Student Rentals in Southern Ontario

[Rayce Vyse]

Hi I have been searching for a new deal my market Brantford is so over priced at the moment I have been looking at other markets and other niches such as student rentals Im interested who ever has experience in this market and your  input good and bad with the student rental market. I also been looking in London and St Catherines Ontario thanks.

[Matt McKee]

My experience with student rentals has been different than those of other posters. 

I have 3 student rentals by Fanshawe College, and a fourplex near downtown that sometimes rents to students. 

I've had the 3 Fanshawe properties for 6,5, and 4 years. Student rentals can be management intensive, but like any rental property a lot of it comes down to the screening of tenants.

There are two very different student rental markets in London Ontario. Western and Fanshawe. Fanshawe is all about cashflow, where Western has greater potential for appreciation.

Note: for anyone not familiar with the London Ontario market, we have rental licensing... Unless otherwise stated (grandfathered in) assume a property is only allowed to have 5 bedrooms. If renting an illegal 6 bedroom student rental, you run the risk of fines etc.

Looking at Fanshawe first: there are a few different neighbourhoods that cater to Fanshawe students. 

1. Thurman/Fleming/Prosperity&Farnsborough (Roehampton could be included in this as well). These are newer properties (all but Roehampton are around/under 30 years old - not sure on age of Roehampton). These properties usually sell for 35K-55K a bedroom (Though I'd suggest if buying, you want to buy under 50K/bedroom). These neighbourhoods are almost exclusively houses that are used as student rentals. (5 or 6 bedrooms). The rents for a bedroom are 375-525/mo. In addition to the R1 Building (Residence on Frist - purpose built apartment building for students, that's directly across the street from Fanshawe) These are the first tier properties. Easy walking distance, newer buildings etc. 

The R1 building (purpose built student rental) has created significant competition for Fanshawe rentals. However it is priced at the higher end of the spectrum (all rooms are above 575/mo and I believe go upto 650 each). They have onsite security/front desk and have a feeling very similar to living in a residence. A significant portion of students find that restrictiveness undesirable. (They want to be able to have parties, smoke quasi legal substances, they want to have bbqs and a backyard to call their own etc) Also believe it or not some are still price sensitive (if they don't have an unlimited student loan or bank of mom&dad).

My 3 Fanshawe rentals are all in this neighbourhood. Renting for 435-495/mo on average. So far I've had no problems finding students to rent my properties.

2. The secondary area/tier I consider to be the Hartlet/Dale/Hansuld st's as well as the homes north of cheapside (ie Mark,Micheal,Beckworth) These houses are likely older and have more deferred maintenance and our likely smaller homes. Most do still have 5-6 bedrooms. These home often rent for between 350-475/mo. Again these homes sell in that 40k a bedroom room range. I believe these homes have been harder hit as tier 1 started attracting tier 2's normal target market.

3. The fringe area, this is homes west of Highbury or near Dundas/Huron/Quebec st. These are the neighbourhoods I'd be most concerned about owning. These homes traditionally rent in the 300-400/mo and sell for 30-40K a bedroom usually.

What I call the fringe area - is where I think the highest risk is. You're no longer easy walking distance, neighbours may/may not be student rentals. Those properties closer to the school can always cut their rent prices to match yours to ensure they fill. In these fringe area's you may need to resort to operating as a (illegal) rooming house where you're taking non students to fill your vacancies. (Note I'm aware of several properties/owners that do this, but it does run afoul of the city's bylaws etc) and I think you end up with significant tenant management issues.

Western University has a similar structure (Just with higher per bedroom prices for purchasing and same rent per room - which is offset by potential for more appreciation), however counterbalancing it is the fact that if you're close to the downtown you can also attract new grads/young professionals (which creates a more resilient rental property).

Hopefully the above helps give you a better idea of student rentals in London. I think (and my experience supports) that student rentals can be very profitable if managed correctly.

From my experience/perspective, the most important thing about student rentals, is keeping them rented. You need to have your tenants/students commit to 12 month leases (I strongly suggest May-April), there is also significant scales of efficiency by owning multiple student rentals. I would not suggest buying one, if you're intention is to only ever own one. My partner and I have been discussing how we likely need to acquire a couple more or consider selling to make our operations more efficient.

Another key to student rentals is advertising them early. If you're looking in late March/April to rent out your student rentals for May 1st. You're too late and will be sitting with a vacancy for May-Aug or end up with sub-par students.

I've always managed my properties myself. I do know of student landlords with 20+ units that have been able to implement effective management systems so that they can be as hands off as they wish. To do so with one property though, again I don't think is as effective/practical.

If you're patient, you can even just wait for the next 'riot' and buy then when student rentals go on sale. It's been a few years and seems like we're likely over do. (I'm only half kidding with that comment)

TL:DR

I'd say if you're going to be hands on with management (at least until you get scale of operations), and plan to acquire multiple properties, student rentals can be a great way to generate income, assuming you purchase in high demand areas and know you're numbers and make filling them you're number 1 priority.