Recently, one of Bidrento’s new international clients in the co-living space discussed what it takes to succeed in that increasingly competitive market.
We want to expand on some of the highlights they shared, such as:
Before we go over the unique perspective of our client, let’s go over some basics.
While co-living operators are very open to serving different segments across the wide spectrum of society, most successful operators and investors end up catering to a similar demographic of young professionals as a core. An experienced co-living operator Peter Fabor characterises this central group quite succinctly:
…The type of “visitor” you actually want to target for your coliving space: remote workers. It’s easy to mistake them for backpacking nomads as they carry the same type of laptops, are from similar countries and they, in general, look the same.
But they actually have a remote job: sometimes they’re working on their own business but more often they’re contractors (freelancers with one client). They need a productive place to work, good internet and are happy to pay for the comfort.
You want to have them as customers 🎯Peter Fabor, Guide to co-living
Hence, co-living operators gravitate towards regions, locales and neighbourhoods that attract this group of people:
Here are just three tips on how to research locations for your co-living business plan
Seek out property price trends by monitoring real estate portals. Regardless of whether you are renting or purchasing a house or already own a property, you should seek to establish
You need not go for the safest neighbourhood but instead, look for a trend of falling crime rates as a sign of gentrification and the increasing attractiveness of the locale.
Search news articles and on Google for development plans related to the neighbourhood. Official announcements provide plenty of information, but you can go beyond that as many real estate developers pre-announce larger projects before building starts.
Check larger roads and transit options. The availability of parking spaces also tends to vary by neighbourhood.
As you finalise a shortlist of locations, give extra points to areas that offer your prospective customers a unique experience. From cafes to venues to parks, what makes the neighbourhood standout for someone living there for six months, a year, two years? What type of buildings are prevalent?
Typically successful co-living operators look at up-and-coming neighbourhoods or districts which have potential, are a bit underdeveloped but are not too expensive. Then they use a tried-and-tested marketing playbook to ensure initial success.
When you have chosen property at a great location, you should start marketing it as soon as possible. Our client states that a big mistake is only beginning to market your space once opened it. Peter Faber repeats that sentiment when he discusses SEO:
You really need just SEO Basics to achieve reasonable success. Create a website and start with basic SEO before you open your coliving space.Peter faber, experienced co-living operator
Start at least 4-6 months before you open a location by creating a website. Squarespace or Wix are good choices if your ambitions are smaller because they offer pre-made design templates that appeal to your audience. You can easily modify these templates with good photography and typography. But go for a custom-made website if you are looking at managing a more extensive portfolio and want to connect your website to your back-end systems via an API.
Ensure that besides booking, contact and other business-critical pages as a bare minimum, you have at least three blog articles that help you rank on search engines such as Google for your main keywords “co-living your_location” and its variants. Three other critical aspects are necessary to support your work with SEO:
* testimonials as social proof
* interviews with your guests
* good location photographs
Facebook and Instagram are the gold standards. However, it is wiser to start with three steps before creating your first ad:
1. Start by producing non-paid content, see what is successful and build that up.
2. Then, you can start directing followers of that content into your mailing lists and retarget them with offers, newsletters and more commercial content.
3. From there, you can see what works, what is tasteful and how you should package and position your commercial offer for your first paid advertisements. You can write up a short one-pager outline rules for taste, wording, imagery and typography.
Finally, do not forget to create retargeting audiences for your website visitors, booking page visitors, abandoned bookings and successful bookings.
Depending on your customer profile, consider looking at listing sites such as Craigslist or booking sites like AirBnB, Booking.com. While your goal is to get bookings directly from your website, these channels can not only bring in occasional much-needed cash flow but raise your profile.
Word of mouth consists of combining an outstanding level of service with active communication. It rarely happens automatically, even though it can appear to be magical. Most often, it is a result of a well-implemented communication plan. Keep consistently talking to your customers, sharing stories and offering value (e.g. “how-to” articles on accomplishing something important for young professionals in your location cities) to them on your website and Instagram.
