If you’re a real estate investor or just have a child heading off to university, buying a property in a “university town”, where prices are often lower than major cities like Toronto or Vancouver, can be enticing. While the average price of a home in Toronto is roughly $920,000, an average home in London, Ontario (home to Western University) is almost 1/3rd of that at $344,815.

In this blog post, we explain the benefits and downfalls of investing in student housing. This post clarifies some myths of the opportunity, and explains what to keep in mind when investing in a property targeted at student tenants.

The benefits of student housing investments

Student tenants. You’re effectively renting to someone with no credit history, plenty of debt, and no full-time income. Or are you? Although this profile is common for students, it’s also common that the student’s parents pay most or all of their rent and expenses. And with a parental guarantee that rent will be paid, this tenant turns into a secure source of income, even less risky than someone who may have a full-time job. This is why a risk-averse investor such as the Canadian Pension Plan is willing to invest in it.

A property close to a university may also mean guaranteed tenants. One article found that only 3% of Canadian students lived in university-provided housing, with the remaining 97% commonly living with parents or at nearby rental units.

There’s no shortage of university students. In recent years, international students have enrolled in Canadian universities at an increasing rate. Other countries that were once popular for international students such as the U.S. and the U.K. have had unfavourable attitudes towards immigrants in recent years, which has resulted in more interest in Canada. This is why among new Canadian non-permanent residents, international students were the largest contributor.  The best part is that each of these students needs a place to live. Thus the growing number of international students has made student housing more popular with real estate investors.

As mentioned prior, student housing often has a lower barrier to entry than a condo investment in downtown Toronto. Although cities such as Waterloo, Ontario, or London, Ontario, are seeing real estate values appreciate, they’re still much more reasonable than what you would find in Toronto.

The pitfalls of investing in student housing

Student housing isn’t all rainbows and sunshine. Although it’s a secure investment for the most part, some aspects of it can make it particularly tough. Students may not care about the property as much as a tenant who is older and more mature. University house parties run rampant as part of the school culture, dirty dishes are usually left in the sink for weeks, and there’s often plenty of alcohol and drunk students around. This could result in damage to the house or other issues like mould or vermin.

And if you’ve purchased a property that’s in a different city that’s an hour or more away, common tenant issues are even more difficult. Toilets and drains get clogged, heating systems might break, or a window can crack. These all require your immediate attention. To prevent a 2-hour drive in the evening to fix a clogged toilet, it’s a good idea to keep some local plumbers or repair people in mind. Better yet, you could simply pay a property management company to take care of everything for you (but you remember that this would eat into your cash flow).

What to keep in mind when you purchase a property targeted at student tenants

Students are a different but similar ball game to regular tenants. You often hear investors mention the number of “beds” they own, which refers to how many tenants they can accommodate. To maximize your returns on a student housing investment, you want to maximize the number of students living there (within reason). This doesn’t mean covering every square inch with a bunk bed. However, a 3-bedroom house could be made into a 5-bedroom by adding two rooms to the basement.

Students may be cheap, but they still desire good living accommodations. In fact, student rentals are more often going towards the luxury-end now. Well-off international students who can afford to study abroad want high-end living accommodations, and as more of these international students choose Canada as their next educational venture, this demand increases.  It’s all about finding a balance between maximizing tenants while having a luxurious living space.

If you plan to renovate a property before listing it for tenants, there are a few items to keep in mind so that the space is suitable for students. This includes using quality, but not particularly high-end, installations like sinks or toilets. Most of the cost for renovations comes from the cost of labour, so why cheap out on a few hundred dollars on a sink that lasts longer? Materials such as laminate or vinyl tiled flooring are also solid and cost effective.

Do your renovations during the summertime when students aren’t around. You can even stagger them year to year. If you have a renovation that requires clearing the whole house, you could list your property for an 8-month lease instead of 12. Although you’re losing out on 4 months of rent, you can charge more during those 8 months, since 8-month leases are typically more desired by students.

Students are great tenants to have. Although they lack credit scores or full-time incomes, it’s usually their parents paying the monthly rent. The increasing number of international students also means that there’s no shortage of students looking for housing accommodations. Although partying and managing a property in a different city may be difficult, it can be worth the stability. Make sure to find a balance between creating a great living space for students while also maximizing how many tenants you can have in a house.

