Today, I want to talk about why more than 60% of coliving operators fail within their first 24 months of operation. This perspective is based on my 11 years of experience in the coliving ecosystem. I’ve been an operator, a tech service provider, and an advisor, I’ve seen the industry from its early days when it was just gaining traction. Over the years, I’ve built systems for this industry and observed patterns in what works and what doesn’t. One hard truth I’ve realized is this: every coliving company starts with the same noble hypothesis, yet most end up making similar mistakes that can be fatal for the business.
Most coliving startups begin with ideals like affordability, community, and bringing people together. Founders say things like, “We want to provide affordable housing, build a vibrant community, develop the local region, and attract people from around the world.” They usually manage to generate some initial traction under these ideals.
However, filling beds is not the same as building a sustainable coliving business. Early occupancy might feel like success, but it can be dangerously misleading. In fact, occupancy is a lagging indicator, not a leading one. Often that early traction comes from friends, family, or an early-adopter network, which is relatively easy to achieve. This can fool you into thinking you’ve proven your concept, so you start scaling up.
Here, I’ll break down the key reasons why coliving operators struggle to survive past two years. Each of these points is a lesson learned the hard way by many operators (myself included at times). By understanding these pitfalls, you can better prepare and hopefully avoid becoming part of that 60% failure statistic.
1. Filling Beds ≠ Building a Business
It’s easy to assume that once you’ve filled your rooms or beds, you’ve made it; many new coliving operators equate high occupancy with success. The reality is quite different. Early on, you might achieve full occupancy through personal hustle, offering discounts, tapping your personal network, or doing multiple jobs yourself. For example, you might act as the community manager, marketer, and landlord all at once to save on costs. Yes, you can fill the house by doing everything yourself and pulling every lever to attract residents.
The problem comes when you try to scale. That initial occupancy was achieved under abnormal conditions: your extra effort, favors from friends, introductory pricing, etc. It’s not sustainable. As soon as you step back and need to hire staff to handle these roles, the costs creep in. Suddenly, the business that looked profitable with one person doing multiple jobs starts to struggle under payroll and operational expenses. Filling beds was the easy part; running a profitable business is a whole different game.
Always remember: high occupancy is a lagging indicator of past efforts, not a guarantee of future success. Don’t let the early full house give you a false sense of security about your business model.
2. Ignoring Unit Economics and True Costs
Many coliving startups lack a “unit economics first” approach. In the eagerness to get a project going, founders often underestimate costs and cut financial corners that later come back to bite them. It’s tempting to accept a deal that’s slightly more expensive, for instance, paying 5% higher rent to the property owner just to secure a location, thinking you can make it work. But that extra 5% can completely change your long-term business model. Small margin differences have a massive impact when scaled.
Founders also frequently underestimate CapEx (capital expenditures for furnishing, renovations, etc.) and OpEx (ongoing operational costs). For example, I once consulted for a coliving space that furnished their first property mostly with great secondhand furniture at a bargain. The initial budget looked fantastic because of those savings, and they assumed those costs for future spaces would be similar. But when they opened a second location, they couldn’t find the same deals on furniture, the costs jumped significantly. Gradually, all those higher costs (new furniture, repairs, utilities, maintenance, staff) started creeping up. Before long, the founder was scratching his head wondering, “Where is all the money going? This business doesn’t seem to work like it did in the beginning.”
The misconception many have is, “Once I scale up and have more properties, the economies of scale will fix everything.” This is a dangerous myth. If a single building’s unit economics don’t work (i.e. each bed or property isn’t profitable on its own), adding more units will not magically make the overall business profitable. In fact, scaling a flawed model often just speeds up the losses. So, nail down your unit economics from day one: factor in realistic rents, vacancy rates, furnishing costs, staff salaries, maintenance, and even your own salary. Ensure each location can stand on its own financially; otherwise, expansion will only amplify the problems.
3. The “Community” Buzzword Trap
“Community” has become a buzzword, arguably even a cliché, in the coliving world. Many operators pitch “a great community” as the cure for everything. Feeling lonely? Our community will fix that. Marketing costs too high? Our community will generate word-of-mouth and lower customer acquisition cost. High turnover? Our amazing community vibe will make people stay.
In reality, you cannot force a community into existence with a few social events. True community isn’t about obligatory weekly gatherings or pizza parties that you, as an operator, host thinking it’ll magically solve retention. Community emerges organically when residents share genuine connections and a culture grows over time around shared values or a vision. It’s about how residents feel, not just the events you schedule.
I’ve seen founders confuse having a trendy “vibe” (cool decor, hip events) with actually fostering long-term retention. They pour energy into superficial aspects, like Instagrammable lobbies or game nights, and assume that equals a loyal community. Unfortunately, you can’t manufacture loyalty that way. If people don’t truly feel at home or part of something meaningful, they will leave despite the fun and games.
So, avoid “community greenwashing.” Don’t tout community as a magic bullet unless you’re willing to invest time and effort into nurturing real connections. Authentic community-building is slow and involves understanding your residents’ needs and enabling them to bond (often in ways you can’t fully control). It’s not a marketing slogan, it’s a byproduct of doing many other things right. When done right, it will improve retention and satisfaction, but it’s not a substitute for sound business fundamentals.
4. Underestimating Operational Challenges
At its core, coliving is a brick-and-mortar, people-to-people business. It’s not a simple app or an online service; you’re dealing with physical spaces and human lives. Operations, the day-to-day management of properties and service delivery, can break down faster than you expect, especially as you grow.
In the beginning, with one property, you might handle operations in a scrappy, ad-hoc way and get by. But once you add a second or third property, things change drastically. Suddenly you’re dealing with geographically spread locations, more residents, and a need for more hands on deck. The systems (or improvisations) that worked for one building often don’t scale to many. I’ve seen founders assume that the same approach will work as they expand, only to be overwhelmed by the new complexity.
A classic mistake is micromanaging everything rather than building processes and systems. For instance, you might personally inspect every room, meet every new tenant, or coordinate every repair at first. But as you expand, you physically can’t be everywhere. If you try to micromanage multiple properties, you’ll burn out (more on that later) and still miss crucial things. Alternatively, if you hire staff but don’t set standard operating procedures (SOPs) and training in place, each manager or community host will do things their own way, and quality will slip.
I call this accumulating operational debt. It’s like technical debt in software: you get by with quick fixes and no documentation initially, but those shortcuts pile up over time. One day you wake up to chaos, things are done inconsistently, residents are unhappy, maintenance is overdue, bills are missed, and you’re stuck firefighting constantly. The processes you thought you had in place turn out to be fragile or nonexistent.
To avoid this, recognize early that running coliving spaces is operations-intensive. Invest time in writing playbooks, checklists, and contingency plans for your team. Build a culture of consistency and quality. Good operations might not be glamorous, but they are absolutely vital. If you ignore this, your operations will break under growth, and your reputation (and sanity) will break with it.
5. Expanding Too Fast, Too Soon
Nothing kills a coliving startup faster than unchecked expansion. It’s tempting to replicate your initial success in a new city or a new part of town, many founders think, “We did great in City A, so let’s expand to City B and beyond!” But coliving is highly sensitive to location. What works in one city, or even one neighborhood, might fail miserably in another.
Every locality has different variables: property prices, local regulations, cultural norms, target demographics, competition, even the availability and cost of reliable staff or services. Even within the same city, a downtown property can behave very differently from a suburban one. I’ve worked with a coliving company in Spain that experienced this firsthand. Their first location was in central Barcelona; later, they opened another space on the outskirts of the city. They assumed the success in the urban center would copy-paste to the suburban site. In reality, the second location had lower occupancy but higher profitability because their costs were significantly lower outside the city center. It was counterintuitive, but it illustrates that the same playbook didn’t apply even just a few kilometers away.
Now, expansion isn’t inherently bad, but expanding without deep local understanding is dangerous. If you jump into a new city with the exact same product and strategy, you might be blindsided by issues you never encountered before. Maybe the permit process is harder, or the demand is different, or your target customers have different preferences. Regulations might differ (more on that soon). The point is, expansion multiplies complexity. A single-property operation and a multi-city operation are completely different beasts.
The solution is to expand cautiously and do your homework. Treat each new location like a startup of its own: research the micro-market, adjust your model as needed, and don’t assume one-size-fits-all. It’s better to consolidate your processes and success in one area before leaping into the next. Remember, growing too fast has been the downfall of countless startups, and coliving is no exception.
6. Tech and Marketing as Afterthoughts
In the coliving world, I often see founders treat technology and marketing as low priorities, things to figure out “later, once we get the properties running.” This is a mistake that can stifle your growth and efficiency.
Tech: In the beginning, you might manage with spreadsheets, WhatsApp groups, and a patchwork of generic tools (shared calendars, basic accounting software, etc.). This might work with one property. But as you grow, this fragmented tech setup becomes a nightmare. I’ve observed operators who started with Excel and Google Forms, then added a payment app like Stripe, then an Airtable base for something else, and maybe a Slack group for internal comms. Before they knew it, they had six different tools that don’t talk to each other, costing a few hundred dollars a month, and nothing was streamlined. They eventually thought, “We should have just invested in a proper property management system (PMS) or coliving management platform from day one.”
The takeaway: if you plan to scale, think about tech early. You don’t necessarily need fully custom software or an expensive system at the start, but you should choose tools that can scale or integrate well. There are management systems designed for coliving and rental businesses, use them. Good tech infrastructure will save you countless hours, reduce errors, and improve the experience for both your team and your residents (think smooth onboarding, easy payments, maintenance tracking, community communication, etc.).
Marketing: Similar to tech, many coliving founders postpone marketing efforts. They’ll say, “Let me finish building out the space and filling it, then I’ll worry about marketing or a website.” The truth is, you should start marketing before your space even opens. Building a waitlist of interested people, sharing your vision, and creating buzz should happen in parallel with getting the property ready.
I actually wrote about how to get your first 100 customers in coliving by leveraging authenticity and storytelling. The gist of it is: start with something as simple as a single landing page or a social media profile. It doesn’t need to be perfect; it needs to be authentic. Document your journey, why you’re starting this coliving space, what you’re building, behind-the-scenes looks at the space coming together, your thoughts on community, etc. People love authenticity and passion. By the time you open your doors, you could have a small but eager following of folks who feel invested in your story and want to try living in your space.
Marketing isn’t just an ad campaign or a website launch at the end, it’s an ongoing conversation with your potential customers. If you treat it as an afterthought, you might find yourself with a beautiful property and no one excited to live there (or end up scrambling with expensive last-minute advertising). Incorporate marketing into your early strategy: it will not only help fill beds faster with the right people, but it will also give you valuable feedback from the community on what they want.
7. Misunderstanding Funding and Growth
During the 2015–2020 period, coliving startups were a hot topic for venture capital. Many companies raised sizable funding rounds, often pitching themselves as “tech” companies or platforms that just happened to have a real estate component. Investors were sold on the idea that coliving could scale like a SaaS product or a ride-sharing app. Unfortunately, coliving is not a hyper-scalable software business, it’s fundamentally tied to real estate, which is slower and far more capital-intensive.
What happened to some of the darlings of that era? We saw high-profile coliving startups like Quarters, Common, and Ollie struggle or shut down when the hype faded. These companies raised a lot and expanded rapidly, but eventually the realities of thin margins and operational complexity caught up with them.
The lesson here is: don’t let investor excitement distract you from business fundamentals. Just because you can raise money doesn’t mean you should pour it into a flawed model in the hopes that growth will fix it (it usually won’t). If you do take on funding, use it to truly scale a working model, not to paper over cracks. For instance, burning cash to keep unprofitable locations afloat or to constantly churn through new tenants with costly marketing is not sustainable.
It’s crucial to have a path to profitability. coliving, done right, can be profitable on a per-building basis (especially if you’re asset-light, i.e. leasing properties rather than owning). But you need to be clear on how you’ll get there. Some founders launch one property and think, “We’ll figure out monetization or efficiency once we have more locations or more users.” That mindset is dangerous. Real estate isn’t like a social network where you get millions of users and then monetize later, you have real costs from day one.
Also, understand the real estate cycle and your local market economics. Growth for growth’s sake can backfire if the market softens or you overextend. Smart growth, maybe slower, but steady and based on actual demand, beats boom-and-bust expansion.
In short, treat capital as a tool, not a crutch. If you raise money, have a solid plan for how to deploy it. And if you can’t raise (or choose not to), make sure your business can survive on its own revenues. Many coliving companies misunderstood what venture capital would do for them, and when reality hit, it wasn’t pretty.
8. Founder Burnout
Running a coliving operation is an intense, hands-on endeavor. It’s not a 9-to-5 desk job; you’re dealing with emergencies at odd hours, handling resident issues, managing staff, and constantly improving the space. The emotional and physical toll can be significant, and founder burnout is a real risk.
I have a close friend who has been running a successful digital nomad-oriented coliving space for about six years. He’s built a great brand and a loyal community. But I noticed that after a few years, the constant stress was wearing him down. He was always on call, if it wasn’t a plumbing issue at 2 AM, it was a last-minute cancellation, or a maintenance person not showing up, or an investor meeting during the day. On top of the daily operations, there’s pressure to grow, to market, to keep investors happy (if you have them), and to stay ahead of competitors. My friend reached a point where expansion opportunities were on the table, but he found himself hesitating, not because the business wasn’t doing well, but because he was exhausted.
coliving, especially if you lease properties (an “asset-light” model), typically operates on modest margins, around 20-25% in a good case. This isn’t like software where one big success can give you 80% profit margins and plenty of breathing room. With tighter margins, any small hiccup can cause stress. A month of low occupancy, an unexpected repair bill, a staff member quitting, suddenly you’re in the red. It’s a grind, and if you’re not prepared for that grind, it will burn you out.
To mitigate burnout, pace yourself and build a support system. Don’t try to do everything alone for too long, delegate where possible. Connect with other coliving operators; sharing experiences can be therapeutic and educational. Most importantly, set realistic expectations. This is not a get-rich-quick industry; it’s a slow burn. Celebrate small wins, take breaks, and remember that if you burn out, the business will likely falter too. Many coliving projects have died not because the idea was bad, but because the people behind them ran out of steam.
9. The Risk of Regulatory Changes
For a long time, coliving in many cities operated in a sort of gray area when it came to regulations, zoning, and licensing. It was new enough that city councils and regulators didn’t have specific rules for it, so a lot of operators flew under the radar or took advantage of ambiguities in housing laws. But as coliving becomes more popular and visible, authorities are starting to pay attention. They might see coliving as a partial solution to affordable housing or urban loneliness, but they also worry about its impact on neighborhoods and housing markets.
All it takes is one new regulation to throw a wrench in your business. We’ve seen parallels in the short-term rental world: cities like Paris and New York introduced strict Airbnb laws that massively impacted hosts and those platforms. coliving could face something similar. For example, a city might suddenly require special licenses for coliving spaces, or limit the number of unrelated people who can share a unit, or impose higher safety and accessibility standards. If you’re operating an informal setup, say, running a coliving space in a building zoned only for single-family use, or not having the proper fire safety certifications, a new crackdown could shut you down almost overnight.
