The core business models for co-living operators is to rent multiple residential units from landlords, then sublet them as individual rooms to multiple tenants.

This co-living concept where tenants rent individual rooms in a shared space with communal amenities — has gained popularity in recent years, especially among young professionals, digital nomads, and expatriates seeking affordability and flexibility. On the surface, it appears to be a promising business opportunity. But behind the trend lies a complex and high-risk model that often proves unsustainable. Here’s why becoming a co-living operator may not be a wise decision.

1. Landlords Demand High Rental Rates

One of the biggest roadblocks for co-living operators is the cost of leasing residential units from landlords. In Singapore, private residential rents have risen sharply. Landlords, aware of the high demand, are unwilling to offer discounted rates. This leaves operators with little to no margin after covering renovation, furnishing, utilities, and operational expenses.

In fact, many landlords would rather lease directly to families or long-term tenants instead of dealing with co-living operators, whom they perceive as bringing higher wear and tear, compliance risks, and management complications.

2. Thin Profit Margins and High Operating Costs

The co-living model involves high operational intensity. Operators must renovate and furnish homes, maintain communal areas, provide regular housekeeping, offer tenant support, and manage frequent turnovers. After paying rent to landlords, utilities, cleaning costs, staffing, marketing, and repairs, the profit left is often minimal — if any at all.

Unlike traditional leasing models, co-living operates more like a hospitality business than a real estate one. This requires full-time operational support, which drives up overheads significantly.

3. Frequent Turnovers and Unstable Income

Tenants in co-living spaces tend to stay short-term — anywhere from three months to a year. This results in high turnover, frequent vacancies, and constant marketing efforts to attract new tenants. With rising customer acquisition costs and competition from other co-living spaces, sustaining high occupancy becomes a major challenge.

Worse, during economic downturns, pandemic disruptions, or shifts in remote work trends, co-living demand can drop suddenly, affecting income. Meanwhile, fixed lease obligations to landlords remain, putting operators at financial risk.

4. Regulatory Uncertainty and Compliance Risks

Many cities impose strict regulations on subletting, short-term rentals, and modifications to residential properties. In places like Singapore, HDB flats and many private condos have rules that restrict or prohibit subletting rooms or converting units into co-living arrangements.

For HDB rental contracts, short-term stays (less than 6 months) are strictly prohibited. Maximum of 6 tenants regardless if it is a 4-room or 5-room HDB flat.

Operators who do not comply with fire safety codes, zoning laws, occupancy limits, or licensing rules may face legal action, fines, or forced closures. Navigating these legal grey areas adds risk and uncertainty to the business.

5. Intensive Tenant Management and Conflict Resolution

Unlike traditional landlords who lease to one family or tenant group, co-living operators must manage multiple tenants sharing the same space. This can lead to interpersonal conflicts, hygiene issues, noise complaints, and even disputes over shared utilities or chores.

Maintaining a harmonious environment often requires a full-time community manager or support team — adding further costs. A poor tenant experience can quickly lead to bad reviews, damaging the operator’s reputation and reducing future demand.

6. Market Saturation and Increased Competition

As co-living gained traction, many startups and institutional investors entered the space, leading to increased competition. Operators now compete not only on price but also on amenities, design, and tenant experience. This puts pressure on profit margins and raises the bar for entry.

Without a strong brand, significant capital, and operational excellence, it becomes increasingly difficult for small or new operators to differentiate themselves and sustain profitability.

Conclusion: A Risky Business with Limited Reward

While co-living may appear to be a trendy, innovative solution in today’s urban housing market, the reality for operators is far from ideal. With high rents, low margins, regulatory complexity, and operational challenges, becoming a co-living operator is a high-risk venture that often leads to burnout or financial loss.

Unless you have deep pockets, industry expertise, and strong landlord partnerships, it's often more prudent to explore alternative real estate models with more predictable returns and lower operational demands.