Co-Living Property Investment: What You Need to Know

The UK rental market is evolving fast, and co-living is at the forefront. With more tenants seeking flexible, affordable, and community-focused living options, co-living has quickly become one of the most talked-about property trends among investors.

Keeping an eye on emerging trends like this is one of the smartest ways to get ahead in real estate — and co-living offers a unique opportunity. In recent years, London has seen a significant surge in purpose-built co-living properties, and demand is growing across other UK cities as well, as more people seek shared spaces, modern amenities, and lower-cost rent. London remains the most popular co-living market in the UK, with 74% of the homes completed to date located in the capital, according to agency reports as of 2 Jul 2025.

As this model gains popularity, so does its investment potential. But is co-living truly a smart addition to your property portfolio, or is it just the latest buzz?

We’re here to break down the pros and cons of co-living investment, helping you decide whether it aligns with your goals. With more than 20 years of experience guiding both new and seasoned investors, Alesco provides the insight and support you need to make informed decisions.

What is a co-living scheme?

Co-living is a contemporary housing model where groups of people live together in a shared apartment or house, intending to foster a stronger sense of community. Unlike traditional houses in multiple occupation (HMOs), co-living spaces are designed for communal living, often featuring smaller private areas and larger shared spaces.

In addition to shared kitchens, living rooms, and bathrooms, many co-living properties now include lifestyle-focused amenities such as gyms, bars, cinemas, co-working spaces, and even swimming pools. Most co-living schemes are managed by specialist companies, which not only handle day-to-day upkeep but also organise social events and activities to encourage interaction among residents.

This way of living is particularly popular among recent graduates, young professionals, and those in contract-based work who seek a more affordable and flexible alternative to traditional shared apartments in high-cost urban areas. Co-living properties are typically located in cities with expensive housing markets and often offer flexible leases to accommodate the fast-paced, dynamic lifestyles of their tenants.

What we like about co-living property investment

Co-living combines strong income potential with modern tenant demand, making it a compelling addition to a property portfolio. Here are the top benefits of co-living investments.

Strong rental income

Co-living properties typically generate higher rental income than traditional residential lets because they accommodate multiple tenants under one roof. This makes co-living a highly efficient use of property space, especially in urban areas with high housing demand.

Lower vacancy rates

Demand for co-living remains strong, particularly in city centres and high-cost urban locations. Popular with young professionals, recent graduates, and flexible workers, co-living properties often maintain high occupancy rates, providing investors with a more stable and predictable income stream compared to traditional rental models.

Professional property management

Many co-living schemes are managed by specialist companies that handle everything from property maintenance and cleaning to tenant onboarding and community events. This reduces the day-to-day workload for investors and ensures the property is professionally maintained, helping protect long-term value.

Community and tenant retention

One of the unique advantages of co-living is the sense of community it fosters among residents. Shared events, communal spaces, and a collaborative environment encourage tenants to stay longer. Higher tenant retention reduces turnover costs and void periods, improving the overall stability of rental income.

Capital appreciation potential

Co-living properties are often located in high-demand urban areas or up-and-coming neighbourhoods. Over time, these properties can appreciate, offering investors potential capital gains in addition to ongoing rental income. In addition, as co-living becomes more popular, the scarcity of well-managed units in prime locations may further support property values.

Portfolio diversification

Adding co-living properties to your portfolio allows you to diversify beyond traditional buy-to-let investments. With strong rental yields, high demand, and professional management, co-living can complement other property strategies like HMOs, helping balance risk and optimise overall returns.

The profit potential of co-living investment

Co-living properties can be highly profitable, especially in cities with strong rental demand. Popular with young professionals, graduates, and contract workers, well-run co-living schemes often deliver higher yields than traditional buy-to-lets.

A key advantage is rental efficiency. Instead of letting a whole property to one household, landlords rent individual rooms within a shared home. This often boosts total rental income in high-demand areas such as London, Manchester, and Liverpool.

Tenant demand is also robust. Rising housing costs and a preference for flexible living make co-living an appealing, affordable option, helping maintain consistently high occupancy.

With the right location and management, co-living properties can generate strong annual yields that outperform standard lets. Although operating costs may be higher, they’re typically outweighed by increased rental income.

Investors can choose how hands-on they want to be. Some manage tenants and operations directly, while others use specialist co-living operators who handle everything from maintenance to community events — offering a more passive route to strong, stable returns.

Co-living property investment: areas of consideration

The main areas to consider before investing in co-living today include:

Market sensitivity

Co-living has really taken off in major UK cities, thanks to rising rents and the appeal of flexible, community-focused living. But it’s still a relatively young sector, so how it will hold up during a prolonged economic downturn isn’t fully tested. Because income comes from multiple tenants rather than a single household, it can be more resilient — but it’s also more sensitive to people tightening their budgets. In tough times, renters might opt for cheaper HMOs or traditional flatshares, and even high-end co-living schemes could struggle to stay fully occupied.

Higher turnover

Turnover is naturally higher in co-living than in traditional buy-to-let. Even though better amenities, social events, and strong management are helping people stay longer, flexible leases mean there will always be more move-ins and move-outs. This creates extra work around cleaning, maintenance, and onboarding new tenants. Investors can either manage this themselves or partner with experienced operators who know how to keep occupancy high and tenants happy.

Regulation and the Renters’ Rights Act

Regulation has become a major factor for co-living investors. The Renters’ Rights Act, rolling out from late 2025 into 2026, is set to shake up how properties are run. Key changes include the end of no-fault evictions, rolling (periodic) tenancies replacing fixed-term ASTs, limits on rent increases to once per year, and tighter rules around upfront rent and rental bidding. Anti-discrimination rules have also been strengthened, and local authorities will be keeping a closer eye on compliance. All of this means landlords and operators need to update agreements, processes, and systems, which could increase costs but also make the sector safer for tenants.

Local market saturation

Some areas, particularly London, Manchester, and Bristol, now have plenty of co-living stock. In these hotspots, competition can push down achievable rents or make it harder to keep rooms occupied. On top of that, councils are tightening planning rules around room sizes, amenities, and density, or limiting new developments altogether. Choosing the right location and offering a distinctive, well-managed product has never been more important.

Financing challenges

Getting finance for co-living is easier than it used to be, but it’s still not as straightforward as a standard buy-to-let. Lenders want to see solid management plans, realistic financial projections, and clear operational structures. The Renters’ Rights Act adds another layer, as banks consider how capped rent increases and rolling tenancies could affect cash flow. Borrowing is possible, but investors need to be prepared for more scrutiny than usual.

How can I invest in co-living properties?

Co-living property can be a smart investment, especially as the market is still relatively new. It offers the chance to get ahead, with strong rental returns and potential long-term growth.

However, before you start, consider your goals, risk tolerance, and exit strategy. Research potential locations, look at local amenities and demographics, and think carefully about long-term prospects.

Even seasoned investors can find the process tricky, which is why Alesco has been helping property investors navigate the market for over 20 years. With our experience, market knowledge, and practical insights, we guide both newcomers and seasoned investors so they can make confident, informed choices.

We can help you build a profitable co-living portfolio, whether your focus is steady rental income or long-term capital growth. From spotting high-potential properties to running due diligence and managing the acquisition process, we support you every step of the way. We aim to make investing in co-living properties clear, manageable, and ultimately rewarding.

Get in touch today to explore co-living opportunities and discover how Alesco can help you make your next property investment a success.