In Houston’s Heights neighborhood and nearby northwest areas, some investors are skipping the resale market and buying land to build. Their main target is co-living housing: private bedrooms and bathrooms with a shared kitchen and common areas. That is according to Kurt Peterson, an agent and investor with World Wide Realty, LLC. Peterson says the shift reflects growing demand for housing types that conventional builders do not offer.
Peterson sees investor activity concentrated in the Heights. He says land there is still reasonably priced compared with how much he expects it to gain in value. These investors are not simply buying land and holding it for resale.
“Land. There’s only so much land,” Peterson says. “Get in now. Build.”
The investors Peterson works with in this area pursue two strategies. The first is new co-living projects for renters who struggle with housing costs. The second is higher-end single-family homes for buyers who plan to live in them. Peterson considers co-living the more important of the two. In his view, it meets a need that existing homes cannot.
The Heights has gradually gentrified, and Peterson says property values there have risen over the past couple of years. The land purchases he describes suggest some investors expect those values to keep climbing.
Peterson’s case for co-living rests on a simple calculation. He says the average renter can no longer afford a studio apartment, and co-living offers similar housing for less each month.
“Your average person can’t even afford a studio apartment rent,” Peterson says. “Co-living gives them that same studio apartment, only with a shared kitchen. But they have their own room, their own bathroom. It locks, it’s beautiful, new builds, and they get it for on average $400 to $500 less a month.”
For investors, renting by the room can bring in more income per square foot than leasing the same building to one tenant, Peterson says. One project his network is building has 14 bedrooms and 14 bathrooms. That single building produces 14 separate rent payments. If some rooms sit empty, the occupied rooms still produce income. This lowers the risk of losing all rental income at once, as can happen when a single-tenant home is vacant.
Peterson also sees a benefit for residents. Renters who save $400 to $500 a month may eventually save enough to buy a home. In his view, co-living can help people who cannot yet afford a home work toward buying one.
Peterson’s account suggests some Houston investors believe traditional rentals are not producing strong enough returns right now. He says it is hard to earn steady rental income from single-family homes bought with conventional loans at today’s prices and interest rates. He argues co-living can still work despite high construction costs because one building collects rent from many tenants.
“It’s so needed, it’s vital,” Peterson says. “That is where investors can come in and see the fruits of their labor.”
Peterson believes the opportunity extends beyond Houston. He calls housing affordability a national problem and sees renting by the room as a response that could work across the country, not only in densely populated cities.
Peterson has a financial interest in the trend he describes. As an agent, he connects investors with land. He also develops co-living housing himself. Development partners in his network are building a 10-bedroom, 10-bathroom property in the Heights in addition to the 14-bedroom project.
His personal projects focus on housing for veterans and people experiencing homelessness.
“We do it for veterans, homeless veterans, and people in need too,” Peterson says. “That’s a passion project, side project.”
Peterson says rising Heights values have not yet made the co-living model unprofitable. He views further increases in land costs as the main risk to its returns. Investors considering the strategy would also need to weigh local construction costs, financing terms, and any deed restrictions or permitting rules that apply to multi-bedroom rentals.
About the Expert: Kurt Peterson is a real estate agent with World Wide Realty in Texas, focusing on creative financing transactions in the Houston market.
This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.
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