Baby boomers may be aging, but many of them still wish to stay active and independent. Senior cohousing is a newer concept that provides a great alternative to 55+ senior living communities, and even assisted living facilities, in some cases. Investors who have wanted to get into senior housing investments may find a great opportunity in senior cohousing.
What is senior cohousing?
Senior cohousing is a small senior community of private homes with shared common spaces. Senior cohousing is designed to allow seniors to maintain their independence while providing each other with a supportive living environment.
Residents in senior cohousing communities share common areas such as a kitchen, fitness center, and library. Cohousing residents also plan their own activities and gatherings together instead of being limited to what the community manager has planned, as in a normal senior housing community.
How is senior cohousing different from other types of retirement communities?
The main difference between senior cohousing and independent living or assisted living is that residents of a senior cohousing community are still completely independent. Senior residents take care of each other instead of relying on facility staff.
In a normal 55+ apartment community, the management makes decisions on activities and manages the use of amenities. Many independent living facilities are even more structured with set meal times with limited menus. Senior cohousing residents manage the community themselves, making their own decisions on amenities and any activities.
Senior cohousing communities have a common house, where residents prepare and share meals together and share their choice of other amenities. You can think of this arrangement simply as a group of neighbors who are looking out for each other's health and well-being.
Is senior cohousing a good investment?
Senior cohousing is a relatively new concept, so there are many opportunities for real estate investors to get in early before this asset class becomes a mainstream investment, like multifamily or assisted living investments. If you have wanted to invest in senior living, a cohousing community is an option worth considering.
Investing in senior cohousing requires a much different approach than most other real estate investments. Cohousing communities are basically neighborhoods that consist of like-minded people, so the investment strategy would be similar to developing a subdivision. Other elder cohousing communities are a group of single-family rental properties.
Senior cohousing communities that are made up of rentals will be more like owning a rental portfolio of single-family homes. The cohousing rent model may become more popular as older people consider housing options that will allow them to have more flexibility.
The flexibility of renting a home in a senior cohousing community makes it easier for residents to move if they later require long-term care, like nursing homes or memory care facilities. More seniors are beginning to prefer renting to avoid the responsibilities of homeownership as they age, which may make rental cohousing communities a popular option.
How to invest in senior cohousing
Senior housing investments have become a hot topic as the demand has been increasing each year. While senior living facilities and assisted living facilities are a commercial real estate investment, cohousing is more like a subdivision development project or investing in a single-family rental portfolio. Even with the rental model, you will most likely be developing this community from the ground up.
Seven steps to investing in senior cohousing:
- Do some market research: Find out whether there is a demand in your area to support this type of investment.
- Choose a location: Do you want your community to be in an urban area, suburbs, or a country setting?
- Plan the community: Design a community for 20 to 40 homes, plus common areas. Consider having walking trails, a garden, etc.
- Purchase the land: You'll have to purchase land big enough for your planned community that has access to utilities as well as municipal water and sewer.
- Develop the land: You'll have to subdivide the land into lots, build roads, and bring electricity, gas, water, and sewer to each lot.
- Build the houses: You want to build houses that are designed specifically for seniors. These may be one- or two-bedroom single-story homes.
- Find residents: Market to the senior community, and partner with your local office on aging to attract residents to your cohousing community.
The Cohousing Association of The United States provides information and resources for people who want to start a cohousing community.
Points to consider when developing a senior cohousing community
Developing an entire community from the ground up is a major investment. Be diligent in your research, and be confident in the community's ability to thrive. You also want to be sure that you have adequate financing available.
Projects of this size almost always come with unexpected surprises that can put you over budget. Be prepared with a plan on how you will handle any overages and delays.
If your plan is to rent the private homes to seniors, you have to consider how your tenant mix will interact with each other. Since you're creating an intentional community of support and collaboration, having residents who get along is crucial to the success of your investment.
Since conflicts among neighbors are inevitable, have a plan in place for how you will handle these issues. You should create a senior cohousing handbook that clearly lays out any rules and expectations, as well as your conflict resolution plan.
Will senior cohousing be your next investment?
As you can see, senior cohousing is a unique investment. Early investors in any new concept or asset type have the potential to make a fortune. That potential also comes with a lot of additional risks. If you invest in senior housing properties, you can learn what has, and hasn't, worked for a lot of real estate investors before you.
Being an early senior cohousing investor can give you the opportunity to develop the concept further and have a positive impact on the senior community while earning a great return. If you're considering a senior cohousing development, start your research and planning now so you can get in on the ground floor of this up-and-coming real estate opportunity.