Prerequisites
- ✓Property P&L: rent + ancillary revenue, all OpEx categories, debt service
- ✓Beds, ADR (or pricing structure)
- ✓Excel / Sheets
TL;DR
Breakeven Occupancy = Fixed Costs ÷ (ADR × 30 × Beds - Variable Costs). Most stabilized coliving sits 55–70% breakeven; leverage and emerging-market ops push it higher. Stress-test at breakeven +10pp to evaluate downside resilience.
Step-by-step
- 1
1. Categorize costs as fixed vs variable
Fixed: rent/master lease, debt service, manager salary, insurance, base utilities, software subscriptions. Variable: per-occupied-bed cleaning, occupancy-driven utilities, supplies, channel commissions.
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2. Compute monthly fixed costs
Sum all fixed cost categories on a monthly basis. Include amortized annual costs (property tax / 12, annual insurance / 12).
- 3
3. Compute variable cost per occupied bed-night
Sum monthly variable costs at full occupancy ÷ (beds × 30). Common range: €1.50–€4 per occupied bed-night in Western markets, ₹50–₹150 in India.
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4. Compute ADR
Use stabilized ADR. For new property, use the underwriting assumption; for existing, use trailing 90-day actual.
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5. Apply the formula
Breakeven Occupancy = Fixed Costs ÷ ((ADR × 30 × Beds) - (Variable Cost per Bed-Night × Beds × 30))
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6. Stress-test at +10pp
If breakeven is 60%, ask: is the property viable at 70% sustained occupancy in a downturn? Most stabilized coliving should clear this stress test.
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7. Stress-test at higher debt cost
Add 200bps to debt service. Recompute. Each 100bps debt cost typically raises breakeven 3–5pp. Refinancing risk shows up here.
Common issues + fixes
×Excluding debt service from fixed costs
→Always include debt service as a fixed cost when computing breakeven from a deal-equity perspective. The metric without debt service is operating breakeven; with debt service it's cash-flow breakeven. Both are useful but should be labeled.
×Treating capex amortization as fixed cost
→Capex spending is below the breakeven line (it's not an operating cost). Capex amortization for tax purposes is a non-cash item. Don't conflate.
×Using full-occupancy ADR when actual operates at 80%
→ADR is per-occupied-bed-night and shouldn't change with occupancy directly. But discounting strategies often shift ADR downward at lower occupancy. Stress-test breakeven with both base ADR and a -10% ADR scenario.
Frequently Asked Questions
What's a typical coliving breakeven occupancy?
55–70% for most stabilized properties. Capital-intensive markets (London H16) 75–80%. Operating-cost-light markets (Bangalore) 50–60%. The further below stabilized occupancy your breakeven sits, the more resilient the deal.
How does leverage affect breakeven?
Significantly. Each 100bps of debt service raises breakeven by 3–5pp. Most institutional underwriting targets a stabilized occupancy at least 25pp above breakeven for adequate margin of safety.
Should breakeven include capex?
No. Operating breakeven is at NOI level (no capex). Cash-flow breakeven includes debt service but not capex. Capex is below the line — handled separately as reserves.
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