You don't have to be an expert real estate investor to understand that rents have been rising for several years now. That's good news for owners and landlords; you're likely earning more on your rental property monthly and in the long-term. Some tenants are feeling a bit priced out of the market, however, and that has required them to get creative about where they live and how they pay their rent. The rental market in Philadelphia is competitive, and there's a diverse selection of apartment buildings and rental properties spread across the city. If you're wondering what the emerging trends are in the real estate and rental markets, we'd be happy to tell you about them and what they mean for your investment goals. Today, we're taking a look at one trend in particular that we find pretty interesting: co-living spaces. There are two reasons that we find this trend compelling:
- It speaks to the need for affordable housing in a unique way. Tenants who cannot afford their own place now have some options.
- There's been a lot of talk about the loneliness epidemic in our country. Co-living spaces can be an innovative and unique solution to social isolation.
This is a trend that smart real estate investors are paying attention to. We're talking about something that goes a bit beyond the general roommate situations that have been around forever in rental housing. This is a space that's intentionally designed for more than one tenant or more than one family of tenants. Let's delve into the co-living concept and explore why it might be the next big thing in rental markets, particularly in Philadelphia.
What are Co-Living Spaces?
Co-living spaces are essentially shared living areas intended for cooperative living. This is not necessarily a new concept. It has been around for centuries, really, but the idea has been updated and modernized to fit the needs of new tenant demographics, and it's currently gaining traction in emerging markets such as Philadelphia. These spaces can look different depending on property type and neighborhood, but they generally consist of private furnished bedrooms, communal kitchen, living, and dining areas, and shared or private bathrooms. In Philadelphia, several companies have begun to offer co-living spaces within larger properties, with amenities such as weekly cleaning service, rooftop decks, and in-house events. This has attracted some attention from tenants who are on a budget or don't want to live completely alone.
Why is Co-Living Relevant in Today's Rental Markets like Philadelphia?
Co-living offers an even more accessible and affordable option for renters than traditional renting. Essentially, tenants are sharing the costs of the space, utilities, and additional amenities with others who are also using the shared spaces. There's still enough privacy, as tenants maintain their own bedrooms. But, there's also a sense of community that's attractive to many renters. Co-living spaces usually offer more flexibility on lease terms, seamlessly accommodating a diverse selection of lifestyles. Tenants who move frequently will enjoy that flexibility. Co-living spaces also allow for a sense of community that can be challenging to achieve in traditional rentals, reducing the feeling of loneliness and fostering connections among residents.
Advantages of Co-Living for Real Estate Investors
Why does this matter to you, and how can you best leverage yourself and your investment properties to take advantage of this trend? From the perspective of real estate investors, the co-living concept is known to be more profitable in many ways than traditional renting. If you're willing to think creatively about how you can earn money on a property that you currently own or you're thinking about buying, you can find some success in this type of renting. Co-living spaces allow owners to convert existing properties into a space designed to accommodate a larger number of residents. As the demographics of potential tenants change and younger renters increasingly seek more flexible accommodation options and older renters considering retirement are also looking for communal living arrangements, co-living spaces offer an attractive value proposition. Moreover, owners can offer a mix of individual and shared spaces, unlike traditional rentals, which tend to be larger one-bedroom or two-bedroom units. This strategy increases income potential while also optimizing the use of available space.
Challenges of Co-Living as a Rental Market
With opportunities come challenges, of course. And co-living spaces do come with their challenges. Two of the most significant challenges are privacy concerns and safety. Tenants will appreciate their communal living situation, especially when they seek out such an arrangement, but they'll have to be good at setting their own boundaries and respecting those that their roommates establish. Safety is also important. Tenant screening will be even more essential than in traditional rentals, since you'll be approving tenants to live with other tenants. There may be personality conflicts. You may find yourself managing disputes and conflicts more frequently. Despite these challenges, the co-living concept presents an exciting opportunity in rental markets, particularly in large, diverse areas like Philadelphia. There's still a lot to learn and investigate around co-living spaces, but our professional opinion is that they offer an innovative and practical solution for renters, real estate investors, and property owners. With more and more renters looking for flexible rental options and a sense of community in a busy city environment, this trend is sure to continue gaining momentum. Real estate investors looking to leverage this trend might consider investing in properties that have been purposely designed to accommodate these situations. Or you can create small co-living communities out of existing properties. As a rental market, co-living can help meet current demand while providing a new and interesting way of renting and living. What do you think about this trend? We'd love to talk about it with you and consider how it fits (or doesn't fit) your own investment goals. Please contact us at Innovate Realty. We work with investors and their properties in the greater Philadelphia metro area as well as the northeast part of the city and in local areas including Bucks, Montgomery, Delaware, Burlington, and Camden counties.
