SHOW NOTES FOR EPISODE 483: COLIVING – THE NEXT BIG REAL ESTATE INVESTING OPPORTUNITY?

The need for affordable housing in larger cities for people 20 to mid 30s has spurred the development of a new real estate asset class called coliving.  In this episode, coliving expert Connor Moore shares how this unique communal housing model is sweeping the globe and attracting entrepreneurs and investors alike.

What You Will Learn

• What the definition of coliving is and how it differs from just living with roommates
• How the role of “community” is key to the coliving model
• What economic and cultural factors created the need for coliving?
• Why people are drawn to this type of shared-living experience
• How entrepreneurs and investors are boosting ROI significantly by converting traditional rental properties to coliving
• What the “Three Cs” of coliving success are
• Who some of the big players are in the coliving space

About Our Guest

Connor Moore

Connor Moore is a world traveler and self-proclaimed people person that truly believes in the ability of coliving to improve the way people live in the twenty-first century.  Spending the past two years getting his MBA in Malaysia, Connor had the opportunity to visit dozens of coliving operators around the world and has been sold on the concept ever since.  Connor currently holds a variety of coliving focused positions including: an associate role at a real estate investment company called Nomos Group, the Head of Content at a global nonprofit called Co-Liv, as well as the author of a coliving research blog Coliving Corner.  In his free time, Connor enjoys backpacking, scuba diving, and pretending he’s a good dancer at social gatherings.

More About Connor

• Originally grew up in Knoxville, TN
• Went to Duke University in Durham, NC
• After graduating, he travelled and worked abroad to New Zealand, Australia
• While traveling, lived in a lot of different hostels that we “coliving” situations
• Came back to the U.S. to do a 2 year entrepreneurial fellowship program called Venture for America
  • Worked for a technology start-up in Pittsburg, PA for a few years
• Got the travel bug again and went to Kuala Lumpur, Malaysia, where he lived, went to business school and worked for 2 years
• He attended the new Asia School of Business, formed by Central Bank of Malaysia and MIT’s Sloan School of Business
• Traveled around Asia working with various businesses
• Also spent time in Boston attending classes at MIT
• Graduated from the Asia School of Business April of 2020
• Came back to the US in the midst of Covid
• Has since been working with the Nomos Group (working on the finance side), a non-profit called Co-Liv (the largest network of coliving professionals in the world) producing content, events, in the global coliving industry and has been putting out thought leadership pieces through his blog Coliving Corner.

Definition of Coliving

• There are a lot of definitions of coliving
• The concept is new
• However, the idea is nothing new.  It’s just the modern execution of it that is new
• Looking at shared living models or communal living models
• A basic definition is: “Two, three or more people living in the same environment (house or apartment usually), sharing resources and basically trying to create a stronger living community than other traditional models.”
• Today, whether you live in the suburbs or a single family home or a 30-story apartment building in a downtown large urban area, people have lost the neighborliness of having more face-to-face interactions.  And while technology has helped bring people together, we spend more time staring a screens today than 20-40 years ago
• Another definition: Coliving is creating a communal shared living model for three or more people that better responds to the way that we live in the 21st Century.

Breaking it Down Further

• There is a wide spectrum of coliving experiences
  • College students renting a house together for a year or more
  • “Hostel” type living situation, with a bunch of bunkbeds, for example, where you may stay in a location for a month or longer
  • You need at least a month to begin building community and where the manager or coliving operator can introduce shared community events  (movie nights, hikes, happy hour events)
• The idea is to encourage and facilitate meaningful human connections – the “creating community” aspect is the key factor
• Coliving people are more transitional in nature
  • When you graduate college and are not yet married
  • From 20 to mid 30s in age
  • People don’t stay at companies or jobs for more than a few years today
  • Prefer living with folks they aren’t related to
  • Pooling resources
  • A more temporary living situation
• Bigger coliving operators require at least a 6 or 12 month lease
  • A big operator today called Open Door
    • Find their average tenant stays 2.7 years
    • Different styles of coliving may be less or more

The Three “Cs” of Coliving

• Community
• Cost Savings
• Convenience
• Sometimes there’s a forth C – Comfort
• The idea is to move to a new place or city and remove some of the “frictions” of relocating – to provide housing “as a service”
• The big challenges of moving to a new area and deal with
  • Got to pay your WI-FI bill, water, utilities
  • Getting to know the surrounding area
  • Finding friends
  • The coliving operator tries to eliminate or reduce those challenges as part of the living experience
• Some coliving operators may focus more on some of the “Cs” more than another operator may
• There’s a coliving operator in Los Angeles called Haven Coliving that has 4 beds in each room
  • Their emphasis is more on the “Cost Savings” aspect of coliving
  • Cost to rent is much less
• There’s a New York coliving operator called Common – one of the biggest in the US
  • They emphasize the Community, Convenience and Comfort aspects
  • Longer leases
  • Personal bathroom
  • Share kitchen and living room area
  • Amenities provided (dishwashing soap, paper towels, toilet paper)
• Coliving tenants need to ask:
  • What kind of living product do I want?
  • What kind of demands do I want my living product to cater to?
    • If Cost Savings is more important, bunkbeds in shared rooms may your best option
    • For longer term living:
      • Community is key
      • Or Convenience

Community Challenges or “Roommates from Hell”

• Roommate from Hell – Getting a roommate that becomes an issue
• The urban Coliving environment is different than the more traditional apartment scenario shared with friends or you find a roommate through Craig’s List, etc.
• In the Coliving…
  • Tenants are viewed more as “customers” or “living members”
  • And are a core part of your “product”
  • In other roommate situations, the tenants are simply provided with four walls, a roof and the stuff in the apartment (appliances, bathroom, kitchen, etc.)
  • With coliving, you are provided with “a living experience”
    • How you’re going to hang out for weekend
    • And the events they are going to participate in