My advice is to stay ahead of the curve on compliance. Don’t assume you can fly under the radar forever. It’s wise to proactively engage with local authorities or at least clearly understand the legal framework you’re operating in. Some cities may offer pilot programs or conditional use permits for coliving; find out and take advantage of those if available. Also, factor the potential cost of compliance into your financial planning (permits, safety upgrades, etc.). It’s better to be legal and safe, even if it costs more, than to be caught unprepared by a law that forces you to close.
If a new law or regulation does come to your area, you want to be prepared to adapt. That might mean adjusting your model or even pivoting your business. This regulatory risk is an inherent part of the industry, a factor somewhat out of your control, but awareness and preparedness are key. Don’t let your entire venture hinge on the hope that regulators won’t notice or won’t act.
10. Lack of a Clear Identity (Being a “Me Too” coliving Space)
Finally, let’s talk about product identity. With the rise of coliving’s popularity, I’ve seen a lot of “me too” coliving spaces pop up. These are founded not out of a unique vision, but because the founders saw someone else doing coliving and thought, “Hey, that looks cool and profitable, I’ll do the same.” The problem is, if you’re just copying someone else’s model without a clear understanding of what unique value you provide, you end up with a generic product.
coliving isn’t one-size-fits-all. Some spaces cater to students, some to young professionals, some to digital nomads or creatives, others to retirees. Each of these groups has different needs and expectations. If you try to design a space that pleases everyone, you’ll likely delight no one. I’ve observed operators who start with one target segment in mind but then, in a rush to fill beds, start accepting anyone and everyone, mixing students, travelers, remote workers, and so on under one roof with a hodgepodge of events and amenities. The result is a diluted experience. The students find it too expensive and overly structured; the professionals find it too chaotic or juvenile; the travelers don’t get the social vibe they expected; and so forth.
Without a clear Ideal Customer Profile (ICP), your marketing message will be vague (“coliving for anyone who wants to live with people!”), and your property’s experience will be unfocused. Residents might move in drawn by a generic promise of “community” or convenience, but if the actual experience doesn’t match what they personally value, they won’t stick around for long. High turnover and low satisfaction will follow.
The key is to have an identity and stick to it. If you’re building coliving for, say, young tech professionals in a city, then design everything around that, from the interior design, to the events (maybe hackathons or networking nights), to the services (fast Wi-Fi, ergonomic workspaces, etc.). Your marketing will naturally target those people, and the residents who move in will feel at home and understood. You can even charge a premium for a well-curated experience tailored to a specific group, rather than trying to please everyone with a mediocre, generic offering.
It’s better to be exceptional for a subset of people than to be just okay for everybody. Otherwise, you’re just another commoditized rental with a “coliving” label, and there’s nothing special to stop your residents from leaving for the next cheaper or newer option.
Running a coliving startup is a complex endeavor with many potential pitfalls. The points above are the main reasons I’ve observed that cause over 60% of coliving operators to close shop within about two years. In many ways, these challenges aren’t unique to coliving; lots of startups in various sectors face issues with scaling too fast, ignoring unit economics, or losing focus. But coliving has the added complexity of real estate and community-building, which makes these mistakes even more lethal if not addressed.
One overarching theme is that many coliving startups are launched and run as if they were a lifestyle brand, all about image, hype, and cool vibes. In reality, coliving is an operationally intensive, capital-sensitive, people-heavy real estate business. It’s not just about branding or a great concept; it’s about execution day in and day out. If you approach it with the wrong mindset, ignoring the gritty operational details and the financial discipline, then all the optimism and initial excitement in the world won’t save you from the harsh realities we discussed.
The good news is that if you go in with eyes open and address these factors proactively, you stand a much better chance of succeeding. coliving can truly help people find affordable housing and genuine connections, and it can be a rewarding business to run. Just remember that success will depend on excellent execution and a clear understanding of what you’re getting into.
I hope these insights help current or aspiring coliving operators avoid common mistakes and build sustainable, thriving communities. Good luck, and thanks a lot for reading!