prevent the forced relocation that’s happening as many people get priced out of their cities, as 62% of renter households can afford average coliving rents.
2. Coliving Fosters Community
In a time when loneliness is at epidemic levels — with 58% of adults reporting feeling lonely — it’s more important than ever for people to find community in their day-to-day lives. With coliving, it’s easier than ever to build community within the comfort of your own home, whether you’re a single adult, a working parent, or a retiree.
Our Domos coliving projects are intentionally designed to foster community building. Many of our investments have amenities that encourage people to gather and connect, such as pools, fitness studios, coworking areas, and outdoor living spaces.
At the same time, residents can experience all the privacy and space they need with features like extra soundproofed bedrooms, a majority of ensuite bathrooms, and oversized kitchen space.
We additionally create unique community building opportunities with activities like happy hours and other tenant enrichment efforts. This in turn leads to higher retention, which makes it easier for residents to build lasting connections and simultaneously creates more consistent returns for investors.
3. Coliving Delivers Strong Returns for its Investors
The coliving model works because it doesn’t only benefit its residents, it also creates higher average returns for investors than other multifamily assets.
There are two main reasons for this. First, coliving spaces generate a higher net income per square foot, because the shared living areas make space for more units within a given property. Second, this asset class targets a broad market that generally has few good options, so it’s more resistant to downturn than traditional multifamily investments.
As a result, coliving properties generate above-market rents as a whole, while offering housing that’s accessible and attractive to a wide range of the population.
Invest in the Future of Real Estate with Domos
Because coliving is a relatively new strategy for many real estate developers and investors, it’s especially important to partner with people who know the space well and have a proven track record of investment success.
At Domos, our team has more than 30 years of shared industry experience, and we’ve owned more than 10,000 units in coliving and opportunity zone portfolios, totalling $550 million under management. We’ve also built long-standing relationships with a broad range of industry partners who help us source opportunities that fit our strategy. To learn more about Domos’ investment opportunities and get in touch with a member of our team, please fill out this form.