Media outreach is less effective these days as co-living is an established trend and is no longer a “hot subject” for most journalists. One idea to gain publicity and free press is to cooperate with local municipalities to do events, seminars and happenings to welcome young working talent to your city.
Journalists see city officials and communication managers as more trustworthy sources, and cities are always looking for new residents as populations age across the world.
Our client states that being persistent is vital. It usually takes 3-6 months to find the right recipe for success, but the real problem is what happens after that initial success.
Our client states that being persistent is key, it usually takes 3-6 months to find the right recipe for success but the real problem is what happens after that initial success.
The inevitable problem with a well-chosen location is that the real estate will appreciate, usually in a few years. That appreciation can make co-living a less viable business or offer more lucrative alternatives, making it tempting for you to pivot into a line of business like short-term rentals that may become more profitable.
The situation leads operators to the vital question: am I using co-living temporarily to extract suitable yields for my real estate portfolio, or is co-living a crucial part of my larger business plan?
Most people stay in limbo. They do not define what they are after in their co-living business. “Wait and see” can be exciting, part of the allure and romance of co-living but also lead to a dead-end.client of bidrento
It is OK to use co-living in a transitory way for three to five years. However, our client underlines: “Acknowledge your ambitions in advance. And write them up in a short co-living business plan. “
The reason is simple: this affects how you want to build your team and your budget. You will likely have a small group of people as a team and want to simplify your processes as much as you can.
Regarding the budget, it is essential to note that since you economise, your initial investment costs will be lower. Still, the margins your partners ranging anything from payment service providers to cleaning crews charge you will be higher as you have less staff on your own and you have less willingness to pay for bespoke solutions that save money or staff that help you.”
To sum up, if you jump into the co-living business model only for a few years, you need a couple of things:
If you are experimenting with co-living, you must ensure a genuinely rock-solid foundation of the right location and people. Something we call “a natural winner”. A property in a popular area that will provide you with the higher yields you desire. Even if partners charge you what you think are outrageous service fees or maintenance issues drive you mad and disrupt stays.Bidrento’s customer
Sample scenario: A more affluent ex-pat or a local young professional starting a co-living business on the South Coast of Spain is a classic example. They find a favourable location that attracts interest, has a unique vibe and where the numbers work out in a Spreadsheet.
So what to look for in co-living software when you are experimenting with co-living and not sure you have a scalable business or that it is a significant area of focus of your real estate investments? Our client advises:
Automation means different things at different levels of scale. The focus should be on automating simple but labour-intensive stuff like invoicing, payment confirmations, and signing agreements at a smaller scale since you lack the staff and human resources others have. You will probably never get a complete end-to-end automated process, so it is best to get the simple things right and save time where you can.our co-living client
We would love it, if you would check out Bidrento – we feel we have created the best software for managing co-living and student housing in one place from anywhere at any time.
If co-living is part of your long-term plans then our client asks a follow-up question: how do you want to define your business?
If you want to treat co-living on a full-time basis but at a limited number of locations as something akin to a full-time passion project, then our client advises that as an owner-operator, a few things are worth bearing in mind:
Being organised is of utmost importance. Your work-life balance (“You will start to doubt such a thing exists “, says our client) depends on it. As an owner-operator, work can be fun and incredibly rewarding. Still, it will also have low points: our client emphasises that as your team is small and even if you are best friends, people will argue or snap at each other due to external pressure. Clients you care for do not reciprocate and take you for granted.
Being disciplined will help you through the highs and the lows. The right software can help you do that:
“What you seek in co-living software is not as much intricate automation or auto-magical time savings but something that is called “a single source of truth“: a place where you keep all your files, your contracts and agreements, all your maintenance tasks. The part you want to automate is routine communications with your tenants. Ensuring a level of professionalism and the right boundaries.”Our co-living client
“While I am building a larger portfolio, I recommend Bidrento for you as an operator of a single location or a few places as its systematic and automated approach is vital to free up your time and ensuring professional standards that will keep your passion for your lifestyle alive.”
