Co-living isn’t your typical real estate play. It’s a hospitality-driven accommodation model and that changes everything.
The challenge is simple, but not easy:
There’s a quiet tension at the heart of every new shared living project. On one side, the urge to create something visually striking and cost-efficient. On the other, the hard lessons learned from watching seemingly minor design choices ripple across years of operating reality. Too often, the industry’s focus tilts toward what looks good on opening day, not what holds up on year seven, when the first maintenance bills arrive, or during a refinancing when the true cost of operation is laid bare.
I’ve seen it firsthand across numerous large-scale residential projects in Melbourne. In those early meetings while architects debate finishes and investors scrutinise cost plans, the seeds of a building’s future are quietly sown. The challenge is simple, but not easy: how do you build not just for launch, but for the long, often-unforgiving runway of operational life? These are the lessons that only emerge with time, spreadsheets, and a dose of humility.
- Materials Selection: The Hidden Driver of Long-Term NOI
Material choices are usually weighed for appearance and initial outlay. But in purpose-built shared living, where developers often become operators, its durability and lifecycle cost that quietly call the shots.
Luxury vinyl tile over engineered timber. It’s not glamorous, but tenants don’t complain about scratches, and you won’t face a hefty bill to refinish floors before the first refinance. Exposed concrete in corridors may feel austere, but it saves on cleaning, avoids endless patching, and holds up to the daily parade of residents and furniture trolleys. Even exposed concrete ceilings, properly treated, eliminate the recurring headaches of plaster and paint touch-ups, leaving one less item on the depreciation schedule.
The real measure isn’t just upfront savings. It’s what the material will cost you, in dollars and disruption, across a decade.
- Sinking Funds: Predicting the Unpredictable
Many developers still see sinking fund modelling as an afterthought, a box ticked for strata schemes or left to future managers. But for BTR and large-scale co-living, it’s foundational.
I’ve learned that mapping a sinking fund schedule early, even if it’s not strictly required, changes the conversation. Instead of scrambling to fund a new roof, HVAC replacement, or furniture refresh from annual cash flow, you’ve already built in the reserve. It brings financial discipline. For a 100-unit building, that might mean $35,000 a year set aside. It dents your NOI in the model, but it means you’re not gambling with future CapEx.
You find your real NOI, not the theoretical one.
- Depreciation vs. Longevity: Navigating the Trade-Off
Here lies another quiet dilemma. Tax advisors will always highlight the upside of high-depreciation, short-lived finishes, those juicy deductions in years one through five. But what happens when those very choices force you to replace half your fitout before you’ve reached stabilization, or just as you’re considering a sale?
A resilient, lower-depreciation material may not excite the accountants, but it keeps your OpEx and insurance steady. It protects your valuation, because future owners (and valuers) will see a building that doesn’t carry looming replacement risk. Sometimes, the best long-term play isn’t the one with the biggest early tax deduction.
In Summary:
Purpose-built shared living is not just about headline yields or high occupancy. Its success is quietly forged in the early decisions, often invisible to tenants and uncelebrated in glossy brochures.
Every finish, every reserve fund entry, every depreciation schedule becomes a thread in the asset’s long-term story. The lesson, again and again: Build as if you’ll own and operate for the long haul. Because in this sector, what you build echoes, quietly, relentlessly, for years to come.