Creating Homogeneous Communities

• Choosing who is going to live in that community is a massive part of the coliling experience
  • Screening coliving customers is a three-part process
    • Looking at the branding
    • Looking at the application process
    • Looking at the onboarding process
• Branding Process
  • Putting out marketing materials and efforts that say “This is what we are all about!”
  • Post this info on coliving websites
  • They also share home each member “contributes” to that community
  • Mention things like “We value inclusiveness”
  • This helps to screen people out who might not have the same mindset
  • That helps to attract people who will do well in that environment
• Application process
  • They’ll have potential customers come in and fill out an application
  • They’ll educate the potential tenant of what kind of community they are coming to live in
  • In addition to the regular background check, i.d. and credit info, etc., the application will also ask:
    • What would you like to do in this community?
    • How can you contribute to the community?
    • They will try to see if that person will be a good fit
  • They’ll also have a tour of the property
    • See living quarters
    • Meet other members of the community
  • If it doesn’t go well, they’ll say that it’s not really a good fit
  • The application process also serves to educate the potential member tenant as to the requirements for the people living there and find the right kind of person who would want to live at that property
• Onboarding Process
  • Once the person is approved and shows up to move-in…
    • The traditional landlord/tenant transaction would be: the landlord says, “Here are the keys, pay the rent and don’t break anything.” And the tenant doesn’t see the landlord for a year
    • Coliving tries to provide the entire living experience
      • The landlord is not holding the hand of the new member tenant but they want to ensure that they have a fantastic living experience
      • Coliving companies may…
        • Host a welcome dinner for the new member tenant and pay for pizza for all the member tenants living there
        • Have the new member tenant meets each person living there face-to-face
        • Get a tour of the local area to show the local coffee shop, grocery store, etc.
    • Hopefully, the onboarding process will help the community to thrive

Coliving as an Investment Opportunity

• If finding affordable housing is such a problem in certain large cities, there has to be a way to attack the problem
• And if people are already renting houses, trying to fit as many people in the house as is necessary to make it affordable, why not formalize the process
• Coliving, from a financial standpoint, is taking a rental property and seeing how you can maximize the occupancy  per square foot while enhancing the quality of the living experience that de-emphasizes the smaller living quarters
• Looking at the it from the investment side, when you look at the typical price of a coliving bedroom in a large city, it’s going to be below the market rate for a studio in that same area – maybe 20-30% below
• But, because you have more people using less space, you are actually able to generate more revenue than properties with traditional rental units
• The investor has to look at it like this: if I can increase our net operating income more than the extra cost it will be to redesign the building and operate it with the lifestyle activities, events, etc., then I can increase the profits I would normally generate from the exact same building with traditional rentals
• This also allows investors and other owners of non-producing real estate assets, such as retail malls, hotels and office buildings, to consider repurposing those assets into coliving facilities

Coliving and Covid

• Connor shared how some people were concerned that, with Covid, people would be less likely to want to be in a coliving environment
• It has actually turned out to be the opposite
• Data over the last 6 to 9 months have shown that coliving occupancy rates have been better than traditional rental rates
• The reasons that they think this has happened is:
  • Many operators were better prepared for the pandemic
    • Already had online 3-D tours already in place
  • The demand for for affordable housing for people in the 20-30 age range has remained strong
  • A lot of the pillars that coliving has stood on, has for the most part, withstood the punch of the pandemic
  • Post-pandemic, there will likely be more people moving back into the cities

Overcoming Earlier Challenges

• Earlier coliving companies started as sort of a rental arbitrage model
• They would go to owners of big city apartments
  • Negotiate a 5-year lease, fix it up and sublease it at a 20-30% increase
  • When the pandemic hit, many were stuck in these kinds of agreements and some companies folded
• Now, they are looking at more of a property management lease model, like hotels, where they look at a base rent amount and all income that comes in above $X  is split 50/50.  Plus, the coliving company will pay a 4% management fee

Advice for Old Dawgs Looking at Investing in Coliving to Help Them in Their Retirement Years

• There are opportunities to invest in coliving buildings
• But another interesting opportunity is with Co-Housing
  • Also a communal type living
  • But more in a housing environment
  • 10 or 25 houses, sharing backyard space and maybe another house in the middle of the yard for community meals
• There’s also shared-ownership models
  • You own one of the houses in the community in order to be part of the community
  • With the ownership, you have vested interest in maintaining the community
  • Empty nesters can make part of their homes available for coliving

The Evolution of the Business

• Collin sees many people still view coliving as almost an offshoot of the student housing asset class
  • Institutional investors are still waiting and watching to see what develops but he’s confident in 5 to 10 years that they will be getting involved and investing heavily
• There are also some very intriguing spatial and architectural design models for coliving being developed today
  • He recently interviewed 4-5 architects for and article he was writing
  • The different models they are designing are fascinating
    • The layouts are more in tune with our lifestyles today
    • They are designing ways of facilitating community and incorporate wellness, fresh air and greenery
    • Collin has really been energized by seeing which models will actually stick and what modern living will look like in 2030

Rap-It-Up

• Favorite real estate book: Brave New Home by Diana Lind
• Favorite business book: Start With Why by Simon Sinek
• Most valuable web site for success (other than your own): TechCrunch.com
• Favorite app: Head Space
• Favorite quote: “When you want something, all the universe conspires in helping you achieve it.” from the Alchemist
• If you lost everything – all your assets – and had to start all over, knowing what you already know, and you only had $1,000, what would you do to launch your real estate investing business? Spend it on library late fees!  I would spend a lot of time reading to see how I could rebuild my business.

How to Reach Connor

• His Blog: ColivingCorner.com
• Email: CMoore9634@gmail.com

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