The client adds: “In my experience, owner-operators tend to be more open and accommodating to people staying at their places. Even if they off-load the day-to-day management to someone else, their phone remains open for calls and heart open for “special arrangements” as they just about love co-living as much as their clients, if not more. Sometimes it is easy to forget that clients are clients rather than acquaintances.”
Higher ambitions demand a higher degree of focus. You choose your first great locations. Then the property prices started to appreciate, and if you own your properties, short-term rentals may become more lucrative. And if you rent, then the appreciation cuts in the margins.
Sticking to your wider co-living business plan is not as seamless as it may seem. Our client outlines five crucial aspects that help you grow your co-living business in a repeatable, efficient manner:
1. Be a great team member. In co-living, the higher you aim – the more you rely on others. Driven people in the real estate business can have the vision of a racehorse and see others around them based on their utility at the moment. Our client adds “I learned quickly that I cannot have some of the attitudes I had as a relatively successful real-estate developer. As good as you need to be with numbers, decisions and oversight – in co-living, an appreciation of those you work with makes that all work.”
“Because you are constantly around others and vulnerable at least a dozen times a day your true self shows to those around you. Some degree of humility is a matter of practicality. In co-living, there is nowhere to hide. Bluff is not your friend.”
2. Be a good neighbour. A co-living operator will never have the budget, time nor energy to run sophisticated PR campaigns. So do not cause problems for the community around your locations. “Own it, fix it and move on is my mantra” states our client, “Everyone talks of building a vibrant community inside your co-living space. That is important. But the thing I noticed is that some of the most profitable co-living spaces I know are the ones that most gel with what goes around outside their own universe.”
3. Know your numbers. If the above sounded soft, here is a hard-hitter: “From my past in conventional real estate development and management, I was used to setting targets and achieving them. But never have I been held as accountable to them as now. There was always a little bit of give-and-take. A sense of fortune giving the final push my way. Not any longer. Co-living at scale is sailing against the wind. It really tests your self-image as a professional. If you ever ask yourself – ‘am I truly as competent as I like to appear on LinkedIn?’ try to manage more than 10 co-living locations at once. You get your answer.”
“I am used to knowing my numbers a month from now. Three months from now. Six months from now. I know the margin of error for each of these targets. Like in my previous roles, I knew the target ahead of us for the following years in terms of locations, units and beds but my feeling of anticipating an annual accomplishment is totally different. The precision during work and sense of satisfaction after accomplishing something as a leader in a co-living business is that of a mountain climber versus that of a weekend golfer. “
4. Know your locations. Curiosity is a valuable tool. Use it but learn to channel it first.
our co-living client
“I have learned to channel my curiosity into understanding our current locations and possible new ones. What works in one place versus another? What are the surroundings like? What can we use to our advantage? My brain has developed a co-living radar of sorts. Most of the time, I do not possess a magic sense of ‘Yes, this is the one’ when looking at new locations or ‘Let’s change that’ when something is wrong but I have learned to pick up on clues and to be patient enough to put the puzzle together when solving problems or making decisions.”
5. Know your people. As in most businesses, if you know something that others do not, you have an advantage. Our client says:
“I used to look a bit down at customer satisfaction surveys, but now they are one of my most valuable tools. Beyond the face-value answers, I can often find gems that help to direct our strategy and, to my surprise, make me look good when I propose something new, even though I am just magnifying what people I serve are saying.”
“Inside our community, being attentive to our customers allows our managers to strike the right balance of being available but not being nosey. It also gives us the confidence to expand our business to new locales. Because we train ourselves to respond to different forms of feedback, and we intuitively know that we can handle those parts of our business which are not yet part of our repeatable business model.”
When setting out to create a more significant co-living portfolio, the software you use is also different. You continue to appreciate the small things that are massive time-savers like automating invoicing or agreements. But you gain a new appreciation for other things. “Digital transformation” turns from an empty phrase to something of practical value
Our client lists just five of the more essential criteria: