Investing in co-living properties is an emerging real estate strategy that promises higher rental yields and lower investment risks. In this feasibility case study, we analyse the financial viability of purchasing a co-living property in Winter Valley Estate, VIC 3358. This investment offers a 5-year rental guarantee at a 10.2% return, making it an attractive prospect for investors seeking stable income and long-term capital growth.
Property Details
Project: Winter Valley Estate
Property Type: Co-Living
Configuration: 5 Bedrooms, 5 Bathrooms, 2 Car Spaces
Price: $896,500 (Under Offer)
Total Floor Area: 269.41 m2
Lot Size: 512.0 m2
Contract Type: 2-Part Contract (Fixed Price - Full Turnkey)
Land Price: $250,000
Build Cost: $646,500
Estimated Weekly Rental: $1,700 - $1,800
Estimated Gross Yield: 9.86% - 10.44%
Guaranteed Return: 10.2% (for 5 years)
The property consists of five self-contained units, each with a private bedroom, bathroom, kitchenette, living space, study desk, air conditioning, and a private courtyard. Shared common areas include a kitchen, dining room, laundry, social area, storage, bike rack, and individual mailboxes.
Financial Feasibility Analysis
Loan and Interest Assumptions
Loan Amount: $896,500 (100% financing for land and construction)
Interest Rate: 6% (Interest-Only Investment Loan)
Land Holding Period: 3 months at 100% debt before construction begins.
Construction Duration: 10 months (5 funding stages with incremental loan increases)
Annual Rental Income: $91,000 (minimum estimate)
Total Interest During Construction: $49,005 (calculated over land holding and construction periods)
Annual Interest on Loan: $53,790 (6% of $896,500)
The property guarantees a 10.2% return, ensuring investors receive a fixed rental income for five years, reducing investment risk.
Feasibility Breakdown
Parameter | Value |
Purchase Price | $896,500 |
Loan Amount | $896,500 |
Interest Rate | 6% |
Land Holding Period | 3 months |
Construction Time (Months) | 10 |
Land Cost | $250,000 |
Build Cost | $646,500 |
Loan Structure | 100% Land Loan, Incremental Loan for Build over 5 Stages |
Total Interest During Construction | $49,005 |
Estimated Annual Rent (Min) | $88,400 |
Estimated Annual Rent (Max) | $93,600 |
| Annual Interest on Loan | $53,790 |
Depreciation Schedule
A major advantage of investing in newly constructed co-living properties is the depreciation benefits. The estimated depreciation starts at $24,000 annually and decreases by 5% each year.
Year | Depreciation Value |
1 | $24,000 |
2 | $22,800 |
3 | $21,660 |
4 | $20,577 |
5 | $19,548 |
6 | $18,571 |
7 | $17,643 |
8 | $16,761 |
9 | $15,923 |
10 | $15,127 |
Capital Growth Projection
The long-term value appreciation of the property is a key consideration. Assuming a 4% annual capital growth rate, the projected property values over 10, 20, and 30 years are as follows:
Years | Projected Property Value |
10 | $1,327,039 |
20 | $1,964,342 |
30 | $2,907,706 |
Investment Benefits
High Yield & Guaranteed Returns: The 10.2% rental guarantee ensures a stable return for the first five years, making this a low-risk investment.
Depreciation Benefits: Investors can claim depreciation, reducing taxable income and increasing net returns.
Strong Capital Growth: Projected property appreciation enhances long-term wealth accumulation.
Growing Demand for Co-Living: Shared housing is an emerging trend, ensuring high tenant demand and lower vacancy rates.
Conclusion
The purchase of a co-living property in Winter Valley Estate presents a compelling investment opportunity. With high rental yields, guaranteed income, depreciation benefits, and strong capital growth projections, this investment aligns with both short-term income stability and long-term wealth creation strategies. Investors looking for a hands-off, high-yield investment should consider this property as a strategic addition to their portfolio.
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