Investing in rentals: how to make shared housing more profitable than traditional rentals

For a long time, cohabitation was reserved for students, and now it appeals to young working people and even some retirees. Demand is indeed growing, especially in large cities where the rental market is particularly tight. And real estate investors have realized this as more and more of them are betting on shared rentals to make their property profitable. “We are seeing an increase in demand for investment in colocation by about 30% per year,” said Manuel Ravier, founder of the investtlocatif.com platform. At least 4 out of 10 investors using our services turn to this type of product.”

If co-leasing is so popular with real estate investors, it’s because it allows for much higher rates of return than traditional rentals. “Renting a joint property is always more profitable than renting it to a family,” adds Manuel Ravier. This increases its productivity by an average of 50-60%. All you need is a property with a minimum area of ​​40 to 45 square meters to be able to start living together. For example, an 86 square meter apartment located in Marseille costs around €1,850 per month for shared accommodation (€450 per room), versus just €1,100-1,200 for a regular rental. This is an income of 8.65% gross for co-occupancy compared to 5.52% gross for the same property rented in a traditional way. So a well-managed apartment can be very profitable if you follow a few rules.

Check upstream demand

Before you start investing in a shared property, the first step is to choose the city in which the property will be located. If Paris does not necessarily offer the highest rates of return due to extremely high purchase prices, it is wise to choose a large city with many students. Lille, Marseille or even Bordeaux are municipalities that are especially popular with investors. “The main risk when you start colocation is to end up in a city where demand is too low,” warns Thierry Vignal, co-founder of Masteos. To avoid this trap, visit the Clameur Rent Observatory website, which collects a certain amount of information about local rental markets such as rental demand, vacancy rate, average rental period, etc.

You can then complete your analysis by finding comparable properties offered for shared accommodation in the same city. Some college towns have indeed attracted so many investors that the equity market has become saturated. This is, for example, the case of Evry, a city in the suburbs of Paris, where demand has outstripped supply.

With the emergence of young working people in the colocation market in recent years, this sector has largely moved to a higher level. “Cohabitation is no longer dictated solely by economic constraints, it has become a true way of life,” continues Manuel Ravier. Young workers are demanding, looking for comfortable and well-appointed premises. So the market is becoming more and more competitive.” In order to rent out your shared apartment and make it attractive, you must provide a bathroom for two people, at least two toilets and two or three bedrooms. Living rooms with neat finishes and the latest appliances will help you attract young workers. It is also important to provide enough storage space in all rooms so that roommates are not crowded. In fact, investing in a collocation often requires a significant operating budget.

50% additional mental load

If colocation allows you to get a higher profit, then, on the other hand, it is very energy-consuming for the owners. “Turnover is high, so you have to regularly manage entries and exits and increase inventory,” warns Thierry Viñal. There are a lot of incidents to be eliminated, it is necessary to be able to travel to the site regularly. To sum up, co-location means a 50% increase in productivity and a 50% increase in the mental burden on the landlord.”

It is also important to consider the seasonality parameter. Students, or young professional mobility professionals, have most often been looking for a roommate since the start of the school year in September. To optimize your chances of finding tenants, plan to complete all work on your property during the summer, even if it requires your bank to deferred refund.

Which lease to choose

Before you can accept roommates on your property, you must choose the type of contract you are going to offer them. There are two solutions available to you. The first is to use a general tenancy agreement signed by all tenants. In this case, all cohabitants sign the same lease agreement and the inventory must be made in the presence of all tenants. The deposit can be made individually or for all residents. The second option is to conclude an individual contract. The lease must then state the number of rooms that each roommate exclusively uses. The amount of the rent may vary depending on the contracts. Landlords have the option to add a solidarity clause that will oblige roommates to pay off the debt if one of them fails to pay the rent.