The post Making a Real Estate Investment in Student Housing first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

The smell of sharpened pencils lingers in the air. The soundtrack: the fresh crack of new textbook spines. That’s right, it’s that magical time of renewal. It’s fall time; the leaves are changing and the heat of summer is fading, but our sunburns are still pretty well intact after the long weekend.

But now, our attention is being pulled—nay, dragged—back into the classroom. It’s school time.

For many, this means big changes are a’comin’. In fact, more than 2,000,000 Canadians are expected to be heading back to university, based on 2015-16 findings from StatCan. That’s a population twice the size of Edmonton, and many of those students will be relocating to attend the school of their choice.

But where will they live?

There are two choices, really. Students can opt-in to #dormlife—if there is room, of course—or they can decide to try to stand up on their own two feet (maybe with the help of a few friends) and rent a place of their own.

There are definitely pros and cons to each of these choices.

Pros of living in a dorm:

• You meet a lot of people really quickly
• You are constantly involved with on-campus activities
• Your lifestyle is all-inclusive; rent, utilities, (often times) food, furniture
• You don’t need to worry about a commute or transportation
• You have a turn-key situation with little to no stress involved, like having to find the right place

Cons of living in a dorm:

• You will most likely have to live with a roommate—often times, you won’t get to pick who it is
• You will likely be living in tight quarters
• You may have to share a bedroom
• Your all-inclusive meal plans may cost you more than you would normally spend on groceries
• You may not appreciate, or want to abide by all of the dorm rules set out by the school

Pros of finding an off-campus rental

• You get to find a place that you love
• You can choose to live alone or have roommates (that you pick) to split the costs
• You can often find cheaper living accommodations — if you look in the right place
• You can have that whole independent, I’m really an adult lifestyle
• You can furnish a place and decorate it to make it feel like home
• You will be able to buy the groceries you need and create the meals you love
• You don’t have strict rules about how you live in your home
• You can definitely have your own room
• You can diversify your social calendar by living away from the university-lifestyle bubble

Cons of finding and off-campus rental

• If you are in a university town, good rentals may go quickly to returning students or students who never left their rental unit over the summer
• It may be tricky to find an affordable place to live on your own
• You may find strict landlords pushing 12-month lease agreements and you know you’re only there for about eight months (September-April)
• You may find some landlords are less inclined to rent to students due to “party animals who ruined it” before you
• You may find you are spending extra cash on things like transportation, cleaning supplies, furniture and other household needs
• You will most likely have to fork out money for utilities

But, once you weigh out the pros and cons of all the situations—and add in your own concerns, as well—you will be better equipped to make a decision that is best for you.

Now it’s time to make your search.

Off-campus rental units can be tricky to find. Especially if you’re not too familiar with the area. Luckily, many Canadian cities such as Toronto, Vancouver, Montreal and many cities in B.C., have real estate agents that can help you find just the right place to kick up your feet and study your coursework in your new home away from home.

In 2017, the Star reported that Toronto had a 3.4 per cent vacancy rent, meaning finding a sweet suite was going to be a daunting task. But if a potential renter chooses to work with a real-estate professional, not only are they saving time by skipping their own research time, they will be protected in the same way homebuyers and sellers are.

Plus, it’s good practice for when you are readying yourself to purchase your first home.

Websites such as rentfaster.ca are excellent sources connecting landlords and tenants. Realtor.ca is also a great source for trusted rental units. In fact, at any given time, the website boasts and average of 310,000 residential, commercial and rental properties online. Plus, they can connect you with a trusted realtor.

When picking a real estate agent to represent you in the hunt for the perfect rental—whether short term, or long term—be sure you are clear with your expectations, your needs and your budget. Be sure to pick a reputable agent with great reviews. You can find some excellent agents online right here, too, at rankmyagent.com that will be happy to help connect you with the perfect haven to destress after a tough midterm season.

All in all, whether you choose to live on campus, or find the perfect place off campus close to downtown or a cool neighbourhood café, we’re just jazzed that you’re back in class—or embarking on this new life adventure.

We hope you take university, college, tech school, or whatever you find yourself in, by the horns and enjoy the ride. ‘Cause, when it’s all said and done and you’re preparing to walk the stage to collect your really expensive certificate, diploma or degree, we hope you can look back on it fondly. I know I do!

Have fun this year. Study hard, do the work, meet the people, but most importantly, enjoy it.

Happy learning.

The post Pros and cons of student life, on campus or off first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.