A new concept which solves an age-old problem in share housing is allowing property investors to potentially achieve double the traditional rental returns.
Residential builder the Gallery Group has launched the co-living concept to develop investment properties which are suitable to be rented as share housing but can also be used as a traditional family home.
Adam Barclay of Gallery Group says they settled on the concept after they realised that rental distress was a growing issue.
He says more people felt they had to share their home to be able to manage the rent, but they couldn’t find anything suitable which fulfilled all of the tenants’ needs.
The Gallery Group design is for a four-bedroom, three-bathroom home. Two of the bedrooms have an ensuite, while there is a two-way bathroom attached to the third bedroom, which can be closed off in practical terms for private use. There is also a media room.
It then manages the property and finds and matches suitable tenants to properties.
Renting the rooms individually means the property owners can achieve a much higher rental return than traditional rental properties, according to buyer’s agent Scott Northcott of Property Hotspot.
“The appeal for our property investor clients is the rental returns,” Northcott says.
“In reality you’re diversifying the income from the one property, which is very difficult to do if you rented to one family unit.
“There’s nothing against renting to one family unit. We’ve got plenty of clients that do that, and we do that continually now with our other clients.
“With co-living, if you have three people living there and one of them leaves, you’ve still got the two incomes from the other rooms while you get the third room re-filled.”
Northcott says a typical house rented to one family may earn a weekly rent of about $400 or $500, but through the shared model there was the potential to achieve between $730 to $900 a week from three tenants, depending on the demand in that area and the type of tenants.
“Either way it’s substantially more, even at the low end, than the amount you would receive from renting it to one family,” he says.
Primarily Gallery Group is developing the co-living housing in the south-east corner of Queensland, as well as in Melbourne, Geelong and Ballarat, but Barclay says it could work anywhere.
“In excess of 50% of the population earn $89,000 or less per year – and for those people to not be in rental distress from the day they move into a property, they need to be paying less than $400 per week for a rental property,” Barclay says.
A survey of 1,300 renters conducted for Gallery Group found tenants where happy to share but wanted to be on an equal footing with other tenants in a property.
That meant bedrooms of the same size and a private bathroom as well as a pantry which was lockable.
Tenants also wanted air conditioning in their bedrooms and for houses to be fully furnished. The Gallery Group co-living houses come with a $29,500 furniture package.
“If you can provide that sort of product, there’s a huge marketplace of people who are saying they want that,” Barclay says.
Northcott says no one in the property industry has been purpose-building and managing suitable shared accommodation until now.
“There are traditional homes which have been converted but nothing new on the market that was comfortable and nice,” he says.
The homes can be tenanted by three people at a time, as once it is rented to more than three individuals it becomes what is known as rooming accommodation, which changes it to more of a commercial development.
“The property management is critical to this working properly,” Barclay says.
He says it’s about understanding the personalities and demographics of the individual tenants when matching them.
“We do that because we want longevity of tenants,” he says. “We want people to move into a brand-new home that’s really well-built and has fantastic inclusions.
“While our concept is new, shared accommodation has been in the marketplace for many years, it is just that no one has designed it in a way that matches the needs and wants of tenants.”