What is The Harmony Formula, and why does it produce nine-bed properties?

What is The Harmony Formula, and why does it produce nine-bed properties?

Answering: What is The Harmony Formula, and why does it produce nine-bed properties?

Estimated reading time: 12 min read

The Harmony Formula is The Harmony Group’s own definition of what has to be true before it will build a property: nine bed, high-end, good location, established area. It produces nine-bed properties because nine bedrooms sits close to the largest a Melbourne rooming house can be before it needs extra council planning approval, and it fits inside the same 12-occupant ceiling that defines a Class 1B building under the National Construction Code, so one knock-down-rebuild site becomes nine separate rental incomes instead of one lease.

If you have heard the phrase “the Harmony Formula” used on a call, in the video series, or somewhere on the site, and you are not sure whether it describes an actual method or just sounds like one, that is a reasonable thing to want cleared up before you book a strategy session around it.

In practice it behaves more like a specification than a slogan. There is a location test a site has to pass, a set of non-negotiables for what gets built once it does, and a measurable result the whole exercise is checked against afterwards.

Key Insights

  • The Harmony Formula is The Harmony Group’s shorthand for the standard behind every build: nine bed, high-end, good location, established area, sitting above the 118-point method rather than replacing it.
  • Stage one is the 118-point method (Market Analysis, Area Selection, Property Specification), applied to roughly 20 to 30 markets a quarter, of which typically only four to six pass.
  • Stage two is the Build Formula: an exclusive partner network, nine rooms, nine bathrooms, a single storey, two executive rooms and a seven-year structural guarantee.
  • Stage three is the result: a Class 1B certified nine-bed property. On the Group’s most recent projects, the figures are an 11.36 per cent gross yield on a $1,574,000 base project cost. Average figures based on most recent projects.

Each stage rules something out before the next one starts, which is the point of building it this way.

Table of Contents

The Harmony Formula is nine bed, high-end, good location, established area: The Harmony Group’s own description of what has to be true before a site gets built.

The Build Formula is the second stage beneath it, a set of non-negotiables for what happens once a location passes stage one.

Stage One: The 118-Point Method Chooses the Location

Stage one is location, and every prospective site is run through the 118-point method before anything else happens. Market Analysis carries 42 of the points, Area Selection carries 38, and Property Specification carries the remaining 38. The team analyses roughly 20 to 30 markets a quarter, and typically only four to six pass, which says more about the method than any description of it could: most of what gets looked at is ruled out before a floor plan exists. Our full breakdown of the 118-point method covers how each of the three pillars is scored.

“Good location, established area” is doing real work in that sentence, not filling space. Harmony builds in Melbourne, across the middle ring, Frankston and a smaller pocket around Geelong, and investors come from every state; the process runs remotely from wherever an investor is based. Established areas matter partly because Victoria’s planning scheme carries a specific threshold for a rooming house: no more than nine bedrooms, a total floor area of 300 square metres or less across all buildings, and no more than 12 residents, and a site inside that threshold does not need a separate planning permit in the General Residential, Neighbourhood Residential, Township, Mixed Use or Residential Growth Zones. Whitehorse City Council, itself in Melbourne’s middle ring, states the same figures directly: a permit is required once a property reaches “10 or more bedrooms” or houses “more than 12 people,” and is not required below that line.

  • Employment diversity, population trends and rental fundamentals in the surrounding suburb, which carry the largest single share of the 118 points.
  • Distance to transport and employment hubs, existing rental supply, and the council’s approval history for that specific street.
  • Whether the site sits inside the planning-permit exemption for a rooming house, which is a large part of why nine bedrooms is the practical ceiling rather than an arbitrary one.
  • Whether the numbers still work once independent market data, not just a real estate agent’s listing, is applied to the site.

Stage Two: The Build Formula Sets the Non-Negotiables

Once a site clears stage one, it moves to the Build Formula, the part of the process The Harmony Group set out in an internal document rather than a public page. The Harmony Group treats the detailed specification as its own intellectual property and will only describe it at the level of principles and outcomes, not the checklist itself.

The Build Formula runs on an exclusive partner network: architects, the builder, hotel fit-out specialists, and the specialist property managers who place tenants once a property is finished. Sitting on top of that network is a small number of non-negotiables that do not move from site to site: nine rooms, nine bathrooms, a single storey, two executive rooms built to a higher standard than the rest, and a seven-year structural guarantee. On the Group’s own three years of tenant data, rooms built to this standard let for $100 or more per room per week above the co-living market average, which is the commercial reason the non-negotiables exist rather than a design preference.

The nine-room, nine-bathroom shape is not arbitrary either. A Class 1B building under the National Construction Code, the classification every Harmony property is certified to before commitment, tops out at 12 occupants and 300 square metres of total floor area. Nine rooms sits inside that ceiling with margin for shared living space and the two executive rooms, while still turning one title into nine separate rental incomes. Go further and the property tips into a different, more demanding building class; stop short and the site is not being used as efficiently as the location test says it could be. Our guide to Class 1B certification covers what that classification actually requires of a build.

