Student housing is one of the best investments in real estate you can make.
Think about it; higher education is always in demand, and regardless of what the stock market or rental market is doing, student housing isn’t affected.
We’ve helped a lot of our clients purchase excellent student housing opportunities, and they’ve made great returns and have benefited from capital appreciation on their investments as well. You might be skeptical because you have heard “horror stories” but the truth is that students are some of the best tenants you can ask for.
Think buying making an investment in student housing might be for you?
Here’s our top list for how to purchase a student house:
Speaking with a broker is the first step in purchasing an investment property because it allows you to determine what price range you can afford to purchase in. Ideally, you want to be putting as little a down payment as possible and be able to use the rental income to pay off all of the expenses, as well as provide you with some monthly cash flow. Once you know your price point, you can narrow your selection further.
Location, Location, Location.
Southern Ontario has plenty of colleges and universities to choose from, but proximity to your home is a very important factor too of course, especially if you plan on managing the property yourself. If you live in Mississauga, are you really going to travel to London to pick up rent cheques? Probably not. We recommend being within 1.5 hours of your investment property.
Know What Returns You Want.
Naturally, you’re going to want the highest return possible, but like any investment, the more return the higher the risk. The “horror stories” usually come when you purchase a house that is providing incredible returns, only because a four-bedroom house turned into an 8 bedroom student house with no living room and is in violation of every code in the book. If you want a stress-free investment, you have to purchase a desirable property that you’ll never have a problem renting out and that will always have good tenants.
Student housing is not created equally. We’ve found that university housing has less risk than college though. Why? While college towns typically cost less and provide higher returns (on paper), we tend to see more students drop out of college mid-year and vacancy rates/non payment are more prevalent. Many people don’t factor vacancy into their Cap Rate, and that can make a huge difference in your annual returns and provide you with some unwanted headaches.
Now you’re finally ready to get out and look for properties! Proximity to the school is very important and we recommend staying within 1.5 km radius walk from the school or directly on the bus line. Most students are on a budget, so being within waling distance is seen as a huge bonus and it also reduces the amount of time coming and going to classes (which are usually split throughout the day). We’ve got a pretty wicked custom search tool we use for our clients that factors in many things which students see as desirable that help to ensure you get great tenants.
Once you’ve found a property you like, it’s time to submit an offer. The offer process on a student house is far different than purchasing a resale home, and we personally guide our clients through the process and ensure nothing is overlooked. The clauses that are inserted in the agreement of purchase and sale are very important, and we want to make sure that we review all of the current leases, know what is included in the home, verify the expenses on the property, get a home inspection, get a fire inspection, and the list goes on depending on the property. At the point of making the offer, the sellers can either accept the offer, sign the offer back, or completely reject it altogether. Offers on student housing tend to have a lot of back and forth and while minor comprises may be made, we make sure to get our clients most important needs and wants met.
You’re in a Conditional Period.
Now you’re in the most crucial part of the transaction. You need to ensure the verification of all the information because you are taking on this property and it’s tenants. We take this part of the transaction very seriously, and you’ll want to make sure that you have a professional representing you and not someone who just wants to push this deal through. If everything looks good, then you will waive your conditions and are one step closer to owning a student house!
Once the deal is firm, you await the closing date. Having a plan of action in place is highly recommended so once you have ownership you are not learning on the go. Things like setting up a bank account for the property, arranging numbers and contacts for handymen/contractors who will be helping with the property, creating your screening process and lease forms for new tenants are all extremely important and can save you headaches in the long run.