Edmonton: Student-rental investment hotspot


Investors seeking a stable market for student rentals, with plenty of cash flow potential, should check out downtown Edmonton.

The extensions to the light rail transit (LRT) system in past years have opened up a number of new investment areas in this burgeoning market, while recent softening in real estate activity across the city has provided a number of opportunities to get a deal ahead of the Edmonton's next energy boom.

U of A

The University of Alberta, founded in 1908, is a leader in health, science and agriculture. More than 37,500 students attended the university during the 2009/2010 school year, with nearly 4,500 coming from other provinces and more than 5,000 coming from outside of the country. The key indicator of this market, however, is that roughly 15% of all students enrolled live in off-campus housing. That's a market with more than 5,600 students.

The university's Edmonton campus in particular is drawing an increasing number of students with its expanded medical facility, the Edmonton Clinic. The clinic, which opened in 2008, was part of a more than $900-million joint effort between the university, Alberta Health Services and the province to construct a learning centre for nursing, dentistry and medicine that would increase health-student enrolment by 80%.

In four years, the university has seen the number of medicine and dentistry students steadily rise to more than 1,800 in 2009, up from 1,500 in 2005. In addition, nearly 1,500 students had enrolled in the university's nursing program in 2009. But by far, the most popular area of study at the university is the sciences.

Nearly 6,200 students enrolled in science programs during 2009. The solid reputation of the university should translate into even more growth, which puts investors offering student housing around its campuses in a good position.

The student market

The vacancy rate in the area surrounding the Edmonton campus has been feeling some upward pressure since last year, rising to 2.6% in 2010, up from 2% in 2009. But that trend doesn't mean demand in the area won't remain steady, says Brent Davies, a broker at Davies Management and Realty Ltd. in Edmonton.

Neighbourhoods like Garneau, Strathcona, Parkallen and Queen Alexander will always be in demand because of their proximity to the university and Whyte Avenue, he says. "Whyte Street in Edmonton is like Yonge Street in Toronto. It's the trendy area where all of the younger people want to live," he adds.

Still, the LRT has taken some students farther away from the university in the search for more affordable housing. But that's not a bad trend for investors, Davies says. "The development of the LRT has opened up new opportunities for investors in other parts of the city where the housing stock is more affordable.

Now they can get properties in Clareview Campus, for instance, for less than $300,000 and still get competitive rents," he says.

On the fringes

Clareview Campus has experienced a surge in demand in recent years, as more and more students comfortable with a little commute move to the area, says Monica Wilcox, a Realtor with 1st 31 Student rental Choice Real Estate Inc. Many students, she says, are even renting trendy apartment condos in Point North and Clareview Court.

"The Clareview Campus area is a great place to invest because of its closeness to the LRT and proximity to amenities students need, such as Wal-Mart, Superstore and restaurants, as well as a recreation and medical centre, all within walking distance," she says. "Plus, it's relatively affordable. Investors can find apartments for as little as $179,000 and newer duplexes in the Clareview Campus area for as little as $300,000."

In some cases, Wilcox says, investors can find detached homes for about $200,000, and rent each bedroom out for $500 a month. But a property at that price will require a fair amount of renovations, she says.

Back to the centre

Wilcox's colleague Lovette Zacharuk, also a Realtor at 1st Choice Real Estate Inc., says investors wanting to buy closer to the university can still find good deals in the surrounding neighbourhoods. In fact, at the time of writing, Zacharuk was showing a duplex in the Garneau area for $434,000, down from $500,000 last year.

She says investors may also be able to find bungalows for as little as $375,000, and rent each bedroom to students for as much as $650. Davies, who owns two triplexes in the Garneau neighbourhood, says investors looking to go to the next level may want to purchase homes near the university and redevelop the land to build multi-unit buildings - something he's planning to do once he purchases the lot next to his triplexes.

He expects his project will receive approval without difficulty given the City of Edmonton's stance on high-density development. "Edmonton recognized several years ago that affordable housing was going to be an issue, and so it allowed residents to add accessory suites in most residential neighbourhoods, while Calgary has done the opposite," he says. "Now, our mayor is very pro-development. The city has approved a lot of development around the university."

Considering the multi-unit option

According to the Canada Mortgage and Housing Corporation (CMHC), an average one-bedroom apartment near the university rents for $947 a month. That's why buying an apartment building around the university just makes good financial sense, says Raphael Yau, a partner within the investment division of Cushman & Wakefield in Edmonton. The average price of apartment buildings per unit was $112,300 last year.

At $947 a month for each unit, there's a tremendous opportunity for cash flow, especially in an area with growing student demand, Yau says. "The student demand is why the area is so popular," he says. "There are a lot of more affluent parents who will get there child a one-bedroom apartment and sign on the lease for them."

It's a little tougher for investors to make good cash flow by renting out apartment-condos in the area, however. Investing in apartment-condos is typically only a good strategy for parents sending their children to the university, Yau says.

"In a lot of cases, parents are buying apartment-condominiums for their children and then holding it over the next four to five years. And it serves as a way to store some of their money. And hopefully they'll get some appreciation in the future." No matter which way investors approach it, Edmonton's university district and other student neighbourhoods offer plenty of opportunities to make solid returns.

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