Real Estate
Finding Robust Returns In New York's Co-Living Real Estate Sector

Shortages of affordable housing – such as properties used by students – can create opportunities for those seeking robust returns. Recent moves by New York to hike new housing permits highlight what is at stake. A firm operating in the sector – with family office investors – talks to this news service.
A real estate management firm specializing in furnished co-living
spaces concentrates on what young people want in the New York
area. And the strategy, says Outpost Club, is
working out just fine.
The business model – founded in 2016 – is a platform for
student housing in New York City and Philadelphia. It is a sector
with a lot of demand and a supply constraint. Shortages of
affordable housing for young people in big metropolises are well
known.
Outpost Club’s chief executive – and the organization’s
co-founder – is Sergii Starostin. (Chief operating officer is
Alex Prykhodko.)
The business has an annual revenue of $25 million, with co-living
spaces in New York with one million square feet under
management, 40 properties, and 97 per cent historical
occupancy.
“Fundamentally, the market is on our side: more people are
looking for affordability than there are rich ones and there is a
limited supply of property,” Starostin told Family Wealth
Report in a call. In New York, a third of all rental
property is treated as “affordable” – ie, under rent control,
with the rest operating in a free market, he continued. “In our
properties, about 10 per cent of them are `stabilized’.”
People are looking for robust property markets to invest in, and
New York is one of them, he said. Family offices invest in
properties that Outpost Group manages; some are long-term
investors.
Starostin spoke at a time when, after the post-Covid rate hikes
and falls in occupancy rates for offices as a result of home
working, the real estate investment market in the US has had to
adjust. New York is facing a harsh housing crisis. The vacancy
rate is usually somewhere around 5 per cent to 8 per cent; it has
fallen to 1.4 per cent even as the city added more than 50,000
homes over the past two years, according to city data.
In April 2024, New York governor Kathy Hochul negotiated a
housing deal. If fully enacted, the deal will raise NYC’s permits
for new housing. A recent report (Manhattan Institute) quoted the
NYC Department of City Planning saying that in 2023, just 16,359
units obtained permits, the lowest number since 2016, when 15,744
units were permitted. Both years followed a large spike in
permits in 2022 and 2015, respectively, as a tax-incentive
program for new housing expired.
New York is far from unique, of course. The world over, the
shortage of affordable housing is often a major political
hot issue.
On a different part of the US real estate market, this news
service recently spoke
to Hamilton
Point Investments about its approach, and why it smiles on
multi-family properties as a source of returns.
The numbers
Starostin said Outpost Club’s business model outperformed the
traditional leasing model in 2023. For example, the average
monthly rental revenue per unit (pricing) of $9,800 was about 31
per cent higher than the estimated rent under the traditional
leasing model. Units chalked up an occupancy rate of 98.3 per
cent, and net operating income (NOI) was about 25 per cent higher
despite higher operating costs, he said.
Renters are willing to pay a higher monthly rent to avoid avoid
spending money and time on furniture, utilities set up, and
finding roommates, Starostin said; they also want flexible
leasing terms. From the landlord’s side of the street, they
invest in furniture and low voltage equipment, but realize more
than 20 per cent higher NOI.