Why should you start a coliving business?

Because you want to change the world 🙂

Right, and what else?

Such a simple question but I had a hard time answering it myself when I started my coliving business. Over the years, I’ve noticed that very few new founders actually think about this before starting out.

Let’s be clear. This is a longterm game, you won't make money fast. So it’s better to think twice.

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Through dozens of discussions with coliving founders, I’ve come up with these 5 reasons:

#1 Diversify a property income

You are a hospitality operator and you want to:

Diversify your portfolio
Cover seasonal gaps in your bookings
Create new revenue streams
Attract better paying tenants

Good reasons. Coliving is just one of the ways to monetize your property and you understand that you need to create a mix of concepts and brands that are complementary.

#2 Building a personal network

If your motivation is to meet interesting people, then there is a valid question of if you really need to live with them.

Perhaps there are easier ways to build an interesting personal network - you can host a meetup or organize regular coworking events or plan retreats for niche audiences you want to target with your coliving concept.

I built a massive network through running a coliving space but I didn't start out because of that reason. However, all that being said I do consider it to be the most valuable output of my venture.

#3 Building a lifestyle business

Definitely possible and in a relatively short time.

I built a very nice lifestyle business with my first coliving space but my ambition was to scale it to more locations and more properties… Once you scale, your profits dissolve and it’s not a lifestyle business anymore.

It doesn't mean that you can’t open another property or different location. I just recommend to do it VERY slowly if your goal is to build a lifestyle business.

Another question to ask yourself: Isn't there an easier way to build a lifestyle business? By easier I mean starting a less asset-heavy business with bigger margins.

#4 Building a large coliving business (VC route)

Many people come to coliving from the tech industry. However, even if you use a lot technology and are super smart with online customer acquisition, at the end of the day, coliving is a real estate business.

You are not selling software and you can't trick the unit economics. The margins are low, the expectations of your investors is high. There is a lot of competition.

When you raise money from VCs, they want 10x-100x return on their investment. Let's say you raise $1 million for 20% equity. That means that to make 10x (the minimum return) for your investors, you need to sell your coliving brand for $50 million. Good luck with that!

#5 Monetize your unused property

You have a property in an area that isn’t popular enough to run a vacation rental business for tourists. The yields from longterm rentals are not very attractive so you’d like to try something different. Coliving is the perfect thing.

These are the reasons that I came up with but let me know on Twitter or LinkedIn if you come up with something that I’ve missed.

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This article is part of the guide where I'm sharing tips on starting a coliving business.