1. Is this the right investing strategy for you?
Student rentals can provide very strong cash flow. In many cases you will have up to seven students living in a house paying $400 to $500 per room. That is a good cash flow return on a property that you can buy for $300,000. The cash is great but it comes at a cost – your time. You’re dealing with young adults who are away from home for the first time, and have no idea about maintaining and running a house. Even though it’s one lease it’s multiple rent payments to collect each month.
2. Financing & Legislation
Getting your student rental property financed is one of the most challenging aspects of this strategy. Some lenders have offered options for student housing mortgages in the past but these typically have more stringent stipulations on borrowing. The down payment is also likely to be in the 25 per cent plus range. The other option is to buy a single family home and convert it to student housing at a later date. Each city also has different legislation detailing how it zones these types of dwelling. Some will regulate the number of students per house and also have rules on maintenance, fire safety standards, insurance, parking, noise etc. In cities that license student housing the cost is typically circa $500 for the first year and then it drops slightly in subsequent years.
Where do the students want to live? Many students rely heavily on walking, biking or public transportation so the closer to the University or College, the better. But, sometimes right around the corner isn’t the most desirable area. The best place to start your research is the schools off campus housing office. My favourite strategy is to take a walk. I walk from the school and look at the housing which I get to in 15 min walk or less.
4. Get some help
Managing your own student rental takes a lot of your time. If you have to add a lot of travel time to get there from where you live then you can expect this to become a part-time job. You need to be visiting your properties at least monthly to look for and issues (damage, cleanliness, water/ leaks). If you don’t want to handle all of this on your own, a local property manager who is comfortable and experienced with student rentals is going to be useful to you in manage the property. Also understand how the property manager prefers to communicate with the tenants. Do they prefer a phone call, email or text? Students tend to prefer to be able to text so having a property manager that is ok communicating that way – or has a way to receive texts – will be important.
5. Maintenance/ Cleaning
Mom isn’t around to clean up after the kids anymore. Add to that, there are lots of extra people in the house. Students need to know when garbage collection days are and where to put the garbage. The cleanliness of the house should be monitored regularly to avoid and issues with pests entering the home. Students who are adverse to cleaning may be prepared to contribute to a cleaning service once a month. If you’re renovating a house to make it suitable for students, that’s a great time to select appropriate materials.
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