Certification is not paperwork the Group adds for comfort. Operating a rooming house in Victoria without holding an operator’s licence under the Rooming House Operators Act 2016 is a genuine compliance exposure, not a theoretical one; Consumer Affairs Victoria requires an operator to apply for, and be granted, a licence before they can start operating. Harmony’s own certification guide sets out how significant that exposure can be for an unlicensed operator, which is why Class 1B certification is confirmed before commitment on every property the Formula produces, not arranged afterwards.

Stage Three: The Result the Formula Is Built to Produce

What comes out the other end is a single title with nine self-contained rooms, each with its own bathroom, on one storey, Class 1B certified before the Group will commit to the site. Our co-living page sets out what that finished product looks like from an investor’s side.

On the Group’s most recent projects, that finished product prices out like this: rooms let for around $380 a week each, against a base project cost of $1,574,000, or $1,650,250 including additional considerations, for a gross yield of 11.36 per cent on the base project cost. The underlying average is $382.50 a room, which across nine rooms and 52 weeks is $179,010, shown rounded to $380. Held against a standard investment property at the same $1.5 million price, that is $865 a week, $45,000 a year, and a 3 per cent yield. Average figures based on most recent projects. Entry requires a minimum of $600,000, in cash, usable equity, or a combination of both.

Measured a different way, across The Harmony Group’s delivered projects rather than only the most recent set, the historical average gross yield is 10.8 per cent. That is a separate, historical figure, not a forecast: it shows what the method has produced across the full track record, while the figures above show what the most recent projects are actually returning. A property that fails stage one, or is compromised on stage two, never reaches either measurement, because it is never built.

For a deeper look at how the location test actually works, read our full breakdown of the 118-point method, the stage that decides most of what happens next.

  • One title, nine self-contained rooms, each with its own bathroom, single storey.
  • Class 1B certification confirmed before commitment, not arranged after the fact.
  • On the Group’s most recent projects: around $380 a room, $179,010 gross annual rental income, an 11.36 per cent yield on the $1,574,000 base project cost ($1,650,250 including additional considerations). Average figures based on most recent projects.
  • A site that reached this stage only after clearing both the 118-point method and the Build Formula’s non-negotiables.

The Harmony Formula is not a single number or a single room count. It is what happens when a strict location test, a fixed set of build non-negotiables and an honest measurement of the result are applied in the same order every time. Most sites do not make it through, and if co-living is not suitable for your circumstances, the team will tell you why rather than fit you into the Formula anyway.

Frequently Asked Questions About The Harmony Formula

Q: Is The Harmony Formula the same thing as the 118-point method?

A: No. The 118-point method is stage one of the Formula, the process Harmony uses to choose a location, scored across Market Analysis, Area Selection and Property Specification out of 118 points, applied to roughly 20 to 30 markets a quarter. The Harmony Formula is the larger idea sitting above it, nine bed, high-end, good location, established area, covering the location decision, the build itself, and the result.

Q: Why does every Harmony property end up with nine rooms and nine bathrooms?

A: Because nine bedrooms is close to the largest a Melbourne rooming house can be before it needs extra council planning approval, and it fits inside the same 12-occupant ceiling that defines a Class 1B building under the National Construction Code. Building to that ceiling, with a high-end fit-out and two executive rooms, is how the Formula turns one site into nine incomes without leaving compliance to chance.

Q: What is the Build Formula, and can I see the full specification?

A: The Build Formula is stage two of the Harmony Formula, an internal set of non-negotiables covering an exclusive partner network of architects, the builder and hotel fit-out specialists, nine rooms, nine bathrooms, single storey, two executive rooms and a seven-year structural guarantee. The Group treats the detailed specification as its own intellectual property and only publishes it at the level of principles and outcomes, not as a public checklist.

Q: What yield does The Harmony Formula actually produce?

A: Two figures answer this, and they measure different things, never blended into one. On the Group’s most recent projects, the worked example returns an 11.36 per cent gross yield on the $1,574,000 base project cost (around $380 a room, $179,010 gross annual rental income). Average figures based on most recent projects. There is also a separate historical average across every project the Group has delivered, covered in the Result section above: a historical figure only, never a promise for any new property.

Q: Can I see a finished Harmony Formula property before I invest?

A: Yes. One of Harmony’s older nine-bed projects, in Melton, has been fully leased for around three years, and the team has kept one room free so prospective investors can walk through a finished, tenanted property. There is no public address or set of photos; the walkthrough is arranged by appointment through a strategy session.

Want to Learn More?

The Harmony Group is Yannick Ieko and Tony Draper’s purpose-built, Class 1B-certified co-living investment practice. The investor pays Harmony nothing: Harmony is paid by the builder at settlement, at the same rate across the panel.

Citations

Building classification and rooming-house licensing sit with the National Construction Code and Victorian consumer law respectively, not with any single builder or advisor, so these are the sources worth checking directly if you are comparing operators.

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General information only. The Harmony Group provides general information about property and co-living investment, not personal financial, tax or legal advice, and does not hold an Australian Financial Services Licence (AFSL). It does not account for your objectives, financial situation or needs, so consider its appropriateness and seek advice from a licensed financial adviser, accountant or the ATO before acting. Past performance is not a guide to future results and historical figures may not be repeated. Any tax or regulatory measures described are announced rather than enacted and are subject to change.

Related reading

About The Harmony Group · The Harmony Method

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