Breakeven occupancy is the most-asked-for metric in coliving underwriting. It tells you the floor occupancy below which the property generates negative cash flow. The lower the breakeven, the more resilient the deal to demand softening.
Breakeven depends on three things: ADR (numerator pricing), fixed costs (denominator base), and variable costs (the slope between ADR and revenue). Coliving's high fixed-cost base (community manager salary, fixed utility access charges, insurance, debt service on conversion capex) pushes breakeven occupancy higher than traditional residential — typically 65–80%.
Formula
Breakeven Occupancy = Fixed Costs ÷ (ADR × 30 × Bed Count - Variable Costs)
Worked example: Property: 50 beds, ADR €25, monthly fixed costs (insurance, salaries, debt service) €18,000, variable costs €2 per occupied bed-night. Revenue at full occupancy = €25 × 30 × 50 = €37,500. Variable costs at full occupancy = €2 × 30 × 50 = €3,000. Contribution margin = €37,500 - €3,000 = €34,500. Breakeven occupancy = €18,000 ÷ €34,500 = 52.2%.
In the field
Most stabilized European coliving operates at 55–70% breakeven occupancy. London premium product (high debt service on H16 capex) closer to 75–80%. Indian coliving (lower fixed costs) closer to 50–60%. Operator-grade underwriting includes a stress-test breakeven 10pp below baseline assumption.
Common pitfalls
- ×Excluding debt service from fixed costs — gives a falsely low breakeven for leveraged deals.
- ×Including capex amortization but not capex spending — tax-vs-cash distinction matters for cash-flow stress tests.
- ×Using stabilized ADR as breakeven ADR — early-stage discounting depresses real breakeven thresholds.
- ×Not modelling seasonality — some markets dip below breakeven in shoulder months.
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