This post is the 2nd part of my summary of what I learnt from the 2 day Co-Living course that I attended recently. The first day of the course is packed with lots of activities and important stuff that form the basis of Co-Living business. You can check the 1st day post here.
Now let’s proceed with what I’ve learnt from the 2nd day of this course. Let’s start our MELEPAK session!
Understanding Utility And How To Charge Them
When we rent out the unit to 6 different tenants, you can expect the utility bills to be significant. But how do we want to determine how to calculate for individual tenant? Well, you don’t.
For this co-living business, there are 2 ways for you to charge your tenant when it comes to utility bills.
- Set a fix price
- Monthly bill amount divided by pax
Method 1: Set A Fix Price
If you decided on setting a fix price (which is recommended) for the utility bill, you will have to include and state the amount to your tenant. For example, you can set $80/month on top of the monthly rent they have to pay. So if you are charging $1000/mth for a CR, every month, you should collect $1080.
The recommended amount to charge for utility is $80 for a single pax and $140 for a 2 pax room.
Method 2: Monthly Bill Amount Divided By Pax
For this method, the monthly amount collected is not fix. If you decided to go with this method, you will need to get the consensus from all your tenant that the bill will be divided equally. So at the start of each month, you will inform them the amount (with screenshot of the bill) and get them to pay along with the monthly rental.
Either way is fine but it is simpler and easier to go with method 1. But you can’t be too calculative with method 1 as there are months that the bill is more and months when the bill is less.
Exercise to Calculate Profitability
In day 2, we also did a lot of exercise to calculate the profitability of chosen projects. In day 1, we were taught how to find the base rent (based on past transaction) and how to set the rental price for each rooms in the unit. So in day 2, we put this skill to practice.
I enjoy this session as I love numbers and it feels like a treasure hunt – finding profitable units for co-living. Some of the projects that we look at includes Bishan 8, The Warren and Queens.
From the exercise, we also notice a pattern and was taught a rough guideline when calculating our profitability. The formula to determine profitability is as follows:
Basically, if we chose a 3 bedder unit, our profit will be from the MR rental whereas if we get a 2 bedder unit, our profit will be from CR rental. What this means is if you are looking for a 2 bedder, it make sense to find units in core central region CCR (higher CR rental) and for 3 bedder, it is ok to find units in both RCR and OCR.
Property Agents Are Our Friends
Next thing that we learnt for the 2nd day is about property agent. Yes, for co-living, we do not need to list our rooms with agents BUT we still need them to find the units. This is because most of the time, landlords will list their home with agents. As such, we need to work together with agents so that we can get the unit we want.
To do that, we must first share what values are we giving to their clients (Landlord).
Values To Landlord
To help agent convince their clients, we can share what values will the landlord gets by renting out their whole unit with us. Some of the values that we can share are:
- We add value to their place by doing little renovation
- They do not have to fully furnish the place
- There will be weekly cleaning of their place
- All changes that was made will be reinstate
- Installing of partition does not involve any drilling
- We can move in anytime
- Landlord can expect 3 years lease
Values To Agent
Now that we have shared what values we can give their client, we now have to provide value to the agents too. This way, they too will be incentivize to work hard to convince their clients to accept our offer. So we can motivate agents with these information:
- Make it clear we are looking for 3 years lease
- More commission for them due to longer lease
- Assure them that co-living business is legit and legal
- Direct them to URA website about legality of partitioning house
Basically, when contacting with agent, just be nice and share what you are planning to do and how you add value to them and their clients. Based on all this, I’ve created a copy to send to all agents when contacting them. (Contact me if you want the copy)
2 Most Important Clause For Co-Living
We were told to always inform agents of the 2 most important clause that we need in the tenancy agreement (TA) for co-living. In the TA, there should be a clause about allowing us to do partition to the house and to allow us to sublet the house to others. So that should be the first thing that we do when we contact agents. If the landlord does not agree to this 2 clause, then there is no point to continue.
And there is no point to explain and negotiate with agents and landlords. Best is to just move on and find other potential units.
What To Look Out For During Viewing Of Unit
Once the agents confirmed that the landlord is agreeable to the 2 clause and am open to the co-living arrangement, it is time for viewing. When you do your viewing, there are a few things that you need to take note:
- Metal gate so can use bicycle lock for logistic purpose during reno
- The bedroom size (Determine if it is PR, CR or MR)
- White goods is working (washing machine, fridge, hood)
- Working aircon
- Existing furniture is suitable
- Take note of the lighting point
- Check got water heater
- Wifi point location
- Take note of the curtain length
Q&A Session: Huat Lady with 12 Co-Living Units
Next, we got to ask questions from someone who has actually done it. This lady has 12 Co-Living Units earning a passive income of $18,000 per month. We were wowed by her achievement and eager asking questions. It is great to have someone who is doing it and willing to share her experience with us.
Everyone was excited and it is shown from the tons of questions that was thrown at her. There are at least 20 other questions that was not answered due to the shortage of time. But it somehow motivates me to work towards that goal.
One Awesome Tip
One tips given by Huat Lady is to negotiate for 1 month free rental with the landlord. If we are able to do that, then we have time to do reno and prepare the unit + have time to find tenant even before our lease starts. So imagine having a full house even before the lease starts. Awesome right? So that is something to take note and implement.
Reduce your risk by asking for 1 month free rental for you to prepare and market the unit. It is possible to fully rent out the unit before your lease starts.Huat Lady (July 2020)
I Am A Certified Co-Living Operator
With that, marks the end of the 2 day course (there are many other things shared during the course but can’t remember everything) and I am now a certified co-living operator. Yay!
After the course, I am more confident to run this business and am eager to find my first 2 units. My goal for this side hustle is to get 2 units (stretch goal is 3 units) by the end of the year 2020. And another 3 by end 2021.
I will be sharing my journey in this side hustle so stay tune and check out for more updates here. That’s all for our MELEPAK session today. Thank you and feel free to drop a comment below.