Coliving, the new trend in real estate investment

A self-financing investment

Matthieu has just purchased a nearly 500-square-meter house near Nantes. Within a few months, he will have transformed it into a « coliving » space for 12 people, or rather, 12 « colivers ». Each of the future occupants will have a bedroom with private bathroom, and can enjoy at will the vast communal spaces: a spacious living room, an open kitchen with dining room, as well as a movie theater and a beautiful garden. Total investment budget: 1.1 million Euros.

If the amount of the operation is high, the property owner hopes to achieve a gross yield higher than a traditional rental. « Each room is rented between 650 and 700 Euros per month, charges included. Once we subtract the expenses, the annual gross yield should be around 7%, » continues the investor. « Not to mention that my risk is smoothed out: if a tenant does not pay, I would be surprised if everybody defaulted at the same time ».

Less known than guest houses or furnished rentals on AirBnB, coliving is a burgeoning trend in real estate investment. « With interest rate rises, large houses like these are having a hard time finding takers. Coliving sets up an operating plan with the collecting of rents. It's easier to finance than a primary residence, because the bank sees that it can be profitable. In my case, if everything goes well, the purchase auto-finances, » Matthieu enthuses.

On the tax side, coliving is eligible for the non-professional furnished rental (LMNP) status, with a choice of a 50% flat-rate deduction on revenues or a deduction of actual expenses with depreciation of the property and furniture. A advantageous peculiarity, but one that requires the assistance of an accountant.

Annonce

A community lifestyle appreciated by tenants

For co-livers, this housing choice resembles a lifestyle. « It’s not much more expensive than a studio, » analyzes Nadège, a devotee for 2 years. « The advantage is that we live in community: we make friends, have good times in a group, and enjoy spaces that would be impossible to have when renting alone."

This is also the opinion of Salma, who shares her housing with 9 co-livers including young employees, students and a senior. Being pragmatic, she emphasizes that the tenants' files are also more easily accepted: « No need to earn 3 times the rent or to have a permanent contract to secure a home, a decent file and a good feeling with the other residents we meet when we apply is enough. » These residents indeed have a say on new entrants.

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Financial and legal risks

For investors, however, the idyllic picture must be counterbalanced by possible inconveniences. First pitfall: forgetting that the choice of location remains paramount. « Tenants generally want to be close to downtown and transportation, and that doesn't change with coliving, » explains Matthieu. « If the house had been 2 miles further, I wouldn't have gone on the adventure ».

Another step to manage: renting. The management of entries and exits, rentals, and the issuance of rent receipts can quickly become time-consuming. To these tasks should be added any minor repairs to be managed. It is better to surround yourself with a specialized agency to handle all these aspects, even if it has a cost.

The same goes for the drafting of leases, the choice of which is of fundamental importance. « Owners have the choice between a single lease with a clause of solidarity between tenants, or a main lease with subletting », deciphers Emilie, a real estate agent in Paris. « In the first case, all tenants are named in the lease and remain jointly liable for the full rent in case of un-replaced departure. In the other case, only one tenant bears responsibility to the landlord, it is up to him to turn to his subtenants ».

Finally, as demand tends to increase in the rental market due to the scarcity of properties, investors are also on the lookout. While specialized companies have indeed emerged in recent years, some REITs have also taken the plunge. « For those who want to get started, I advise doing so quickly. The number of buyers is increasing and some companies are beginning to take interest in this model. Perhaps in 2 or 3 years, it will be too late to invest as an individual », regrets Matthieu.

Especially since the legislator is likely to get involved: coliving does not necessarily please municipalities. Some major cities like Paris, Lyon and Marseille are starting to push back, seeing a risk of drying up the family housing market... and of bypassing rent control. In Brussels, rooms are now taxed €1,250 ($1,377) per year. Enough to cool potential investors.