Many colleges in Canada cannot manage the influx of students or have specific rules prohibiting undergraduates from living on campus. This is then the reason why student housing is in high demand.
In case you don't know, student housing is apartments or houses in close proximity to a college or university that's rented exclusively to students. Over the past few years, the rental market has seen significant growth with student housing rentals. There's money to be made when investing in student rentals but there are some things to consider that makes student rentals different from other rental types.
To determine if it is the right option for you, have a look at the pros and cons of owning student housing rental.
1. Higher Rent Possibilities
When you’re dealing with students you can rent by the room, which increases your bottom line. The more bedrooms, the better. You can easily turn a 3-bedroom house into a 5-bedroom with a little creativity.
2. Greater Cash Flow
Students aren't looking for expensive finishes like hardwood and granite tops. All they want is for units to be clean and functional. Installing expensive finishes won't give you a good return on investment which means you can hold on to your cash with fewer renovations.
3. Secure Rents
When it comes to student housing, finding tenants is a breeze. I have yet to come across a student town with enough student housing. While tenant turnover might be higher, the rental cycle is more predictable. Leases begin and end at the same time each year so you only have to manage it once per annum.
1. Students Will Be Students
Students are typically not good with taking care of rental homes since it's the first time out on their own. They are definitely not as responsible as long-term tenants.
2. High Volume Applications and Screening
While you only have to stress about renting once every 12 months, the more rooms you have available, the more applicants you'll have to screen. The window to attract new tenants is also short - typically 30 days. If you miss this window, you'll have less time to screen tenants and might have to consider renting to students that are not as qualified.
3. Bigger Time Commitment
Students, more often than not, rent from you after leaving their parents home for the first time. Chances are they don't know how to handle simple issues around the house. You can expect a phone call or house visit for stupid things like changing a light bulb.
Student tenants are similar to the average tenants you might have rented to in the past. For every good tenant, at some point down the road, you'll have a bad one. Typically professional real estate agents advise their clients to take into account the cost of a property manager upon running final numbers.
Like any other property, there will be positives and negatives but student housing rentals take more time to run. Student rentals offer significantly bigger rental amounts but also a bigger time commitment. It is up to you to decide whether these types of properties will compliment your business.
Other Things to Consider Before Investing in Student Housing
If you've decided that student housing is right for you, it's vital to determine if the market isn't oversaturated. Speak to other rental owners to get an idea of vacancy rates.
Another key factor to consider is the type of college. Many smaller learning institutes are commuter colleges which means that there typically isn't a dedicated group of apartments or homes that can be classified as student housing. While there are students who live there, there's no real incentive for it.
Take care to do thorough research ahead of time or ask for help from a reliable Toronto Real Estate Agent. It would be detrimental to buy an apartment or house with the intention to turn it into student housing when the market is oversaturated or it's too far away from the college or university.
Student housing can be extremely profitable in the right market and when rightly executed. But like with any other niche, make sure you understand its potential deadfalls before jumping in.